11
Insurers

Coordinator


John W. Rowe, Columbia University

(former Chief Executive Officer, Aetna)


Other Contributors


Carmella Bocchino, America’s Health Insurance Plans; George Halvorson, Kaiser Permanente; Carmen Hooker Odom, State of North Carolina Department of Health and Human Services; Mark McClellan, AEI-Brookings; Leslie Norwalk, Centers for Medicare and Medicaid Services; Steve Udvarhelyi, Independence Blue Cross

SECTOR OVERVIEW

The Institute of Medicine’s (IOM’s) Roundtable on Evidence-Based Medicine seeks to transform the way in which medical evidence is generated and used to improve health care. This is a goal strongly supported by the insurer sector, as evidenced by this sector’s continual evolution of tools and techniques designed to encourage excellence in medical practice and improve the value of the health care provided. This chapter describes the strategies already under way within the insurer sector (i.e., health insurance plans and public payers) and also sets out the insurer sector’s sugggestions for furthering this necessary transformation through a shared and collaborative effort.

Insurer Sector Profile

The United States spends nearly 16 percent of its gross domestic product—or $2 trillion—on health care, more than any other developed nation. In 2005, private health insurance plans were the largest payers for healthcare services, with payments from health insurance plans and other private spending, including consumers’ out-of-pocket costs, accounting for almost



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11 Insurers Coordinator John W. Rowe, Columbia University (former Chief Executive Officer, Aetna) Other Contributors Carmella Bocchino, America’s Health Insurance Plans; George Halvorson, Kaiser Permanente; Carmen Hooker Odom, State of North Carolina Department of Health and Human Services; Mark McClellan, AEI-Brookings; Leslie Norwalk, Centers for Medicare and Medicaid Services; Steve Udvarhelyi, Independence Blue Cross SECTOR OVERVIEW The Institute of Medicine’s (IOM’s) Roundtable on Evidence-Based Medicine seeks to transform the way in which medical evidence is gener- ated and used to improve health care. This is a goal strongly supported by the insurer sector, as evidenced by this sector’s continual evolution of tools and techniques designed to encourage excellence in medical practice and improve the value of the health care provided. This chapter describes the strategies already under way within the insurer sector (i.e., health insurance plans and public payers) and also sets out the insurer sector’s sugggestions for furthering this necessary transformation through a shared and collab- orative effort. Insurer Sector Profile The United States spends nearly 16 percent of its gross domestic product— or $2 trillion—on health care, more than any other developed nation. In 2005, private health insurance plans were the largest payers for health- care services, with payments from health insurance plans and other private spending, including consumers’ out-of-pocket costs, accounting for almost 29

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20 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE 55 percent of total healthcare expenditures (approximately $1.09 trillion of the $2 trillion) (CMS, 2005). Employment-based coverage continues to be the primary vehicle for private coverage, with 155 million nonelderly workers receiving such coverage in 2005 (Claxton et al., 2006). The different health insurance plan types are all represented within employment-based cover- age, with 60 percent of workers covered by preferred provider organization (PPO) networks, 20 percent by health maintenance organizations (HMOs), 13 percent by point of service (POS) plans, 4 percent by high-deductible health insurance plans with a savings option, and 3 percent by conventional plans (Claxton et al., 2006). The top 10 providers of private health insur- ance in the United States cover approximately 115 million lives enrolled in the health plans’ fully and self-insured managed care products, including HMOs, PPOs, POS plans, Medicaid and the State Children’s Health Insur- ance Program (SCHIP), Medicare, fee-for-service managed medical plans, and consumer-directed health plans. The enrollments in the different health plans include 27 million for WellPoint, Inc., 22 million for UnitedHealth Group, Inc., 14 million for Aetna, Inc., 12 million for the Health Care Service Cor- poration, 9 million for CIGNA Health Care, 9 million for Kaiser Permanente, 8 million for Humana, Inc., 5 million for Blue Cross Blue Shield of Michigan, 5 million for Highmark, Inc., and 4 million for the Health Insurance Plan of New York. Of these health plans, Kaiser Foundation Health Plan, Inc. and Blue Cross of California lead in HMO enrollment, at 5.6 million and 1.5 million enrollees, respectively (AIS Health, 2007). Public spending—including that by the Medicare, Medicaid, SCHIP, U.S. Department of Defense, and U.S. Department of Veterans Affairs (VA) health benefits programs—accounted for the remaining 45 percent of total healthcare expenditures (CMS, 2005). In 2007, there were 43.5 million people enrolled in either Medicare Part A or Part B, or both, which included 8 million enrollees participating in a Medicare Advantage plan (CMS, 2007a). Approximately 7.9 million veterans received benefits through VA (2006); and another 9.2 million active-duty personal, retirees, and depen- dents received care under TRICARE (2005) (U.S. Department of Veteran’s Affairs Office of Public Affairs Media Relations, 2007; U.S. Government Accountability Office, 2007). During 2006, almost 7 million children were enrolled in SCHIP at any one time, and in 2005, 58 million people received at least one health benefit through Medicaid (Congressional Budget Office, 2007; Kaiser Family Foundation, 2007). The private health insurance plan sector is represented by America’s Health Insurance Plans (AHIP), a trade association that represents the full spectrum of health insurance plans, and the Blue Cross and Blue Shield Association (BCBSA), a licensing entity that represents those health insur- ance plans that are licensed to use Blue Cross and Blue Shield service marks in exclusive service areas.

