By Del Doherty, PhD, PharmD, MBA, MPH, Co-Founder and CEO, Prodigy Care Services/ProdigyRx
Is value-based care (VBC) possible in workers’ compensation? Certainly, yes. Workers’ compensation carriers have traditionally been excluded from this conversation, but they should be very much a part of it. In recent years there have been more calls for workers’ comp carriers to act more boldly and implement value-based initiatives.1,2
Despite the role of workers’ compensation in an employee’s health, some argue that the industry has traditionally operated under the paradigm that it is in the insurance business instead of healthcare. For most patients, this is a distinction without a difference. Patients’ clinical outcomes should not be impacted by the nuances between workers’ comp and their regular employee benefit insurance.
Shifting the paradigm from insurance to healthcare could break down the silos of management between employee benefits and workers’ compensation and unlock such benefits as cost savings and productivity. In short, it could improve outcomes across the continuum of care. If done correctly, adopting a healthcare-focus rather than an insurance focus mindset could pave the way for acceptance of VBC models in workers’ comp pharmacy.
What is VBC?
Value-based care is the use of incentives to encourage the utilization of appropriate high-value, evidence-based healthcare products and services. It discourages the utilization of low value products and services that are not supported by clinical evidence. In essence VBC shifts the focus from “how much” medical interventions cost to “how well” they work. In doing so, VBC shifts reimbursements from the archaic fee-for-service model, which fails to acknowledge differences in clinical value among medical interventions, to a new model that rewards value creation.
VBC can be applied to various areas of healthcare, including chronic disease management, mental health, and prescription drugs. It has also been used to address healthcare disparities by reducing barriers to accessing high-value services for individuals who may face financial or other barriers.
Can VBC work in workers’ compensation pharmacy?
A few VBC models for pharmacy have evolved over the past several years, but none has garnered enough support to gain broad adoption. For example, more health insurance companies are now linking reimbursement to the efficacy of the drug, and one in four health carriers now have “at least one outcomes-based contract” with a drug maker.3
Workers’ comp pharmacy benefit managers (PBMs) have a clear opportunity to lead the industry to pharmacy-based VBC through value-based contracts. In a typical value-based contract, the PBM and the payer take on a level of risk. If the PBM does not perform as expected, the PBM likely reimburses the payer for a portion or all the costs.4
For instance, a payer might pay the PBM an additional fee for each generic drug filled. However, if a certain generic effectiveness/utilization rate (GER/GUR) is not achieved on a periodic basis, the PBM reimburses the full amount back to the payer. This incentivizes the PBM to consistently and persistently collaborate with prescribers and pharmacies to accomplish the GER/GUR goals.
Additionally, a payer could enter into a value-based contract with its PBM for comprehensive medication management (CMM), which is a standard of care for improving health care outcomes for patients with catastrophic claims or high-cost medications. Aside from clinical outcomes, the CMM can be targeted at reducing practices such as “fill and bill,” and opioid utilization, providing prescriber management and tools and resources to help patients make informed decisions about their medications. CMM can also lead to negotiating value-based contracts with pharmacies downstream for complex therapies such as specialty drugs.
The key objective of value-based contract is to ensure that the PBM takes accountability for the optimization of patients’ medications to improve outcomes and reduce cost. PBMs have arguably eschewed value-based contracts with payers because the economic incentives are not aligned.
Considerations for implementing VBC into workers’ comp pharmacy programs with PBMs:
- Determine if VBC is appropriate for your organization. While VBC is a promising approach, it may not provide value for every payer. For example, VBC is not an optimal savings approach for payers with a young and healthy population or book of business with high rate of turnover.
- Determine who will benefit from VBC. If a VBC program is deemed appropriate, then the payer must analyze claims data to decide which of its injured workers will most benefit the most from the VBC initiative. The goal is to understand the payer’s population to better assess potential risk for losses due to health care utilization, evaluate potential benefits, forecast financial projections, and estimate the potential return on investment.
- Choose a Targeted Approach. After defining the target population, the PBM administers the VBC initiative to a specific group, such as patients with catastrophic claims or high-cost drugs rather than the entire book of business.
- Apply the right incentives. For a VBC program to succeed, the PBM’s financial incentives must be synergistically aligned with achievable clinical and other outcomes.
VBC is not a panacea. VBC can be an excellent tool that encourages the use of healthcare products and services when the clinical benefits exceed the cost and likewise discourages their use when benefits do not justify the cost.5 But it is not a magic wand that can be waved over every situation to achieve a desired outcome. It requires planning, clear objectives, and the right economic incentives to drive alignment to achieve its stated objectives. In workers’ comp, PBMs have a clear path forward and oceans of opportunity to innovate and fundamentally evolve from the current per-fill hamster wheel reimbursement to a value-based compensation model that incentivizes performance and rewards value creation. This is not only good for patient outcomes and cost reduction, but it may also very well solidify the role of PBMs for the coming decades.
About Del Doherty
Del Doherty oversees the development, operations and clinical services of ProdigyRx, a pharmacy benefit manager that delivers patient-centric clinical services and pricing transparency to workers’ compensation payers.
A PharmD with a second doctorate in Pharmacoeconomics, Doherty also holds an MBA and a master’s degree in public health (MPH). He has over 15 years of experience in healthcare and pharmacy, working in managed care, workers’ compensation and group health PBM services, as well as independent pharmacy network management.
Doherty has also served as a consultant to both group health and workers’ compensation PBMs.
In addition, he has provided direct patient care in inpatient and retail pharmacy settings–and occasionally still does–to stay in touch with this side of the industry.
Doherty earned his Doctor of Pharmacy (PharmD), Doctor of Pharmacoeconomics and Master of Public Health degrees from the University of Minnesota. He also has a Master of Business Administration MBA degree from Rice University in Houston, Texas.
He has been on the faculty of Wartburg College in Waverly, Iowa for over eight years and serves on the college’s board. He is the member of the Advisory Board of Axum Rx, a specialty drug company and on the Board of Directors of Remedium Healthcare Services, which provides home health care services. Email: email@example.com, LinkedIn, Twitter
About Prodigy Care Services’ ProdigyRx
Prodigy is a healthcare services technology company dedicated to positively impacting patient lives by delivering outcomes-driven solutions and increasing payer efficiency across the continuum of care. Its founders have decades of experience in clinical pharmacy, workers’ compensation, group health, PBM, and other ancillary clinical services. ProdigyRx was established to give workers’ compensation payers better control over their pharmacy costs through access to its intuitive technology platform, integrated tools and strategic oversight. Pass-through pricing, proactive clinical controls, and a suite of evidence-based clinical tools are among its offerings. Its parent company, Prodigy Care Services was founded in 2020 and is based in Austin, Texas, and serves clients throughout the U.S.
- Here’s Why Value-Based Care Is the Medical Approach Workers’ Comp Needs to Embrace : Risk & Insurance (riskandinsurance.com)
- How workers’ compensation carriers can build better models of care | McKinsey
- As Drug Prices Soar, Value-Based Pay Hits Pharmaceutical Industry (forbes.com)
- Value-Based Agreements in Healthcare: Willingness versus Ability – PMC (nih.gov)
- Chernew, M., Rosen, A. and Fendrick, M. (2007) “Value-Based Insurance Design,” Health Affairs, 26(2):w195-w203