Posts tagged ‘Value-Based Insurance Design’

MedSpan Research Pay-For-Performance Case Study

MedSpan Research Pay-For-Performance Case Study

Connectivity is one of the Key Underlying P4P Programs…Read more to learn why


Continue Reading July 21, 2015 at 2:00 PM Leave a comment

MedSpan Research’s Managed Markets Perspectives

MedSpan Research’s Managed Markets Perspectives: Pay For Performance Programs are becoming more prevalent. Dialysis facilities are already using this type of reimbursement program to improve on quality measures.

Continue Reading July 21, 2015 at 11:21 AM 1 comment

MedSpan Research’s Tips for Conducting Payer Research

MedSpan Research’s Mentions…Here’s a Tip!


MedSpan Research finds that many consumers do not know the type of Medicare (Fee for Service vs. Advantage) or Medicaid (state vs. managed) insurance they have. When conducting an Internet survey with consumers, ask them to look at their insurance card to give you an accurate answer.

June 23, 2015 at 9:02 AM Leave a comment

Here is What MedSpan Research Has Been Up To and Learning: Our Tri-Weekly Newsletter

Recently, a Modern Healthcare survey determined that a majority of healthcare CEOs supported the transition from Fee-For-Service to Value-Based Compensation. However, their time frame of transition varies. Read our blog entry for more on this subject.

Continue Reading June 8, 2015 at 10:22 AM Leave a comment

Evidence-based radiology — a concept on the cusp

For some years now, payers, academics and clinical practitioners have had concerns about the justifications for clinical practice patterns.   The need for evidence-based practice ranges from formulary design to clinical care to radiology.

“Medical practice is largely based on clinical anecdotes, uncontrolled investigations and expert opinion. The demand for scientific evaluation to guide patient care is increasing because financial resources are limited and because practice based on such influences may be inappropriate. In radiology, the situation is especially problematic…. Few radiology programs address and encourage critical thinking skills.” (Source: Hillman BJ, Noninterpretive skills for radiology residents. Critical thinking: deciding whether to incorporate the recommendations of radiology publications and presentations into practice. AJR Am J Roentgenol 2000; 174 (4):943-946.)

For example,  when clinicians, such as radiologists, health plan administrators, and others try to decide between imaging and interventional options, they may find that textbooks are out of date, guidelines are not specific enough and there are conflicting or apparently unreliable reports in the literature. Expert opinions and policies vary and even the definition of ‘evidence’ is unclear.

Some experts recommend using the ‘consensus of experts’ approach.  However, the reliability and reproducibility of this type of evidence is questionable.  Others recommend the use of guidelines that are based on expert appraisal of the literature.  These are roughly equivalent to a consultation with experts but may not answer our specific question well, be based on strong evidence or take into account new developments and local circumstances.  However, when clinicians and health plan administrators go to the literature, the first problem encountered is the volume of literature being published and, perhaps, a lack of training in how to separate the good studies from the weak ones.  Another problem is determining whether specific clinical decisions and medical policies should be based on the general consensus illustrated by the evidence or following a minority opinion that better applies to a specific situation or sub-group of patients.

One of the issues facing healthcare manufacturers is how to best support clinicians and administrators as they address these challenges.  For healthcare manufacturers, the key questions are 1) What type of data will my customers find most compelling?  2) How will that data best support my marketing efforts and support appropriate adoption of my product? 3) How can I develop the data most cost effectively?  Is a retrospective study or an observational study sufficient?  Is a costly prospective study with a randomized design necessary?  4) What return will I realize from the data I develop?

The first step for healthcare manufactures is to realize the data are necessary.  As comparative effectiveness research becomes more prevalent and clinical decisions are increasingly scrutinized, data is all that clinicians and administrators will find relevant and compelling. 

The next step is to develop an evidence plan early in the product development process.  To the extent possible, the time to develop such data is when drugs are going through clinical trials or diagnostic assays and imaging equipment and applications are under development.   Developing data after FDA approval and product launch could burn the limited commercialization time available before a competitor arrives or patent protection expires.

The evidence plan should be based on the expected return on investment.  If less-costly retrospective and observational studies will drive adoption, though perhaps not optimally, they might optimize ROI.  Potential market blockbusters might warrant costly prospective, multi-center studies that support a lasting and profitable competitive advantage.

The design of specific studies within the evidence plan should be based on the intended audience.  Payers (eg, health plans and hospital administrators) are looking for value.  That is the expected improvement in quality of care, based on specific and measurable outcomes, divided by the impact on cost.  Cost includes that of the drug, device or imaging application as well as any cost offsets (eg, reduction in hospitalizations) directly due to the product.  Providers are more focused on improvements in clinical care and outcomes and, to a lesser degree, cost impact. 