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2 INSURERS America’s Health Insurance Plans AHIP is the national association that represents nearly 1,300 companies providing health insurance coverage to more than 200 million Americans within the group and individual health insurance markets as well as govern- ment programs. Their members offer medical expense insurance, long-term care insurance, disability income insurance, dental insurance, supplemental insurance, stop-loss insurance, and reinsurance to consumers, employers, and public purchasers. AHIP represents 90 percent of all the accident and health insurance business in the United States; and AHIP members include commercial insurance companies, most Blue Cross Blue Shield plans, man- aged care organizations, self-funded plans, PPO networks, third-party administrators, disease management organizations, and reinsurers. AHIP’s goal is “to provide a unified voice for the health insurance industry, to expand access to high quality, affordable health care for all Americans, and to ensure Americans’ financial security through robust insurance markets, product flexibility and innovation, and an abundance of consumer choice.” The organization represents member interests on legislative and regulatory issues at the federal and state levels and with the media, consumers, healthcare professionals, and employers (America’s Health Insurance Plans, 2004). Blue Cross and Blue Shield Association BCBSA is the national federation of the 39 independent and locally operated Blue Cross and Blue Shield companies, which collectively provide healthcare coverage for more than 98 million Americans. BCBSA is a lead- ing supplier of business strategy, technical support, healthcare services, and consulting expertise for its member companies. BCBSA and the Blue Cross and Blue Shield companies work to strengthen the movement to greater transparency in health care by providing increased detail about healthcare trends, quality, cost, and best practices (BlueCross and Blue Shield Corpo- ration, 2007). Today’s Environment and Challenges for Change For much of the 1990s, healthcare costs rose at a slower rate than they had during the previous decade. After a period of relatively low cost growth in the mid-1990s, costs began to rise again, resulting in a health insurance premium growth that peaked at 13.9 percent in 2003 (Claxton et al., 2007). Not surprisingly, the number of uninsured Americans grew during this same time period, rising from 14 percent in 2000 to 15.3 percent in 2005. Although the growth in premiums has slowed over the last three consecu-

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22 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE tive years (2003 to 2006), healthcare costs continue to outpace inflation and place significant pressure on the cost of insurance coverage, as evidenced by the approximately 46 million Americans who remain uninsured. Although a wide range of drivers of rising costs have been suggested, there are several that are generally agreed to be key contributors. These generally agreed-upon drivers include new treatments and higher-priced technologies; the increased bargaining power of providers; increased con- sumer demand; an aging population; and chronic conditions associated with obesity, smoking, and substance abuse. Accompanying these rising healthcare costs and, many would argue, contributing to these costs is the fact that medical care has become notori- ous for wide regional variations in treatment, the significant underuse and misuse of recommended best practices, and an undue reliance on treat- ments of little or no value. Research has consistently shown that Americans receive healthcare services in accordance with the latest scientific evidence only about half of the time. A 2003 RAND study reported that, on aver- age, Americans receive the recommended medical care less than 55 percent of the time, with little difference shown when the care provided is divided into preventive care (54.9 percent), acute care (53.5 percent), and care for chronic conditions (56.1 percent). Research by John Wennberg and others has concluded that evidence-based medicine plays virtually no role in gov- erning the frequency of use of supply-sensitive services and that most of the care provided is driven by other factors, such as the numbers of physicians and hospital beds in a given market, and the widely held assumption that more medical care means better care (Wennberg, 2007). Additional research conducted over the last two decades by Wennberg’s group has effectively demonstrated the wide variation in care received by patients across the country. For example, one study demonstrated that care was consistent with evidence-based guidelines less than 20 percent of the time in 10 of the 306 hospital referral regions in the United States and in only 8 regions was care consistent with medical evidence more than 80 percent of the time (Wennberg and Cooper, 2007). Despite such research, there continue to be examples of treatments widely adopted and used outside the boundaries of supporting evidence that are later found to offer no advantages to existing treatments (e.g., the use of drug-eluting stents for the treatment of coronary artery disease) and, in some cases, to even be harmful (e.g., rofecoxib [Vioxx]). Legislative and regulatory processes have also contributed to some of the problems of overuse, underuse, and regional variation. The provision of high-dose chemotherapy following an autologous bone marrow trans- plant (HDC/ABMT) is a prime example of the influence that legislative and regulatory processes can have. In the 1990s, physicians began performing HDC/ABMT for women with late-stage breast cancer, often forgoing stan-

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2 INSURERS dard chemotherapy treatment. Given that there was virtually no good evi- dence supporting the safety and effectiveness of HDC/ABMT, many health insurance plans denied coverage for the procedure. In response, physicians, patients, and policy makers successfully lobbied state legislatures to pass legislation mandating that health insurance plans provide coverage for this treatment. It was not until 1999 that the preliminary results of five clinical trials for HDC/ABMT showed that the treatment was no better in extend- ing survival than standard treatment and, in fact, posed higher risks of toxic side effects. In addition, because this treatment had become so widely used before its effectiveness had been assessed, many women declined to enroll in clinical trials for HDC/ABMT for fear of being assigned to the standard treatment control group. It took years longer than it might have to gather the evidence showing that HDC/ABMT is an ineffective, risky, and expen- sive procedure. The current trends in both cost and quality, coupled with the influence and expectations of legislators, regulators, consumers, and purchasers, have resulted in an environment fraught with significant challenges to the promotion of evidence-based decision making. Yet those same challenges represent the very reasons why such a transformation is necessary. A health- care system that relies on evidence-based decision making will (1) improve the quality of healthcare delivery; (2) maximize the value and effectiveness of the nation’s investment in health care; and (3) help guide providers, consumers, health insurance plans, and purchasers in making decisions pertaining to treatment and benefit design. ACTIVITY CATEGORIES Private Sector From individual health insurance plan efforts to health insurance plan consortium activities, such as those of the HMO Research Network,1 to industry-wide initiatives led by AHIP and BCBSA, the private health insurance plan sector has led the way in adopting strategies to improve the value of health care by using medical evidence to enhance both quality and affordability. The widespread adoption of these strategies also helps stimulate the interest in and development of further evidence. 1 The HMO Research Network is a consortium of 15 HMO organizations that have formal, recognized research capabilities with a mission to use its collective scientific capabilities to integrate research and practice for the improvement of health and health care among diverse populations. Its database includes information on more than 12 million covered lives. More information can be found at http://www.hmoresearchnetwork.org/.

