The Common Sense Approach to Community Health

Oct. 1, 2009
Value-based design is shaping healthcare, improving health and reducing the cost spike.

Health management and health improvement within a community — or the absence thereof — are intrinsically tied to economic health. Right now, the rising cost of health care is a ticking time bomb in the U.S. economy. Fortunately, evidence exists to show that that businesses can employ specific, value-based design (VBD) levers to bring about health improvement and a significant reduction in health care costs.

Employers, health plans, hospital systems and physician organizations — some of whom are competitors in the marketplace — are beginning to come together to learn how to apply these levers to bring about improved health and curb the cost trend. Companies and public entities as diverse as Caterpillar, Hannaford Supermarkets and Chippewa County in Wisconsin are pushing the envelope and realizing results from cross-pollinating ideas and design approaches.


Specifically, VBD strategies conserve resources through decreased utilization. They help an organization focus on:

  • The long-term outcome of improved functional health
  • The efficient management of each line item
  • The total cost picture to include indirect costs
  • The basing of cost-share on the acquisition cost of service or product
  • The subsidy of effective services through lowered out-of-pocket exposure
  • The decrease or elimination of subsidy for ineffective services
  • The varying of the financial subsidy based on individual needs

The consensus among VBD thought leaders is that plan design approaches based on financial management (conserving resources by limiting utilization) rather than on value (focusing on the outcome of a subsidy) can be dangerous to personal health and to the company's economy.


VBD comes at a critical time in the nation's history because the recession has intensified fundamental problems. The U.S. Department of Health and Human Services (HHS) reports that health care spending in this country doubled from 1996 to 2006, reaching $2.2 trillion in 2007 — accounting for more than 16 percent of the gross domestic product, which is nearly twice the average spent by other developed countries. Despite this massive investment of resources, our health system achieved a dismal overall score of 65 out of a possible 100 on 37 quality performance indicators, according to a Commonwealth Fund study.

A person is a microcosm of the community. If someone is unhealthy, it costs more money. If a community is unhealthy, its costs will rise. Therefore, it's extremely important that communities and payers focus on adherence to recommended protocols: screenings, chronic care compliance and lifestyle changes. These are the methods to reduce total trend in a company and in a community.

The recession has served to widen this disconnect. With tax bases eroding, public services are cut back. As more people lose their jobs and their health insurance, they seek treatment in emergency departments — the most costly and least effective venues for receiving most care. As a result, hospitals incur more un-reimbursable expenses, and with funding and investments shrinking, they are shuttering departments and delaying expansions needed to care for the community's sickest patients.

According to the HHS report: “In the current economic crisis, even people with insurance are forgoing needed medical care, including prescription medications and doctor visits, because of inability to pay copayments and deductibles.”

Untreated medical conditions generally get worse and cost more to treat. This means that as the economy recovers, people will be rehired, but they will be sicker and their costs will be higher. Businesses and communities will need to respond in order to reinstitute preventive care and care management for those employees — and to implement strategies to get the most value from the dollars they spend on health care.


The widespread adoption of VBD is an opportunity to make significant and lasting changes, using levers to accelerate and amplify this transformation. Employers who have pioneered the use of VBD strategies are yielding impactful results. Companies applying levers — insurance designs, incentives and disincentives — are bringing about fundamental change in health behaviors and in our care delivery system in three broad categories: individual health management, condition management and care delivery.

Individual health management — Prevention and wellness incentives, including lowering co-pays for employees who take health risk assessments and biometric screens to set goals, have yielded from a 1:1 to a 3:1 dividend, with one company reporting $1 million in total cost reductions, including productivity and safety improvements.

Condition management — Recognizing the importance of overall medical management, many companies have reduced co-pays for drugs, clinician visits, labs and supplies prescribed to maintain the health of patients with chronic conditions, providing they adhere to care management programs. A randomized controlled study found that the city of Springfield, Ore., which followed this strategy, experienced a 21 percent decrease in sick days and unscheduled absences. Results from another company included improvement in overall adherence to prescribed statins (more than 20 percent of the population had medication possession ratios [MPR] of more than 80 percent, considered the gold standard of success in medication adherence). The fastest growing sector of adopters of these strategies is cities, states, public associations and small-to-medium size employers.

Care delivery — In the third category, levers reduce a patient's out-of-pocket expenses for choosing lower-priced services, such as urgent care centers instead of emergency departments, or traveling to centers of excellence. Some are using the levers to engage physicians to deliver evidence-based treatments that include more time, when necessary, to counsel patients. These often are coupled with levers to guide the patients to these physicians. Modeling this transformation is Premera Blue Cross, which has built a culture of collaboration with physicians.


Companies that have taken the first step in implementing VBD — “entrants” — may have just begun to implement prevention and wellness incentives. They also may have begun with one chronic condition. However, even with the waivers in chronic care, no successful, sustainable improvements have been documented without the increased focus on prevention.

“Fast followers” have moved into chronic care after experiencing a sense of urgency. They have modeled the innovations of pioneers city of Asheville, N.C., and Pitney Bowes, but they have modified the plans and updated them to align with their specific corporate goals. They quickly learned that sustainable designs need to be focused on their own data. Fast Followers, including the state of Maine, Journal Communications in Wisconsin and Genesis Health System in Iowa, have realized early dividends and are developing new levers.

“Innovator”-level companies have learned that the more they engage people in their health, the better their productivity and the fewer the safety accidents. They are creating a culture of health. These companies relate VBD concepts across business silos. They understand that people who engage in their health are planning for their future — they have competency, vision and hope — because they are building their health/wealth portfolio. Among these companies are QuadMed, Caterpillar, Quest Diagnostics and smaller entities such as Polk County in Florida.


Evidence has shown that an increasing number of companies are moving more rapidly from the entrant stage and that the innovator space is getting crowded. Payers are building value in incremental units. Health plans are building value by piloting new models of care and contracting based on reducing barriers and on physician-patient engagement.

Highly effective levers are being applied to change behavior according to shared best practices about what it takes to maintain and improve individual health and the health of our economy. The dividends speak for themselves:

  • Improved health status and productivity
  • Improved quality of care
  • Reduced cost trends

A key message for communities seeking economic security is that improved health is driving improved economic impact. With reduced and predictable cost trends, the workforce can stabilize (fewer workers are let go, if any) and work force capitalization can be better managed.

For those companies considering VBD, it's important they begin with a philosophy based on prevention and wellness. In terms of documenting the effectiveness of their VBD strategy, they also must rely on their own data collection, whether it's gleaned from claims, health risk assessments, biometric screens or comparisons to their vendors' book of business trends. Finally, before making the leap into improved health and cost control, companies must have top-down support. In other words, leaders cannot mandate health behavior change — they must actively participate in it.

Cyndy Nayer is CEO and president of the Center for Health Value Innovation, an information exchange for value-based design. She can be reached at [email protected].

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