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Perspectives on Payer and PBM Innovation

Posted by Matt Breese on Feb 16, 2016

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Since early childhood we have been programmed to seek recognition for good work, innovative thinking or succeeding where others have failed. As we matured, the form of recognition changed from a gold star to trophies, degrees, promotions and bonuses, but the pursuit continued.

The Stars in Healthcare

Recognizing success is evident throughout healthcare. Overseeing agencies, partners and clients collect and analyze data on every aspect of healthcare delivery — from access to patient experience, and from length of stay to outcomes and readmissions. For payers and pharmacy benefit managers (PBMs), positive performance across these measurements drives massive back-end value for their network and provides additional leverage for their engagements with pharmaceutical manufacturers.  

The Medicare Advantage (MA) Star Ratings by the Centers for Medicare & Medicaid Services (CMS) is arguably one of the most recognizable — and potentially rewarding — recognition programs. The CMS uses a five-star quality ranking system to rate:

  • Outcomes
  • Intermediate Outcomes
  • Patient Experience
  • Access
  • Process

In calculating its ratings, CMS gives outcomes and intermediate outcomes the highest value, followed by patient experience, access and process.

Influence of Performance, Size and Maturity

It is noteworthy that preferred provider organizations (PPOs) ranked higher than health maintenance organizations (HMOs) for 2016, and plans built around integrated delivery networks (IDNs), such as Kaiser Permanente, have traditionally ranked high. Ratings for commercial plans and Blue Cross Blue Shield carriers, however, continue to improve and close the rating gap, propelled by innovative technologies and processes.

Analysis of the 2016 Star Ratings shows that improved ratings closely align to improvements in plan performance, size and maturity. Plans with more members (greater than 20,000), that have more experience in the MA program, tend to do better. Although recent reports indicate there are two noticeable disparities in the rating scheme — socioeconomic and geographic — millions of individuals rely on the CMS Star Rating to help them choose their health and/or pharmacy benefit plans. Improved ratings also provide health plans with a boost in reimbursement, an option to expand as a business and improved eligibility for bonuses.

Achieving Excellence through Innovation

Providers, health plans and payers strive for improvements that will have a positive impact on their outcomes, efficiencies and costs, and that will garner recognition through rankings and/or public awareness. Those that embrace innovation in their pursuit of excellence not only affect their own operations, but also may have a lasting impact on the industry itself.

Passport Health Plan, top rated in Kentucky, and Evolent Health, a leader in healthcare technology, are two such organizations. Their new strategic alliance will create The Medicaid Center of Excellence to deliver strategy, clinical and operational capabilities, health plan administrative support and IdentifiSM — Evolent’s population health performance management platform. This innovative alliance, which will be scalable on a national level, offers the potential to improve patient outcomes and lower costs.

In much the same way, Express Scripts, became an innovative pioneer when it initiated a long-needed, albeit difficult, discussion between PBMs and drug manufacturers, around improving the traditional payer-pharma contracting workflow. While many new drugs dramatically improve patients’ lives and survival rates, and drug companies understandably expect to recoup their R&D costs, the high cost of medications is a leading factor in the country’s increasing cost of healthcare. Focusing on becoming a partner in innovation with drug companies, ExpressScripts implements an indication-based pricing pilot program, through which it will pay more for drugs that perform better and less for drugs that do not perform as well.

Payer and PBM innovation triggers improvements in the healthcare network that greatly affect how members shop, how providers network and how manufacturers engage. Recognition of these innovations motivates other plans to adopt similar processes and/or develop their own improvements, incubating a more efficient ecosystem for healthcare coverage.

Stay tuned for more perspectives on payer and PBM innovation and what it means for your business.

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Topics: Industry Trends, Market Access, Payer