Value-Based Design Cuts Costs, Increases Health

Published February 1, 2009

The economic downturn is causing many employers and health plan managers to rethink the allocation of their health care dollars, with some companies adopting a method called value-based design to reduce the effects of health cost inflation on their businesses. The trend is occurring voluntarily, without government mandates, and could help cut health costs nationwide.

Value-based design technology generates data required for initiating interventions that create incentives for individual behavior changes, improve member health, increase workforce productivity, and lower health care costs. A growing number of the nation’s leading insurance brokers and third-party administrators have begun to adopt the processes.

The design approach uses data to identify statistically common medical conditions and treatments. Unlike evidence-based medicine, which focuses solely on clinical outcomes, the value-based model takes quality of life and productivity into account when performing cost-benefit analyses of coverages and treatments.

The idea is to help keep costs down while improving productivity by reducing the time employees lose as a result of poor health.

Lower Costs, Higher Productivity

David Hom, vice president of strategic initiatives at Pitney Bowes, a large communication and management consulting firm, said his company has succeeded in cutting health care costs through a value-based system after several years of trying other approaches.

“Pitney Bowes began implementing value-based health care in the early part of this decade,” Hom said. “The result was a trend toward lower health care costs and increased worker productivity.”

Using new technologies designed specifically to collect, integrate, and organize health care data, similar value-based health plan designs can now be optimized in a matter of months, saving businesses the years of trial and error Pitney Bowes endured.

Voluntary Adoption

The process begins with the collection of baseline aggregate information about the plan members’ current health and expenditures. It then involves measuring how well members adhere to and comply with the best standards of care and healthy lifestyle choices.

For example, measurement of pharmacy refill rates will indicate whether individuals are taking their medications for chronic disease treatments. Since pharmacy co-pays may not be affordable for many members, increased pharmacy utilization can be achieved with lower co-pay plan designs and effective communication.

Similarly, increases in lab work and physician visits may indicate improved monitoring of disease control, while parallel concerns may stem from excessive co-pays.

These designs allow businesses’ health plan managers to track member progress and calculate the return on investment for interventions and wellness activities. Functioning on a national scale, value-based health measurements can contribute to improved health and reduced national health care costs, without any government intervention.

Ernest T. Youngblood ([email protected]) is founder, president, and CEO of NavigatorMD.