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2 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE Below are selected examples of how medical evidence is used in devel- oping medical policy, benefit design, network design, and provider reim- bursement arrangements. Pharmacy Management Health insurance plans use pharmacy and therapeutics (P&T) committees—which comprise physicians, pharmacists, and other health- care professionals—to research the scientific evidence on what works and review the available cost and comparative effectiveness data to determine which drugs should be placed on formularies. Utilization Management Early in their evolution, health insurance plans relied on utilization management programs as a tool to promote evidence-based care and the cost-effective use of healthcare resources. These programs screened recom- mended care against evidence-based guidelines to reduce unnecessary varia- tions in practice and to identify care that was inappropriate or unsupported by the medical evidence. However, pressure from consumers, providers, and legislators forced health insurance plans to significantly curtail their utilization management programs, which has led to continuing issues with healthcare quality and which has prompted health insurance plans to seek alternative ways to promote quality and cost-effective care. Coverage of New Technologies and Services Drawing on the latest scientific findings on effectiveness and value, health insurance plans use internal staff and processes to guide the creation of medical policy, including decisions about coverage. Many health insur- ance plans conduct their own assessments of new technologies and services or commission external technology assessments by academic or private groups to help inform their internal deliberations. All health insurance plans base their medical policies on evidence, with each creating its own method for gathering evidence and weighing it in relation to the values of various stakeholders to seek high-quality and efficient care. Recognizing that there is inadequate evidence to determine the appropriate role for experimental or investigational interventions, health insurance plans have promoted the more rapid development of new evidence by covering routine care costs for patients enrolled in clinical trials that are appropriately designed to study experimental and investigational interventions and not covering the costs when patients are not enrolled in such trials.

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2 INSURERS Disease Management and Wellness Health insurance plans have developed a new generation of tools to ensure that the coordination of care and that the delivery of evidence-based medicine are complementary, particularly for individuals with multiple chronic or complex conditions, because these individuals are often treated by multiple healthcare professionals. Through their use of health risk assess- ments, health insurance plans can offer patients and providers customized tools that they can use to modify behavior, encourage the use of preventive care, monitor potential medication interactions, and improve health. As part of this approach, many health insurance plans have reduced or elimi- nated altogether the cost sharing for maintenance drugs or preventive ser- vices that reduce the likelihood of hospitalization, such as asthma controller medications. Additionally, many health insurance plans have incorporated fitness benefits more widely into their benefit designs. By profiling the actual care received and comparing it with evidence-based recommendations, identifying gaps, and working to close those gaps, health insurance plan disease management and wellness programs maximize an opportunity to advance nationally recommended preventive services, among other types of recommended care. One of the most successful models of disease management and wellness programs relies on health coaching to promote behavior changes. Under this model, patients who have been identified as being at risk for a disease or complications from a chronic disease are offered the opportunity to work with a healthcare professional trained as a health coach. The health coach helps the patient make life style changes that improve his or her health, increase compliance with physician treatment plans, and address unmet health and social service needs. Despite the conclusion from a recent Congressional Budget Office analysis that it is too early to estimate the impact that disease management programs are having on overall healthcare spending, the market response to disease management suggests that health insurance plans and employers are finding that disease management provides good value. A national study that used data from a large health insurance plan in 10 urban areas found that overall costs were significantly lower for full-year program participants with diabetes than for nonparticipants with diabetes, and the purchasers of the disease management program saved more than was spent. The most important source of savings was a 22 to 30 percent reduction in hospi- talization, which was beneficial for both patients and providers (Villagra and Ahmed, 2004). A study that evaluated the impact of a heart disease management program on hospital service utilization, as well as the potential costs savings over and above the cost of delivering the program, found that participants experienced 46 percent fewer inpatient days and 49 percent

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2 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE lower inpatient costs than the control group, but no significant differences in the rates of emergency department utilization were reported between the two groups (Wheeler et al., 2003). Pay for Performance Both public and private health insurers have begun to offer finan- cial and other incentives to providers for delivering higher-quality care. Performance is measured by the use of selected evidence-based standards and performance measures as a method to potentially reverse the perverse incentives of current payment models that lack any recognition of quality performance. By aligning incentives to encourage improvements in patient care, some health insurance plans have already begun to see rising rates of preventive care and improvements in key indicators of patient health. Some studies of pay-for-performance programs have shown an increase in the quality of care received. In one study, the most significant improvements in quality were seen among physician groups with the lowest baseline perfor- mance (Rosenthal et al., 2005). Some private insurers are targeting incen- tives to reward physician groups not only for high absolute performance but also for relative improvements (Rosenthal et al., 2006). Work with provider professional societies and certification boards in the design and implementation of pay-for-performance programs has resulted in added success and support of these programs. In fact, a 2004 poll of physicians found that 71 percent of physicians supported payments based on the quality of care (Rowe, 2006). Additional support from purchasers, such as the Leapfrog Group, which represents large employers and public purchasers who work to engage consumers and clinicians in improving healthcare quality, led the Medicare Payment Advisory Commission to recommend that Medicare adopt performance-based payment (Galvin et al., 2005). In a 2007 comparison of the results of the Centers for Medicare and Medicaid Services’ Premier Hospital Quality Incentive Demonstration (HQID) and the Hospital Quality Alliance’s (HQA’s) public reporting initiative, researchers found that hospitals whose public reporting was tied to financial incentives had greater improvements in the quality of care than hospitals that only publicly reported quality data. Although both groups of hospitals showed improvements in each of the individual and compound performance measures, the pay-for-performance hospi- tals (HQID) that were offered a 1 to 2 percent bonus for achieving high levels of performance compared with the performance of their peers showed a 2.6 to 4.1 percent improvement in quality over a 2-year period (Lindenauer et al., 2007).

