If value-based contracts succeed…we might not need them anymore

My Take

If value-based contracts succeed…we might not need them anymore

By Mike DeLone, US life sciences leader, Deloitte LLP

Many of my colleagues are in Washington, D.C. this week attending the Value-Based Health Care Congress. My friend Jeff Morgan, who heads the value-based contracting division within Deloitte’s ConvergeHEALTH unit, will be leading a session on value-based contracting and the role real-world data and evidence can play in developing cross-stakeholder partnerships, improving health outcomes, and differentiating products and brands.

Deloitte is working closely with life sciences companies, health systems, purchasers, and even federal regulators to move the ball forward on value-based contracting (VBC). The success of these contracts can hinge on interoperable and sharable data as well as agreed-upon standards and definitions of value. If we succeed in bringing these types of contracts into the mainstream, we could reach a point where we no longer need them.

Here’s what I mean: In the fee-for-service environment, each stakeholder typically makes decisions based solely on its own data. A health plan, for example, might rely on claims data when setting reimbursement rates, while a biopharmaceutical manufacturer might use clinical data to determine prices or to prove the efficacy of a drug. Once interoperability and open data sources make it possible to share and evaluate massive sets of information, we should have real-world evidence (RWE) about which drugs are most effective for each subpopulation—rather than using a one-size-fits-all approach. Once we understand which therapies are most effective for each patient or patient group, we might no longer need contracts that reward value. Drug effectiveness would be known and agreed upon. This is still several steps away from our current reality.

The real value is in the data
Our health care system has historically rewarded competition, not cooperation, and the fee-for-service model is deeply engrained. But this outdated payment model is no longer effective, particularly when it comes to financing highly personalized, but often expensive therapies. Health care purchasers and consumers are demanding lower costs and greater transparency around price and outcomes. VBC could help on this front while also improving outcomes. But such contracts can only succeed if purchasers and drug companies cooperate and trust each other. Before that can happen, all parties will need to trust the data.

The real value of VBCs is the data that demonstrates the effectiveness of a drug or device for a specific population. These contracts should be driven by data rather than risk or reward. Real-world data can also help explain variability among various patient populations. Insights gleaned from artificial intelligence and data analytics, for example, could help stakeholders understand the effectiveness of various treatment approaches, costs, and outcomes with the goal of refining evidence-based protocols.

How do we accelerate value-based contracting?
In a My Take last month, I suggested that VBC growth won’t accelerate until biopharma companies, purchasers, patients, and clinicians agree on (and trust) what constitutes value, and how the value of a therapy is demonstrated. Organizations that are most effective at VBC today could be best positioned for the future once existing barriers have been reduced or removed.

Drug pricing has been a top priority for the administration and Congress over the past year. Impending regulations could help open the door for more VBCs. Organizations that experiment now and master the components of these contracts will be better positioned to scale their pilot projects. Stakeholders that move too slowly could have the most to lose. Continued investments in platforms and solutions around RWE as a discipline could help organizations position themselves as VBC moves beyond the experimental stage into the next level of maturity.

What’s holding back value-based contracts?
Despite a growing interest in VBC among stakeholders, adoption has been slow for a variety of reasons including misaligned incentives, difficulty tracking patient outcomes, and lack of consensus on a definition of value and data standards. Deloitte recently brought together thought leaders from across the health care ecosystem to discuss the current state of value-based contracting, identify obstacles that need to be overcome, and determine the best strategies for accelerating the use of VBCs in a way that improves value across stakeholders (i.e., better patient outcomes and lower costs).

Most participants at our Value Exchange Summit said value-based contracting was among their top priorities, and some said they have already implemented 10 or more such contracts. While about half of our participants have not yet launched a VBC, most of them have internal incentive structures in place that should help them get started. Most participants also agreed that their organizational capabilities have not yet reached the level of maturity needed to support the scaling of VBCs efficiently and sustainably.

Summit participants pointed to several challenges that might be stalling uniform and widespread VBC adoption. Obstacles include limited access to information and unavailable data. Our participants also agreed that the lack of technology—particularly the absence of a shared platform through which patient data can be collected, managed, and analyzed so outcomes can be tracked—is a top barrier. Some participants suggested that involving a neutral third-party to manage the data could make contracts more palatable to all participants.