As today’s discussion begins to illustrate, the development of an evidence plan is a complex undertaking that should be well thought out.  Today’s environment and its emphasis on comparative effectiveness, cost management and access to appropriate therapies and procedures makes the development of the evidence plan more critical than ever before.

July 23, 2010 at 12:49 PM Leave a comment

Value Based Insurance Design: Financial Impact


U.S. healthcare spending is on track to double over the next 10 years, from $2.6 trillion to $5.2 trillion.  By 2020, healthcare spending will grow from 18% to 21% of the gross domestic product.  Approximately $700 billion of this cost, about a quarter of the country’s total healthcare cost is unnecessary. (Source: Arnst, C. 10 Ways to Cut Health-Care Costs Right Now.  Bloomberg Businessweek.  April 26, 2010.  ) 

About one-quarter of the $700 billion per year – approximately $177 billion a year – is due to non-compliance with prescribed care regimens.  Three out of four Americans fail to take their medicines as directed.  Such non-compliance leads to unnecessary office visits, hospitalizations, and treatments.  Patients’ financial responsibility for their medications is one reason for non-compliance. 

Cost Cutting Effect of Value Based Insurance Design  

How does value based insurance design (VBID) work to reduce healthcare costs?  VBID programs facilitate access to healthcare resources by reducing the patient’s financial responsibility.  This facilitates compliance with prescribed therapy regimens. 

 The extent to which a VBID program provides a net financial benefit is a function of (1) the size of the patient population; (2) the likelihood of an adverse outcome from non-compliance; (3) the cost of treating the adverse outcome; (4) the responsiveness of consumers and patients to lower copayments; and (5) the degree to which the therapy regimen prevents an adverse outcome. (Source: Fendrick AM. Value-Based Insurance Design Landscape Digest. National Pharmaceutical Council. Center for Value-Based Insurance Design.  National Pharmaceutical Council.  July 2009.) 

Studies of chronic diseases, such as diabetes, have yielded evidence that lowering workers’ payments for certain treatments will, over time, slow medical spending.  The most recent example is that of a study conducted by CVS Caremark published in the American Journal of Pharmacy Benefits.  The study compares outcomes for more than 20,000 patients participating in VBID plans to those for more than 190,000 participants of similar age and gender breakdowns in standard three-tier plans.  The study found that diabetes patients participating in VBID programs that reduce the cost of medication are more likely to start and stay on their prescribed therapy regimen. (CVS Caremark Study Finds Value Based Insurance Designs Can Increase Adherence in Diabetes Patients.  Medical News Today.  February 17, 2010.)  

Let’s compare the potential for VBID programs for the diabetes population to the five characteristics listed above.  

(1) 23.6 million US citizens suffer from diabetes (Source: National Diabetes Information Clearinghouse; accessed July 7, 2010).  At 7.8% of the US population, diabetes is highly prevalent. 

(2) The likelihood of comorbidities requiring hospital admissions, emergency department visits or additional treatments is significant for diabetes patients.  Let’s look at the statistics, per the National Diabetes Information Clearinghouse at (; accessed July 7, 2010).

  • In 2004, heart disease was noted on 68 percent of diabetes-related death certificates among people ages 65 years or older.
  • In 2004, stroke was noted on 16 percent of diabetes-related death certificates among people ages 65 years or older.
  • Adults with diabetes have heart disease death rates about two to four times higher than adults without diabetes.
  • The risk for stroke is two to four times higher among people with diabetes.

High Blood Pressure

  • In 2003 to 2004, 75 percent of adults with self-reported diabetes had blood pressure greater than or equal to 130/80 millimeters of mercury (mm Hg) or used prescription medications for hypertension.


  • Diabetes is the leading cause of new cases of blindness among adults ages 20 to 74 years.
  • Diabetic retinopathy causes 12,000 to 24,000 new cases of blindness each year.

Kidney Disease

  • Diabetes is the leading cause of kidney failure, accounting for 44 percent of new cases in 2005.
  • In 2005, 46,739 people with diabetes began treatment for end-stage kidney disease in the United States and Puerto Rico.
  • In 2005, a total of 178,689 people with end-stage kidney disease due to diabetes were living on chronic dialysis or with a kidney transplant in the United States and Puerto Rico.

Nervous System Disease

  • About 60 to 70 percent of people with diabetes have mild to severe forms of nervous system damage. The results of such damage include impaired sensation or pain in the feet or hands, slowed digestion of food in the stomach, carpal tunnel syndrome, erectile dysfunction, or other nerve problems.
  • Almost 30 percent of people with diabetes ages 40 years or older have impaired sensation in the feet—for example, at least one area that lacks feeling.
  • Severe forms of diabetic nerve disease are a major contributing cause of lower-extremity amputations.