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2 INSURERS Value-Based Purchasing and Benefit Design Value-based purchasing and benefit design is a strategy that both pur- chasers and health insurance plans use to base decisions regarding coverage and payment policies on the value of the treatments or the services provided compared with the underlying costs of those treatments (Clancy, 2006). Under value-based purchasing strategies, value is judged on the basis of a comparison with the best existing alternative and not on the basis of a com- parison with a placebo or no treatment. Additionally, value is judged only when marginal benefits can be viewed in the context of marginal additional costs. This analysis of benefits and costs occurs not only at the individual patient level but also because it involves issues of implementation, staffing, and quality assurance within systems of care. Although the detractors of value-based purchasing and benefit design argue that decisions regarding healthcare coverage should not include costs, others point to the escalation of healthcare spending as an outcome of not considering cost in relation to the amount of additional benefits that new technologies and treatments can provide. Value-based purchasing and ben- efit design can help break the pattern of wasteful spending and increase the quality of the care provided by basing decisions on both clinical and cost- effectiveness, without leading to all-or-nothing coverage decisions. Both public and private insurers are already using methods, such as tiered drug formularies and premium networks, that allow consumers to make personal healthcare choices according to what benefits they desire and what risks and costs they are willing to incur. Patients who see physicians outside of the premium network or who take medications in a higher formulary tier may have to pay more in terms of deductibles and or copayments, but the value-based judgment is theirs to make. CMS has already implemented multiple value-based purchasing initiatives (e.g., programs, demonstration projects, pilot programs, and voluntary reporting efforts) in hospitals, phy- sician offices, nursing homes, home health services, and dialysis facilities. Currently under development and scheduled to be launched in 2009 is a value-based purchasing program for Medicare hospital services that will measure and reward performance for the care provided in hospital outpatient settings (CMS Hospital Pay-for-Performance Workgroup et al., 2007). A recent example of a private insurer working with purchasers and pro- viders to implement value-based purchasing occurred at the Virginia Mason Medical Center in Washington. The insurer completed an analysis of high- quality providers in Seattle and found that the costs in several of Virginia Mason’s subspecialty departments far exceeded the cost benchmarks for the region. To remain the insurer’s high performance network, Virginia Mason worked with the insurer and four of its largest employer clients to implement a cost-reduction strategy. The strategy focused on a set number

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2 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE of conditions and services. The initial results showed a reduction in costs for purchasers and patients, with no adverse impact on patient outcomes (Pham et al., 2007). Continued progress in the area of value-based purchasing should include the development of a common understanding of the noncost components of value, such as patient preferences and personal values. State Medicaid Programs Rising costs have also led state Medicaid programs to place a greater emphasis on value. For example, rising drug costs and decreasing amounts of state funding for Medicaid programs have led states to look for methods by which they may control pharmacy costs, in particular. The Drug Effec- tiveness Research Project (DERP) is a collaboration of public and private organizations, including 15 state Medicaid programs, that have joined together to share the cost of conducting systematic evidence-based reviews of the comparative effectiveness and safety of pharmaceuticals in many widely used drug classes. The collaboration can then use the results of these systematic reviews to develop public policies or preferred drug lists. DERP reports contain no cost data and do not recommend specific pur- chasing policies, which allow partners to use global information to make local decisions on what would be best for the beneficiaries within their states. DERP is a self-governing project, with member organizations vot- ing to set priorities, determining which drug classes will be reviewed, and developing key questions and inclusion criteria for each drug class review. In some states, DERP reports are the sole source of evidence for the sup- port of drug coverage decisions, whereas other states use multiple sources. Some states use DERP reports to validate their own evidence-based clinical reviews or those that contractors develop for them (Hoadley et al., 2007). Like most large-scale programs, DERP is not without controversy. Some have maintained that DERP reviews tend to include only randomized con- trolled trials (RCTs), to the exclusion of observational studies (Neumann, 2006). Proponents of DERP counter that DERP reviews do favor RCTs as the “gold standard” of clinical studies, but observational studies are also used to assess the safety of medications. Supporters also consider DERP one of the more transparent research projects ongoing, citing the fact that DERP publishes draft key questions and draft reviews for public comment before finalization (Gibson and Santa, 2006). The success of DERP led to the formation of a similarly structured project, the Medicaid Evidence-Based Decision Project, which is also a col- laboration of state Medicaid programs whose purpose is to better inform clinical coverage issues and benefit design beyond pharmaceutical use. Initi- ated in June 2006, state collaborators receive access to systematic reviews of

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29 INSURERS the existing evidence on treatments and procedures, assessments of current and new healthcare technologies, support in designing evaluations of prod- ucts when there are evidence gaps, and access to an information clearing- house (Oregon Health and Science University, 2007). Medicaid programs have used the work of relevant government agencies, such as the Agency for Healthcare Research and Quality (AHRQ) through its Evidence-Based Practice Centers and DEcIDE (Developing Evidence to Inform Decisions about Effectiveness) projects. Furthermore, some state Medicaid agencies have established indepen- dent advisory entities that provide access to the latest evidence for policy decisions. Several state Medicaid programs have also undertaken innovative pilot efforts to improve the quality of care based on principles that origi- nated in the private sector. A number of states have implemented pay-for- performance strategies, such as physician profiling incentive programs in Maine and provider profiling incentive programs in Massachusetts (Llanos et al., 2007). Other states have implemented disease management initiatives through homegrown efforts or commercial vendors. One such demonstra- tion program, Community Care of North Carolina, has had significant success in asthma and diabetes programs, which have been demonstrated to be cost-effective and to have increased the quality of care that they provide according to set performance measures. Savings have been estimated to be $3.5 million for asthma care and $2.1 million for diabetes care (Community Care of North Carolina, 2003; Ricketts et al., 2007). Medicare Program Medicare’s Quality Improvement Organization (QIO) program, created in 1982, was developed with the purpose of improving the quality and efficiency of services delivered to Medicare beneficiaries. The QIO program consists of 41 organizations that hold 53 contracts with CMS to provide services in each state, territory, and the District of Columbia. The QIOs work with stakeholders, including consumers and physicians, hospitals, and other caregivers, to improve care delivery systems to ensure that patients get the right care at the right time, with particular attention paid to patients from underserved populations. In addition, QIOs work with physicians and other stakeholder organizations to measure and report on performance and to help with the adoption of healthcare information technology (CMS, 2007d). Announced in 2005 for a 3-year period, the 8th Statement of Work for QIOs focuses on reporting, improving, and rewarding quality within four care settings: nursing homes, home health agencies, hospitals, and physician offices (CMS, 2007c). Medicare also continues to focus more attention on the use of evidence in coverage, reimbursement, and compensation policies. In 1999 Medicare