Where should we start with value-based contracts?
Choosing the most appropriate products to include in a VBC is essential. Therapies used to treat common chronic diseases might be a good place to start because there tends to be more real-world data available for those conditions. However, the timeline needed to measure the impact of a therapy within a VBC should be short, which can be challenging when managing chronic illnesses. Cell and gene therapies tend to have smaller patient populations and could require a multi-year timeline to determine effectiveness. Such drugs, however, can make good candidates because they typically have higher costs, which can lead to limited patient access.

Rather than moving multiple products into VBCs, biopharmaceutical companies should use pilots to determine which products are best suited. Pilots that focus on improving outcomes, rather than financial risk or reward, could help stakeholders develop an early VBC roadmap. Once a quality-focused model has been developed, the shared-savings and risk-sharing components can be added.

Value-based contracting is an important step along the journey toward the future of health. It is also a step that we might be able to leave behind once we harness data that tells us which treatments are the best fit for each patient.

Email | LinkedIn

Back to top

In the News

CMS releases 2020 Star Ratings, announces quality improvements

On October 10, the US Centers for Medicare and Medicaid Services (CMS) released its 2020 Medicare Advantage (MA) and Part D Star Ratings report. The report provides the latest quality scores for MA and Part D plans in categories such as care quality, chronic-disease management, and customer service. Ratings range from one star (lowest score) to five stars (highest). A day after releasing the report, the agency said MA and Part D enrollees would have access to more high-quality plans in 2020 than in previous years, meaning that scores have gone up for these plans.

The report also showed that for 2020:

• 81 percent of MA beneficiaries who have prescription-drug coverage will be enrolled in plans that have four or five stars—up from 69 percent in 2017. The average star rating for 2020 is 4.16 stars, up from 4.02 in 2017.
• More than half—52 percent—of MA plans with prescription-drug coverage have at least a four-star rating, up from 45 percent in 2019.
• An estimated 28 percent of enrollees will be in prescription-drug plans with 4 or more stars, up from 3 percent of enrollees in 2018. The average star rating is 3.50 stars, up from 3.34 in 2019.

In its statement, CMS reiterated that average monthly MA premiums in 2020 will be at their lowest level in 13 years (see the October 1, 2019 Health Care Current). Medicare open enrollment for next year began on October 15 and will continue until December 7.

(Source: CMS, Trump Administration Drives Access to More High-Quality Medicare Plan Choices in 2020, October 11, 2019)

Back to top

CBO releases preliminary estimates on House drug-pricing bill

In an October 11 report, the Congressional Budget Office (CBO) estimated that Title I of the “Lower Drug Costs Now Act,” informally known as Speaker Nancy Pelosi’s (D-Calif.) proposed drug legislation, would reduce federal spending by $345 billion between 2023 and 2029.

The legislation, released in September, would let the US Department of Health and Human Services (HHS) negotiate drug prices for health plans, including Medicare and commercial health insurance, based on an international index of prices for certain drugs (see the September 24, 2019 Health Care Current). In addition to reducing federal spending, the bill could also have significant effects on the pharmaceutical industry and other stakeholders, according to CBO. These include:

• Higher manufacturer prices for drugs sold overseas to make up for lower drug prices in the US
• Fewer new drugs coming to market over the next decade due to decreased revenue for the pharmaceutical industry
• Higher prices for new drugs coming to market to offset lower prices for existing drugs

Congressional committees of jurisdiction debated and marked up the legislation last week.

(Source: Congressional Budget Office, Effects of Drug Price Negotiation Stemming From Title 1 of H.R. 3, the Lower Drug Costs Now Act of 2019, on Spending and Revenues Related to Part D of Medicare, October 11, 2019)

RELATED: On October 17, the House Education and Labor Committee voted 27-21 to advance Speaker Pelosi’s proposed drug-pricing legislation. The same day, the House Energy and Commerce Committee advanced an updated version of the same legislation by a 30-22 party-line vote. The committee also approved bills that would direct expected savings (from the bill’s required price negotiations between the government and drug manufacturers) toward the new dental, hearing, and vision benefits for Medicare enrollees. Savings would also be used to help support low-income Medicare beneficiaries.

(Sources: POLITICO Pro, House Education and Labor advances Pelosi's drug pricing plan, October 17, 2019; POLITICO Pro, Energy and Commerce advances Democrats' drug bill, October 17, 2019)

Back to top

FDA sets new record in generic drug-approvals

The US Food and Drug Administration (FDA) set a new record for generic-drug approvals in 2019, according to an October 16 report. During fiscal year 2019, FDA approved 1,171 generic drugs—an increase from the agency’s previous records of 971 approvals in 2018 and 937 approvals in 2017. In a prepared statement released the same day, HHS Secretary Alex Azar praised FDA for its three record-setting years of generic approvals. According to Azar, FDA’s generic drug approvals have helped to reduce prices and increase consumer access to prescription drugs.

