Are we willing to pay more for measurably better healthcare?

The following article was originally posted on the Mercer US Health News blog. You can find this article along with more health news content here.

By Mason Shea, FSA, MAAA, FCA, Partner and Andy Halpert, Senior Clinical Consultant, Mercer

In a recent meeting with a national insurer looking to win more business from employer health plan sponsors, the insurer touted their physicians as achieving measurably better cancer survival rates compared to other physician networks in the market. That raised a few eyebrows in the room because quality is not how most insurers and networks compete for an employer’s business – in fact, quality metrics rarely get airtime with key stakeholders. Sure, all else being equal, a statistic like that could swing the decision. But if the cost were higher, would we be willing to pay a little more to get better quality? 

Employers already pay a lot to provide healthcare to their plan members, so the idea of paying more –  for any reason – is understandably jarring. Financials will always play a key role in how employers evaluate the next or a more evolved solution, but quality metrics so far are largely absent from these conversations – even though a growing number of players in the ecosystem today maintain that quality is central to their business model. To name a few: 

Alternative Networks. Narrow networks are offered as an alternative to broad networks by every traditional commercial insurer as well as some non-traditional players. The tradeoff for some member disruption is plan savings as members are steered to lower-cost – and presumably higher-quality – care. 

Centers of Excellence. Plan members are directed to specific care settings that meet certain quality standards to receive a certain type of care, typically surgical in nature, either by a traditional insurer or specialize vendors.  

Member Navigation Tools. Apps are put in members’ hands to help make point-of-service healthcare shopping decisions easier. The algorithm used to surface providers within the app is based on a combination of cost and quality metrics. 

Alternative Health Plans: Plans that remove and/or simplify traditional member cost sharing in the plan design in favor of a copay-based plan that requires members to shop for their care using an app that’s powered by a sophisticated cost/quality algorithm. These have begun proliferating in recent years. 

As we’ve learned over the past few years in working with data to help employers understand health plan quality, there are wide variations in quality and efficiency from one provider to the next.  In our view, any intervention that relies on data-driven techniques to value-rank providers – whether that’s being done at the plan/network level or in an app on a member’s phone – is a step in the right direction. 

While all the solutions described above have quality measurement as a component of their model, quality must impact cost if it is to achieve savings.  It’s important to understand whether a solution is simply steering members to the providers with the top-tier discounts, or if greater efficiency is generating savings for the plan sponsor – specifically because of how care is delivered.  

In contrast to the “off the shelf” approaches above, some employers have implemented customized tiered networks through a pre-existing relationship with a local health system, and we’ve used quality analytics to examine how these networks are structured and how they perform. Not infrequently, when we present our findings, both the health plan and the clinical teams are surprised at how many lower-quality providers have been placed in the highest tier. These conversations about quality and how to achieve it are fundamentally different than just trying to determine which health plan offers the best unit cost. 

We will continue to work on ways to help validate the quality equation of quality-based solutions. As the market and analytics continue to evolve, our North Star will be the end state where the relationship between cost and better outcomes – for plan members and plan sponsors – is clear. Before we can get there, we need to first understand what we’re being asked to pay for today.