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2 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE Focus and Coordinate Research Efforts to Address Identified Gaps in Evidence and Factors That Drive Physician Decision Making Given that gaps in evidence can lead to variations in medical practice and put patients at risk, identifying key areas that need further research will serve to address this known evidence gap and aid clinicians in their decision making. No one entity is currently accountable for the development of a long-term strategy that can be used to address this deficiency. Because the U.S. Department of Health and Human Services (HHS) is the fiscal manager of federal dollars for research, HHS’s fiscal responsibility should be coupled with the task of developing a strategy to prioritize the research agenda needed to address known gaps in evidence and safety. In this new role, HHS, in collaboration with the CEB recommended above, can help ensure that research is conducted in areas that currently lack sufficient research findings yet have the potential to significantly improve patient outcomes. One important benefit of this enhanced emphasis on the evidence gap will be to draw attention to the fact that a significant portion of modern medi- cine is not supported by medical evidence and that more work needs to be done to align current medical practices with medical evidence. In addition to identifying and promoting research in these priority areas, HHS’s role should include enhanced communication with the public about those studies under way to address these priority areas. Such public infor- mation and education will advise both consumers and providers of the lack of reliable evidence on these conditions or treatment protocols and provide them with the ability to track this information throughout the study period. Similar to the information that the National Cancer Institute releases on its website highlighting the current cancer clinical trials that are under way and providing information on patient eligibility, trial protocols, and the current status of the trial, HHS could, for example, coordinate the release of public information on any postmarketing approval studies—studies conducted after FDA approval of drugs, devices, and biologics—currently under way, the goals for such studies, and their expected completion dates. Better Dissemination of Actionable Information at the Point of Care and Transparency of Performance and Information Used to Make Decisions In the majority of U.S. economic markets, entities compete on the basis of price and quality and consumers make their decisions on the basis of reli- able, accurate information. For a variety of reasons, this has never been the case in the healthcare market. Instead, many consumers, having little other information to go on, tend to equate higher costs with higher quality— although this is often not the case. In recognition of this problem, the IOM in its 2001 report Crossing the Quality Chasm stressed that transparency

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2 INSURERS should be a key element of any strategy to improve clinical quality and achieve better value in the healthcare system (Institute of Medicine, 2001). A healthcare marketplace that empowers consumers to make informed choices on the basis of both cost and quality will result in a healthcare system that offers improved value to consumers and encourages innovation and contin- ued evolution. The private sector has led the way in developing a uniform approach to the disclosure of relevant, useful, understandable, and actionable infor- mation to facilitate consumer decision making. The key stakeholders among the different disciplines, including health insurance plans, physi- cians, hospitals, consumers, and employers, have convened broad-based, national alliances (AQA Alliance and HQA) to determine a more effective strategy for measuring, reporting, and improving physician and hospital performance. The leadership of AQA and HQA has recently formed a new national entity, the Quality Alliance Steering Committee (QASC), whose purpose is to better coordinate the promotion of quality measurement, transparency, and improvement in care across all care settings. CMS has been an active member of both alliances and is working to use the rec- ommendations from AQA and HQA and the measures endorsed by the National Quality Forum as part of the PQRI, the hospital public report- ing project (Hospital Compare), and hospital demonstration projects on value-based purchasing. The private sector has also begun building the capacity to analyze certain agreed-upon episodes of care (e.g., pregnancy), in addition to specific services (e.g., labor and delivery), to allow con- sumers to make more comprehensive and informed assessments of the health care that they receive. In an effort to eliminate duplicative efforts to measure and report on performance, AQA has launched a pilot project at six sites across the country that would combine public- and private-sector data to measure and report on physician-level practice. These sites, which will eventually include an aggrega- tion of data from commercial sources and the Medicare program, are now called “value exchanges.” In an effort to encourage the development and growth of public–private collaborations under this project, HHS has estab- lished two levels of recognition for participants in these initiatives. Partner- ships in the early stages of development are designated “community leaders,” and more advanced collaborations are designated as “value exchanges” and will be invited to participate in a nationwide learning network, sponsored by AHRQ, that will provide access to expert faculty, lessons about successful quality improvement, and reporting to consumers. This comprehensive approach being undertaken to promote better assessments of performance will make it far easier to identify opportunities for quality improvement, result in valid and consistent measures of quality and efficiency that can be used to improve care throughout the healthcare