(Sources: HHS, Secretary Azar Statement on FDA’s 2019 Generic Drug Approval Record, October 16, 2019; FDA, Activities Report of the Generic Drugs Program (FY 2019) Monthly Performance, Updated October 16, 2019).

Back to top

KFF releases 50-state Medicaid budget survey, announces decreased enrollment

In its 19th annual 50-state Medicaid budget survey released on October 18, Kaiser Family Foundation (KFF) reported a 2 percent decline in Medicaid enrollment during 2019. The annual survey of Medicaid directors in all 50 states and the District of Columbia anticipates a 0.8 percent enrollment increase in 2020. According to KFF, states attribute the 2019 enrollment decline and relatively flat predicted increase to a strong economy and changes to the participation rules. The most frequently reported Medicaid eligibility restriction for 2019 was work and community-engagement requirements.

According to the report, Medicaid spending grew 3 percent in 2019, and is expected to climb to 6.2 percent in 2020, due to increased prescription-drug costs, higher payment rates for providers, and higher costs for treating elderly and disabled beneficiaries. Spending growth varied among states—eight states reported flat or negative growth in 2019, while spending grew by at least 5 percent in 11 states. Many states have taken measures to control Medicaid spending growth. For example, 24 states have implemented programs to curb prescription-drug costs.

(Source: KFF, Medicaid Enrollment & Spending Growth: FY 2019 & 2020, October 18, 2019)

Back to top

Breaking Boundaries

Researchers and tech companies are helping older adults stay in their homes longer

Canadian researchers are working to help older adults stay in their homes longer while giving clinicians more ways to monitor their patients remotely. The research team at the University of Manitoba is using a grant to develop a Smart Suite—a model home that combines mobile health, sensors, and platforms to monitor the health and routines of residents. With the help of Doppler radar, smart floor mats, and motion sensors (which track time, location and frequency of movement), the Smart Suite can detect activities like going to the bathroom, bathing, opening the refrigerator, washing hands, and resting in bed or on the living room couch. The technology can be applied to older adults who prefer to live at home rather than moving into a long-term care or assisted-living facility.

Similar research is happening at the University of Missouri, which has been testing telehealth and remote monitoring platforms at its Tiger Place independent living community for several years. In-home sensors combined with artificial intelligence (AI) can detect changes in a person’s health—even before patients or family members notice. Similar to the Smart Suite, radar is used to enhance the care team’s ability to monitor walking speed and determine potential fall risk. During sleep, bed sensors gather data on heart rate, respiration, and overall cardiac activity.

Ingestible sensors, which can help care teams monitor medication adherence, are another innovation that could help older adults age in their homes. A study published in PLOS Medicine featured an analysis of an ingestible sensor paired with wearable and monitoring tools. The devices were 93 percent accurate in determining whether a patient had taken prescribed medication, according to the results. When the clinician watched the patient take medication, the accuracy rate was only about 63 percent. Moreover, because the data are digital, there is no lag time—the care team can find out in real time when the patient took the medication. It could take weeks for that information to make it to the patient’s medical chart when using traditional medication-monitoring programs.

RELATED: According to Deloitte research on the future of aging, smart homes equipped with internet-connected devices, such as remote-monitoring biosensors, could help people live longer and with greater independence. A smart home might include a hyperconnected bathroom where the mirror and other tech-enabled appliances process, detect, and analyze the resident’s health information. Highly attuned sensors embedded in a bathroom mirror, for example, might track body temperature and blood pressure, or detect anomalies based on a person’s historical biometric data. Enabling technology would not stop when people step out of their homes. Communities of the future might allow residents to naturally incorporate health and well-being into their everyday lives. Medical and health facilities won’t exist in just once place—they will likely be everywhere as traditionally brick-and-mortar locations shift to mobile-enabled platforms. The concept of community could also change—expanding beyond physical structures to include virtual communities that support health and well-being.

(Sources: Eric Wicklund, mHealth proves better at medication adherence than eyes on therapy, mHealth Intelligence, October 10, 2019, Eric Wicklund, Canadian project using mHealth, telehealth to create a smart suite, mHealth Intelligence, October 11, 2019)

Back to top