[October 27, 2011]

TriZetto Says Systematic Health Management Can Improve Cost and Quality and Strengthen Payers' Role in U.S. Healthcare

According to The TriZetto Group, healthcare reform legislation creates new opportunities to improve the quality of care and reduce healthcare costs, and in response, payer organizations are evaluating strategies that align incentives to reward value instead of volume. One new strategy, which prizes value over volume, is called Systematic Healthcare Management ^TM (SHM). A unique approach to population health management, SHM leverages a suite of technology-enabled solutions to help payers implement innovative new delivery and reimbursement models, improve the coordination of care and benefits, align incentives, modify behaviors, improve outcomes, and reduce costs.

Design Value-Driven Strategies to Improve Cost and Quality of Care

Healthcare payers are in a position to be knowledge leaders in leveraging technology and clinical analytics to engage providers in coordinating care based on value rather than volume. The following are examples of SHM initiatives that payers can deploy:

• Wellness, disease management and other care management programs
• Value-based benefit programs
• Payment-bundling reimbursement programs

Payers can address medical-loss ratio (MLR) rules and bend the cost curve by encouraging consumers to make healthier choices; incenting providers to practice proven, evidence-based medicine; and, hence, reducing the volume and cost of acute care. Additionally, payment-bundling, or episode-of-care reimbursement, can both reduce costs and improve quality by helping move U.S. healthcare away from a historically ineffective, inefficient fee-for-service model.

Make Investments That Reward Payers, Providers and Patients

Often treated favorably under MLR rules, SHM solutions address quality improvements and create value in the following areas:

• Improved health outcomes: Care and disease management, coaching, compliance support, patient-centered medical home (PCMH), reporting, data analytics
• Hospital readmission prevention: Discharge planning, post-discharge care, analytics, information sharing post-discharge
• Improved patient safety and medical error reduction: Error identification and preventio, infection control, analytics, data sharing
• Increased wellness: Wellness assessments, coaching and education, prevention, healthcare information technology associated with these activities

Reduce Cost Variances With Value-Based Insurance Design

Value-based insurance design (VBID) presents one way for payers to incent members to manage chronic illnesses, engage in treatment management (e.g., informed consent), obtain preventive care, and make better lifestyle choices concerning nutrition and fitness. Examples of member incentives include contributions to health fund accounts, gift cards, co-pays, and coinsurance reductions for specific diagnosis or procedures. Health plans base rewards on participation or specific actions by members, such as adhering to recommended doctor visits and completing online educational programs.

Growing employer interest in VBID creates an opportunity for payers to gain a competitive edge in the market, but only if health plans manage member benefits cost-effectively and measure results accurately. Both require technology-enabled solutions, available today, that capture data and enable payers to adjust benefits accordingly, process claims, administer incentives, answer member questions and carry out member communications.

Bundle Payments for a Winning Strategy

Additional technology-enabled solutions help payers manage the automation and scalability of payment-bundling programs. Health plans can administer such programs for clearly defined provider groups and episodes of care for which financial incentives can improve clinical outcomes and control costs. Payers often target episodes of care involving high-volume, high-cost cardiac or orthopedic procedures. One such example is a bundled reimbursement to a group of providers for a member's hip replacement, an episode of care that would include an inpatient stay, rehabilitation, primary care, emergency room services and other care related to the procedure.

Using episodic-based payment can reduce medical costs 5 percent to 6 percent in some patient-management models, according to the Centers for Medicare and Medicaid Services (CMS).^{ii, iii} About 80 percent of payers and 52 percent of all providers are expected to adopt payment bundling for a range of medical events by the end of 2012, according to an industry survey by TriZetto (News - Alert).^iv

Payment bundling offers multiple benefits to health plans. Evidence from the CMS Healthcare Financing Administration project during the 1990s^v suggests the following benefits:

• Reduces medical expenses, which can help healthcare payers meet reform mandates to control costs
• Shifts some risk to providers in an intelligent way
• Creates a stepping stone to integrated patient-centric models of care that are essential to health reform goals

Pave the Pathway to Improving the Cost and Quality of Care

Healthcare payer organizations have an opportunity to use SHM solutions - available today - to identify and stratify their member populations; improve care management, especially for members with chronic conditions; implement VBID programs; and leverage payment bundling to improve episodic-care outcomes. A marked focus on value will position payers for a strong role in accountable care organizations, PCMH and other coordinated care models that can help improve the cost and quality of care delivery.

Reporters interested in speaking with TriZetto executives for further comment about this evolving trend in U.S. healthcare should contact Davida Dinerman or Nicole Solera (News - Alert) at Schwartz MSL, [email protected] or 781-684-0770.

About TriZetto

TriZetto provides world-class healthcare IT software and service solutions that drive administrative efficiency, improve the cost and quality of care, and increase payer and provider collaboration and connectivity. TriZetto solutions, many of which are patented or patent-pending, touch half the U.S. insured population and reach more than 21,000 physician practices. TriZetto's payer offerings include enterprise and component software, application hosting and management, business process outsourcing services and consulting. Provider offerings, delivered through TriZetto's Gateway EDI wholly owned subsidiary, include tools and services that monitor, catch and fix claims issues before they can impact a practice. TriZetto's integrated payer-provider platform will enable deployment of promising new models of post-reform healthcare. For information, visit www.trizetto.com.

Footnotes

^i. "Value" refers loosely to how much a buyer gets for each dollar spent. In value-based healthcare, it denotes the quality and extent of health outcomes per dollar spent, reflecting a shift away from the prevailing care model of fee-for-service.

^ii.. Medicare Participating Heart Bypass Center Demonstration - Executive Summary, Final Report, prepared by Health Economics Research Inc for HCFA, July 24, 1998.

^iii. Samitt, Craig; Walters, Barbara; and Zucker, Michael. "Medical Home Reimbursement ABCs: Funding Care Delivery through ACOs, Bundled Payments and Concrete Contracts." Healthcare Intelligence Network, November 2009. Dobbs, Steve. "The Medicare ACE Demonstration Program, Testing a New Bundled Payment System at Hillcrest Medical Center," Presentation at the World Healthcare Congress Leadership Summit 2010.

^iv. Industry survey research conducted by TriZetto using a professional research company, unpublished.

^v. The Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way; and Robert E. Mechanic and Stuart A. Altman, "Payment Reform Options: Episode Payment Is a Good Place to Start," Health Affairs 28, 2, Web Exclusive (Jan. 27, 2009), http://content.healthaffairs.org/cgi/content/abstract/28/2/w262.

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