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2 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE system, and provide important information to patients in making health- care decisions. Only by improving performance assessment and making the results of those assessments available to consumers in both the private and public sectors can systemwide improvement be achieved. Another important research need that deserves specific attention relates to the accurate display of cost information for consumers. More focus has been placed on asking consumers to make informed healthcare choices, either in choosing an efficient provider or in comparing their treatment options; the medical community has little understanding of how best to share information on cost by either specific procedure or episode of care. This is especially difficult in an industry in which the consumer has been isolated from the true costs of health care. With the rise in popularity of consumer-directed health plans and the desire of the consumer to receive the highest-quality health care for the lowest price, the importance of this type of research should not be discounted (Buntin et al., 2006). Achieve Data Consistency to Allow Easy Sharing of Information Among Various Stakeholders In addition to emphasizing the need for information to aid consumers with making decisions about their health care, the IOM’s 2001 report Crossing the Quality Chasm also identified the need for better information to aid physicians, hospitals, and other healthcare professionals with the identification of gaps in quality and to assist them in comparing their per- formance with that of similar practicing providers. The lack of consistency in the available information makes comparisons of providers and health care difficult while the public is becoming increasingly aware of gaps in care and safety for themselves and their family members (American Health Information Community, 2007). Many different private- and public-sector groups have attempted to step up to the challenge by designing models for assessing performance and aggregating and reporting data. Although some progress has been made, the proliferation of multiple, uncoordinated, and sometimes conflicting initiatives has had significant unintended conse- quences for different stakeholders. Duplicative efforts unnecessarily burden physicians, other clinicians, and health insurance plans with different data requests, shifting the focus away from quality and efficiency improve- ment. When divergent information is collected and publicly reported, it creates confusion among consumers, detracts from efforts by employers to design programs that meet the needs of their employees, and diverts limited resources and focus away from achieving systematic improvements in health. Through AHIP, the health insurance plan sector is working to imple- ment a national strategy to aggregate data from multiple health insurance

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29 INSURERS plans and other sources to produce and report on an increasingly sophis- ticated set of quality and cost measures throughout the country. This national strategy will build on the foundation provided by existing quality measurement efforts, such as the AQA alliance and HQA efforts mentioned above, as well as the efforts of individual health insurance plans. The data aggregation method may also be applied to address other issues related to monitoring and improving medical practice, such as tracking drug utiliza- tion and safety and developing better evidence on medical treatments. Promote Optimal Care by Emphasizing Evidence-Based Coverage and Reimbursement Strategies As mentioned above, health insurance plans have adopted a range of strategies designed to encourage evidence-based decision making. In addi- tion to creating medical policies that reflect scientific findings on effective- ness and value, health insurance plans routinely provide information to patients encouraging them to receive preventive benefits supported by medi- cal evidence. Health insurance plans have also capitalized on their ability to advance nationally recognized preventive services through their disease management and wellness programs. Additionally, health insurance plans provide feedback to individual practitioners about their performance and alerts about potential drug interactions. They also offer incentives to practi- tioners to practice medicine in a manner that is consistent with the medical evidence and that yields high-quality health care. The use of such pay-for- performance strategies represents a mechanism that aligns incentives in a way that encourages ongoing improvement in the quality of care that is provided and should continue to be pursued. Although the reimbursement practices of public programs preclude a direct corollary with those of private programs from being made, coverage and reimbursement policies in public programs offer immediate opportuni- ties for policy reform. For example, because of its tremendous influence on the adoption of healthcare technologies and treatments, the U.S. Congress should give CMS the explicit authority to use the available data on compara- tive effectiveness and cost-effectiveness in determining its coverage policies. Similarly, empowering CMS to set reimbursement rates for new technologies more in alignment with the added (or marginal) value of a new technol- ogy over established alternatives will help constrain unsustainable trends in increased cost and improve overall quality. Parallel efforts by other federal agencies that have a role in establishing coverage policy, such as VA and the Office of Personnel Management, as well as by state agencies responsible for administering state Medicaid programs, should also be considered. In addition to modernization of state Medicaid coverage and reimburse- ment policies, state enactment of coverage mandates must be addressed. A

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290 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE number of states have enacted laws requiring the systematic review of ben- efit mandates and the extent to which such mandates are consistent with the medical evidence. By nature, a mandate is static and unable to reflect changes in the practice of medicine that may make the mandate obsolete or even harmful to patients. Yet mandates do exist and may persist in the future. The continued establishment and use of independent state advisory bodies, such as external review organizations and state cost-containment boards, to evaluate the consistency of state mandates with the latest medi- cal evidence are essential and will provide valuable information to policy makers, clinicians, and consumers. Invest in Infrastructure Development, Deployment, and Use The transparent collection, analysis, and dissemination of information on the latest medical evidence, performance, and comparative effectiveness at the point of care will require further investment in several key areas of the healthcare infrastructure. First, significant investment will be needed to build the early systems that can aggregate administrative data and electronic health record information in a reliable fashion. Second, for this information to reach clinicians and patients, new research and investment in methods of information synthesis and dissemination will be needed. An important impetus to restructuring the U.S. healthcare system is the presence of the American Health Information Community (U.S. Department of Health and Human Services, 2007); the work of QASC, HQA, and the AQA Alliance in seeking to reach common standards for data stewardship and aggregation; and the work of multiple vendors, clinicians, and other stakeholders. Additional resources must also be directed toward efforts to translate the results of clinical research into best practices. Providers will need to look for ways to redesign their business practices so that they allow the easy adoption of new evidence. An interoperable healthcare system will ensure that appropriate, reliable information is available to guide medical deci- sions at the time and place of care, help reduce preventable medical errors, improve quality, and advance the delivery of evidence-based medical care. In doing so, it will create a more effective marketplace, create greater com- petition, reduce overall healthcare costs, and create a value-based healthcare system. NEXT STEPS Opportunities for Collaboration The insurer sector is well positioned to play an integral role in a national effort to improve the generation, dissemination, and implementation of