  • More than 60 percent of nontraumatic lower-limb amputations occur in people with diabetes.
  • In 2004, about 71,000 nontraumatic lower-limb amputations were performed in people with diabetes.

(3) the cost of individual inpatient admissions and ED visits is significant and the total cost of treating diabetes is significant.  For example, a single emergency department visit costs approximately $10,000.  Treating a heart attack costs approximately $35,000 or more.  60% to 70% of employer’s healthcare costs stem from chronic diseases, such as diabetes. (source: Appleb J. Carrot-And-Stick Health Plans Aim to Cut Costs  – Potentially Controversial Policies are Part of Trend Toward Value-Based Design.  Kaiser Health Network.  March 11, 2010)

(4) as demonstrated above in the CVS Caremark study, diabetes patients demonstrate greater therapy compliance as their financial responsibility is reduced; and

 (5) therapy compliance has been proven to lower co-morbidities and related costs.

The Cost of Funding VBID

Years can pass before payers realize a return on their investment in VBID.  Payers incur costs immediately.  For example, payers incur costs for developing VBID programs and administering them.  As well, treatment costs increase due to greater therapy compliance.  It can take months or years before VBID programs generate cost savings.

Accurately assessing the financial benefit of a VBID program can require the services of clinical researchers, health economics analysts and perhaps, actuarial consultants.  The analysis often is quite complex and expensive.

Not all concerns with VBID are financial.  VBID programs enhance access to select therapy regimens based on the value of those services, which is not always related to their cost.  Patients who have an adverse reaction to a preferred therapy regimen in a VBID program might need to administer a non-preferred therapy regimen.  These patients would incur a greater cost for therapy than those who did not experience the adverse reaction.  Those patients who incur a greater cost could develop a sense of ‘unfairness.’ 


The net cost constituting the financial impact of the VBID program depends on whether the incremental expenditures on high-value services can be offset through a decrease in adverse outcomes as a result of enhanced compliance with the prescribed therapy regimen.  Savings are likely to be enhanced by the program targeting specific patients at high risk of a preventable adverse event. 

As a result, VBID should be carefully implemented and targeted to the situations that meet the five requirements previously listed.  Designing and implementation of VBID programs requires a thorough clinical study of the given patient setting followed by development of administrative protocols and monitoring of compliance with the protocols.   

 Our discussion on VBID concept continues in our next blog article – evaluating return on investment.

July 7, 2010 at 9:04 PM Leave a comment

The Big Bad Drug Industry?

A recent study by the Kaiser Family Foundation found that spending in the US for prescription drugs was $234.1 billion in 2008, nearly 6 times the $40.3 billion spent in 1990. Although prescription drug spending has been a relatively small proportion of national health care spending (10% in 2008, compared to 31% for hospitals and 21% for physician services), it has been one of the fastest growing components, until the early 2000’s growing at double-digit rates compared to single-digit rates for hospital and physician services.  

Since 2000, the rate of increase in drug spending has declined each year except for 2006, which was the year Medicare Part D was implemented. By 2008, the annual rate of increase in prescription spending was 3%, compared to 5% for hospital care and 5% for physician services. From 1998 to 2008, prescription drugs contributed 13% of the total growth in national health expenditures, compared to 30% for hospital care and 21% for physician and clinical services.  


Annual prescription spending growth slowed from 1999 (18%) to 2005 (6%).  The key reasons for this slowing of prescription drug spending are: 

  • Increased use of generic drugs
  • Increase in tiered copayment benefit plans
  • Changes in the types of drugs used
  • A decrease in the number of new drugs introduced.
This profile raises the question as to why the drug industry has been a major focus of the healthcare reform effort.  Sure, some drugs cost more than $100,000 per dose.  That is significant, even for people with insurance coverage, and not easily understood by many consumers and healthcare professionals.  But given the limited portion of healthcare costs due to drugs, the significant rate of introduction of generic drugs, the lack of a significant drug pipeline outside of oncology and other, select disease states, there seems to be limited room for better managing these costs.
Instead, the lack of a significant pipeline outside of oncology therapies should be a major concern.  Pharmaceuticals offer the potential to improve outcomes while offsetting hospital and other healthcare costs.  The United States should support research efforts into new therapies while encouraging appropriate choice of drug therapy and compliance with indicated therapy regimens.  Such concepts as the patient-centered medical home and value-based insurance design should make inroads.  Appropriate provider and patient education will encourage even better therapy choice and enhanced compliance.


Let’s focus our energies in areas where cost savings and improved outcomes can be gained as there is significant room for improvement in the United States.  Let’s not excessively beat up those who are seeking to improve healthcare outcomes in a cost-effective way.


June 9, 2010 at 2:17 PM Leave a comment

Enter your email address to follow this blog and receive notifications of new posts by email.

Like this? Share it!


Twitter Feed

%d bloggers like this: