12% of Payers Implement 10 or More Outcomes-Based Contracts

November 04, 2021 - Outcomes-based contracts continue to be popular for certain therapies as healthcare costs mount, an Avalere study found.

Avalere’s findings draw on survey responses from 51 insurers and pharmacy benefit managers. Altogether, the survey participants cover approximately 59 million members. The survey was fielded from September 27 to October 8, 2021 and it is Avalere’s fifth annual survey on the subject.

“OBCs typically include an agreement between health plans and drug or device manufacturers that ties product reimbursement to specific clinical, quality, or utilization outcomes,” Avalere researchers explained.

These contracts have become increasingly important as prescription drug spending escalates. Outcomes-based contracts stand in opposition to fee-for-service reimbursement models for healthcare products and services, such as prescription drug costs and drug administration costs.

The survey found that 12 percent of payers boast ten or more outcomes-based contracts in 2021. Six percent of payer respondents reported having five to ten outcomes-based contracts.

“The significant increase in payers who have more than 10 OBCs in place is showing us that some payers are successfully executing these agreements,” said Sarah Butler, head of client solutions, marketing, and operations at Avalere. “At the same time, however, the decline in payers that have tried one OBC indicates fewer new entrants in this space.”

These numbers demonstrated a significant expansion in payers’ capacity to manage outcomes-based contracts. The share of payers that have ten or more outcomes-based contracts was twice as high in 2021 as it was in 2020. 

However, the researchers expressed interest in a downward trend among the number of payers with five to ten outcomes-based contracts. In 2020, 19 percent of payers had five to ten outcomes-based contracts. But the following year ushered in a 13 percent drop in this category.

To the Avalere researchers, this could be a tentatively positive indicator.

“The reverse trends across the 5–10 and 10+ categories may be an indication that some plans that have had successful experiences with OBCs are reaching efficiency and scalability and are willing to engage in more OBCs,” the researchers suggested. “However, further research is needed to verify the underlying causes behind these opposing trends.”

Payers and pharmacy benefits managers implemented outcomes-based contracts to service a variety of types of therapies. The most popular types of therapies for which payers used an outcomes-based contract were cardiovascular therapies, endocrine therapies, and respiratory therapies.

These trends in the types of therapies that payers covered through outcomes-based contracts largely built on trends from the previous year.

However, there was one notable exception. The share of payers that used outcomes-based contracts to cover oncology therapies dropped dramatically from 62 percent in 2020 to 18 percent in 2021—a 44 percent decrease. The researchers did not offer any insight into the factors driving this shift. 

While not as drastic, other therapy categories also saw decreases in outcomes-based contracting in 2021. Immune or inflammatory disease therapies, infectious disease therapies, mental healthcare, and rare or orphan disease therapies all saw slight dips in the number of outcomes-based contracts that addressed these conditions.

Payers looking to establish outcomes-based contracts may face a number of barriers to implementation. In particular, these types of contracts can be very draining on administrative resources.

Increasing the number of outcomes-based and risk-based contracts may be key to value-based care progress. The coronavirus pandemic provided a strong incentive for providers to join more stable models of reimbursement.

However, as the coronavirus pandemic becomes more manageable, payers will need to find ways to advance value-based care.

“The pandemic accelerates the need for all of this as our social health needs are more important than ever to address as part of our whole person health,” said Caraline Coats, vice president of Bold Goal and Population Health Strategy of Humana, told HealthPayerIntelligence in an interview. “Payers can continue to push for more screenings, more data, advanced payment models and outcomes-based payment to support the CBOs.”