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29 INSURERS medical evidence. The current state of the quality and the affordability of health care in the United States demand nothing less than a concerted and collaborative commitment to improving the value of health care. All of the progress that has been made to date has been achieved through partnerships and collaborations across the healthcare system. The AQA Alliance and HQA initiative to determine a more effective strategy for measuring, reporting, and improving physician and hospital performance is an excellent example of the type of broad-based coalition necessary to drive change and improvement. Just as AHIP and BCBSA represent the health insurance plan sector, different groups also represent providers, consumers, employers, and other stakeholders. Countless organizations representing different stakeholders have been involved in collaborative and cooperative efforts with the health insurance plan sector on a variety of healthcare issues. Collaboration among providers, insurance plans, consumers, purchasers, and manufacturers must increase to take advantage of these opportunities. Several specific areas in which continued progress would greatly benefit from enhanced collaboration between health insurance plans and other stake- holders are as follows: Efforts to develop benefit language compatible with medical • evidence-based innovative benefit designs (e.g., tiered benefits for procedures, devices, and diagnostics and incentives for con- sumers to take up therapies supported by evidence) will require collaborations among health insurance plans, purchasers, and state regulators. The creation and the design of the proposed CEB will require col- • laboration among all stakeholders in the healthcare system to help identify for evaluation priority areas that will have the greatest potential to improve the quality of health care. Public awareness and education efforts to communicate the under- • lying goal of evidence-based medicine and comparative effective- ness as being one of care improvement and not access reduction will require collaboration among health insurance plans, consumer groups, purchasers, manufacturers, and providers. The continued evolution of performance-based payment models • that recognize and reward hospitals, physicians, and other clini- cians for adopting evidence that results in improved outcomes and appropriate resource use will benefit from collaboration among health insurance plans, purchasers, providers, and consumers. Efforts to develop a more transparent and consistent approach to • judging evidence in the context of medical policy decision mak- ing will require the broad-based involvement of health insurance

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292 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE plans, manufacturers, experts in evidence-based medicine, patients, employers, and government. The development of a consensus around what constitutes “value,” focusing particularly on the non- cost components of value, will require collaboration among these stakeholders. The development of a new format for technology appraisals that • allows the integration of ratings of clinical and cost-effectiveness that can support value-based insurance benefits and guide deci- sion making by patients and clinicians toward higher value could benefit from collaboration among health insurance plans and other stakeholders and the Institute for Clinical and Economic Review. The exploration of further application of CED initiatives in cir- • cumstances in which further evidence generation is needed to assess important remaining questions about the safety and comparative effectiveness of new technologies could be achieved through col- laboration among CMS, health insurance plans, and other private- sector entities, such as the Center for Medical Technology Policy. The current paradigm for building evidence and value may have • limited application in the future as personalized medicine becomes more in demand. Evidence on demographics, genomics, patient preferences, and other factors will need to be considered. This will require collaboration among providers, payers, and manufacturers to make sure that the necessary information on treatment options is available to allow improved quality at both the individual and the aggregate levels. Reform of the medical liability system, so that the resolution of • disputes is based on scientific evidence, will require the collabora- tion of groups representing virtually all of the healthcare system’s stakeholders. The heightened level of attention being paid to issues of healthcare cost, quality, and access signifies an opportunity for stakeholders within the healthcare system to come together and develop the necessary road map for the transformation to a more evidence-based system. The IOM Roundtable has provided a much needed forum for the discussion and development of this road map, and the insurer sector looks forward to continued active participation in this overall effort to drive progress. REFERENCES AIS Health. 2007. AIS directory of health plans. http://www.aishealth.com/Products/dhp. html (accessed December 9, 2007).

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29 INSURERS American Health Information Community. 2007. Quality workgroup. Quality workgroup full vision summary. January , 200. http://www.hhs.gov/healthit/ahic/materials/qual_ vision_summary.pdf (accessed March 15, 2007). America’s Health Insurance Plans. 2004. America’s Health Insurance Plans website. http:// www.ahip.org (accessed May 12, 2008). Atkinson, W. 2007. The impact of CED on private payers. Biotechnology Healthcare 24:24-30. BlueCross and BlueShield Corporation. 2007. BlueCross and BlueShield Corporation website. http://www.bcbs.com (accessed May 12, 2008). Braithwaite, R. S., and A. B. Rosen. 2007. Linking cost sharing to value: An unrivaled yet unrealized public health opportunity. Annals of Internal Medicine 146(8):602-605. Buntin, M. B., C. Damberg, A. Haviland, K. Kapur, N. Lurie, R. McDevitt, and M. S. Marquis. 2006. Consumer-directed health care: Early evidence about effects on cost and quality. Health Affairs 25(6):w516-w530. Clancy, C. M. 2006. Arming health care consumers: Testimony before the Joint Economic Committee, May 0, 200. Washington, DC. Claxton, G., I. Gil, B. Finder, B. DiJulio, S. Hawkins, J. Pickreign, H. Whitmore, and J. Gabel. 2006. The Kaiser Family Foundation health research and educational trust (HRET) employer health benefits: 200 annual survey. http://www.kff.org/insurance/ 7527/upload/7527.pdf (accessed June 1, 2007). Claxton, G., J. Gabel, B. DiJulio, J. Pickreign, H. Whitmore, B. Finder, P. Jacobs, and S. Hawkins. 2007. Health benefits in 2007: Premium increases fall to an eight-year low, while offer rates and enrollment remain stable. Health Affairs 26(5):1407-1416. CMS (Centers for Medicare and Medicaid Services). 2005. 200 CMS national health expenditures data; web tables. Baltimore, MD. http://www.cms.hhs.gov/ NationalHealthExpendData/downloads/tables.pdf (accessed May 21, 2007). ———. 2007a. CMS Management Information Integrated Repository (MIIR). Baltimore, MD. ———. 2007b. Physician quality reporting initiative: Overview. Baltimore, MD. http://www. cms.hhs.gov/pqri/01_overview.asp (accessed May 28, 2007). ———. 2007c. Quality improvement organizations: th round statement of work contract. Baltimore, MD. http://www.cms.hhs.gov/QualityImprovementOrgs/downloads/8thSOW. pdf (accessed June 27, 2007). ———. 2007d. Quality improvement organizations: Overview. Baltimore, MD. http://www. cms.hhs.gov/QualityImprovementOrgs/ (accessed May 15, 2007). CMS Hospital Pay-for-Performance Workgroup, RAND Corporation, Brandeis University, Booz Allen Hamilton, and Boston University. 2007. U.S. Department of Health and Human Services Medicare hospital value-based purchasing plan: Development issues paper. Washington, DC. Community Care of North Carolina. 2003. Progress report: Asthma initiative. http://www. communitycarenc.com/PDFDocs/AsthmaProgressReport.pdf (accessed May 15, 2007). Congressional Budget Office. 2007. The state’s children health insurance program. Wash- ington, DC. http://www.cbo.gov/ftpdoc.cfm?index=8092&type=1 (accessed May 30, 2007). Denny, C. C., E. J. Emanuel, and S. D. Pearson. 2007. Why well-insured patients should demand value-based insurance benefits. JAMA 297(22):2515-2518. Galvin, R. S., S. Delbanco, A. Milstein, and G. Belden. 2005. Has the Leapfrog Group had an impact on the health care market? Health Affairs 24(1):228-233. Gibson, M., and J. Santa. 2006. The drug effectiveness review project: An important step forward. Health Affairs 25(4):W272-W275.

