The most popular word in health care today is “value.” It describes the relationship between what someone is paying for health care services and how well those services perform.

Health care providers often are criticized for not providing value. Health insurers pay hospitals and doctors based on the volume and type of services they provide, not on whether those services produced the desired medical or health outcomes. And employers pay the health insurance premiums that pay the insurers that pay the hospitals and doctors based on volume, not value.

But health insurers don’t want to do that anymore because it costs too much. It’s not a sustainable business model. They want to pay hospitals and doctors based on how well they do their jobs, and health insurers—both public and private—are developing what are called value-based reimbursement systems. Essentially, they will pay health care providers based on a sliding scale, with the reimbursement rates determined by how well hospitals and doctors perform on specific performance measures of quality, safety, efficiency and outcomes. Do your job, get paid. Do your job really well, get paid more. Do a lousy job, get paid less or not at all.

Switching from a health care payment system based on volume to one based on value is a foundational change. But unlike other foundational changes in health care or any other industry, this one is happening so fast that employers may not have time to write their names in the wet cement before it dries. They must educate themselves quickly and figure out how they can get a piece of what their carriers are saving from value-based reimbursement systems. If insurers are paying the same or less for better care, then the employers that pay the premiums should pay the same or less, right?

How long will this switch take? It will all be over within the next five years based on the following:

• An employer health care advocacy group called Catalyst for Payment Reform says 40 percent of the payments made to hospitals and doctors by commercial health plans in 2014 were performance-based, compared with just 11 percent in 2013 (bit.ly/1wY2Ep7).
• The U.S. Department of Health and Human Services says it wants 90 percent of all Medicare payments made to hospitals and doctors to be value-based by 2018, compared with 20 percent in 2014, and it says it expects the private insurers to follow suit (go.cms.gov/1yVI4Ju).
• On cue, two days after HHS issued its call to action on Jan. 26, a coalition of major health insurers and health systems unveiled an initiative to move 75 percent of their payments and reimbursements into value-based insurance mechanisms by the year 2020 (bit.ly/1vohNUD).

As mentioned often in this column, Minneapolis-St. Paul is one of the nation’s leading incubators of value-based reimbursement schemes such as accountable care organizations, patient-centered medical homes (primary care facilities that emphasize care coordination and communication) and value-based insurance design. It’s time that employers in the Twin Cities and across the country start asking what’s in it for them.

David Burda (twitter.com/@davidrburda, dburda@msp-c.com) is editorial director, health care strategies, for MSP-C, where he serves as the chief health care content strategist and health care subject matter expert.

Short take
Unexplained variations in price and outcome are one of the hottest topics in health care. The subjects of the conversations usually are limited to hospitals and doctors charging wildly different prices for the same treatments and procedures, with no correlation to the quality of those services. Maybe it’s time to include health insurers in that conversation. That’s my takeaway from a new report from United Benefit Advisors, an Indianapolis-based employee benefits consulting firm (bit.ly/1LAlNWE). The report is based on a survey of 9,950 employers that offer 16,467 different health plan options to their workers. The report said it cost an average of $9,504 to provide health benefits to one employee in 2014. But the cost varied wildly by industry and by company size in ways that buck common sense. The health benefit cost per employee for companies in finance, insurance and real estate was $10,014, compared with $9,119 for companies in construction, agriculture and transportation, which carry higher risks to workers’ health. Equally illogical was the fact that the health benefit cost per employee at the largest companies (those with more than 1,000 employees) was 10 percent higher than that at the smallest companies (those with fewer than 25 employees). It was $10,189 and $9,269, respectively. You’d think the more employees you had, the less it would cost per head to insure them if you believe in volume discounts and spreading underwriting risk. The results tell me health insurance premiums are more arbitrary than we think, and that a business would be smart to shop around for the same or better benefits for workers at lower prices. They’re out there if you take the time to look.

Update
In the February column, we talked about the explosion in commercial accountable care organizations, or ACOs, and the need to start asking whether businesses are offering them—or even considering them—as health insurance options for workers (bit.ly/1AfT5Hp). A survey of 595 employers by Towers Watson and the National Business Group on Health suggests employers as a whole are unsure about ACOs (bit.ly/1vSLZor). Some 28 percent of the surveyed employers said they foresee care being delivered to their employees through ACOs, but that was offset by another 28 percent that said that was unlikely. And what about the other 44 percent? They said they were neutral on ACOs. That adds up to a big nothing until we start tracking how many employers offer an ACO option. It’s time to ask the question.