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29 LEADERSHIP COMMITMENTS TO IMPROVE VALUE IN HEALTH CARE Health Industry Forum. 2007. Comparative effectiveness forum: Executive summary. Waltham, MA: Brandeis University-Heller School for Social Policy and Management. Hoadley, J., J. Crowley, D. Bergman, and N. Kaye. 2007. Understanding key features of the Drug Effectiveness Review Project (DERP) and lessons for state policy makers. Wash- ington, DC: National Academy of State Health Policy. Institute of Medicine. 2001. Crossing the quality chasm: A new health system for the 2st century. Washington, DC: National Academy Press. ———. 2006. The future of drug safety: Action steps for congress. Washington, DC: The National Academies Press. Kaiser Family Foundation. 2007. Medicaid enrollment in 0 states: A June 200 data up- date. Washington, DC. http://www.kff.org/medicaid/upload/7606.pdf (accessed May 21, 2007). Lindenauer, P. K., D. Remus, S. Roman, M. B. Rothberg, E. M. Benjamin, A. Ma, and D. W. Bratzler. 2007. Public reporting and pay for performance in hospital quality improve- ment. New England Journal of Medicine 356(5):486-496. Llanos, K., J. Rothstein, M. Dyer, and M. Bailit. 2007. Physician pay-for-performance in Medicaid: A guide for states. Hamilton, NJ: Center for Health Care Strategies. http:// www.chcs.org/publications3960/publications_show.htm?doc_id=471272 (accessed May 21, 2007). Neumann, P. J. 2006. Emerging lessons from the drug effectiveness review project. Health Affairs 25(4):W262-W271. Oregon Health and Science University. 2007. Medicaid evidence-based decisions project (MED). Portland, OR. http://www.ohsu.edu/ohsuedu/academic/som/phpm/med/index. cfm (accessed May 12, 2008). Pham, H. H., P. B. Ginsburg, K. McKenzie, and A. Milstein. 2007. Redesigning care delivery in response to a high-performance network: The Virginia Mason Medical Center. Health Affairs 26(4):w532-w544. Ricketts, T., S. Greene, P. Silberman, H. Howard, and S. Poley. 2007. Evaluation of Com- munity Care of North Carolina asthma and diabetes management initiatives: January 2000-December 2002. Chapel Hill, NC: The Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill. Rosenthal, M. B., R. G. Frank, Z. Li, and A. M. Epstein. 2005. Early experience with pay-for- performance: From concept to practice. JAMA 294(14):1788-1793. Rosenthal, M. B., B. E. Landon, S. L. Normand, R. G. Frank, and A. M. Epstein. 2006. Pay for performance in commercial HMOs. New England Journal of Medicine 355(18):1895-1902. Rowe, J. W. 2006. Pay-for-performance and accountability: Related themes in improving health care. Annals of Internal Medicine 145(9):695-699. U.S. Department of Health and Human Services. 2007. The American Health Information Community. Washington, DC. http://www.hhs.gov/healthit/community/background/ (ac- cessed May 14, 2007). U.S. Department of Veteran’s Affairs Office of Public Affairs Media Relations. 2007. Facts about the Department of Veterans Affairs. Washington, DC. http://www1.va.gov/OPA/ fact/docs/vafacts.pdf (accessed May 21, 2007). U.S. Government Accountability Office. 2007. Military health care: TRICARE cost-sharing proposals would help offset increasing health care spending, but projected savings are likely overestimated. Report to Congressional Committees. Washington, DC. Villagra, V. G., and T. Ahmed. 2004. Effectiveness of a disease management program for patients with diabetes. Health Affairs 23(4):255-266.

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29 INSURERS Wennberg, J. 2007. The care of patients with severe chronic illness: A report on the Medicare program by the Dartmouth Atlas Project. Executive summary. Hanover, NH: Center for the Evaluative Clinical Sciences, Dartmouth Atlas Project. Wennberg, J., and M. Cooper. 2007. The Dartmouth atlas of health care 999. The quality of medical care in the United States: A report on the Medicare program. Chicago, IL: Dartmouth Medical School. Wheeler, J. R., N. K. Janz, and J. A. Dodge. 2003. Can a disease self-management program reduce health care costs? The case of older women with heart disease. Medical Care 41(6):706-715. Wood, A. J. 2006. A proposal for radical changes in the drug-approval process. New England Journal of Medicine 355(6):618-623.

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