How Payers Can Identify, Reduce Low Value Care Spending Patterns

March 25, 2021 - Payers have the power to influence low-value care spending in a meaningful way.

However, recent data has unveiled the reality that low-value care remains prominent in certain health insurance markets.

Specifically, although payers have touted Medicare Advantage plans’ capacity to reduce low-value care spending for seniors, a recent study revealed that Medicare Advantage plans matched or fell below traditional Medicare’s record on 13 low-value care measures.

While certain areas of low-value healthcare spending have seen significant decreases, the report demonstrated that there is still room for improvement.

Payers exist at the center of this effort of finding overlooked low-value spending and designing strategies to eliminate those patterns.

READ MORE: 13 Areas of Low-Value Care Spending in Medicare Advantage Plans

“Campaigns such as the Choosing Wisely initiative have called upon health care providers to identify low-value services, but without corresponding action by purchasers and other stakeholders, progress has been slow,” the Center for Value-Based Insurance Design (VBID) stresses on its site.

Payers must first identify low-value care services accurately and then use the appropriate levers and strategies to redirect healthcare spending away from low-value care spending.

What is low-value care?

Between 10 and 20 percent of overall healthcare spending qualifies as low-value care spending, experts have estimated. But what is low-value care?

“Low-value care can be defined as ‘services that provide little or no benefit to patients, have potential to cause harm, incur unnecessary cost to patients, or waste limited healthcare resources,’ and contributes to over $345 billion annually in wasteful health spending,” the VBID site states, citing an article from the Journal of General Internal Medicine.

The top five most common low-value care services and procedures are vitamin D screenings, diagnostic tests before low-risk surgeries, prostate-specific antigen (PSA) screenings for men ages 70 and older, branded drugs instead of their generic counterparts, and low-back pain imaging within six weeks of the initial pain.

READ MORE: 3 Ways to Cut Payer, Employer Gene Therapy Healthcare Spending

Low-value care can arise from a couple of distinct sources, the VBID site indicates. Human bias could perpetuate unnecessary care expenditures and poor-quality treatment choices. Providers could also lack the right information or allow fear of litigation to influence their decision-making.

Fee-for-service reimbursement also reinforces low-value care spending, particularly in contrast with value-based care systems.

When permitted to escalate, low-value care spending can have dire results for the patient. Providers may endorse treatments that add to the patient’s financial burden and may even produce adverse health effects. For example, inappropriately prescribing opioids for back pain or chronic cancer pain can prompt addiction or overdose.

How can payers identify low-value care?

The aforementioned study of 13 Medicare Advantage and traditional Medicare low-value care patterns also serves to highlight that a wide variety of low-value procedures exist. The low-value care services that payers fail to recognize will only continue to drain the healthcare system and amplify wasteful spending.

In order to identify areas of wasteful healthcare spending, VBID advises payers to analyze existing lists of low-value care services, which are determined through data analyses by reputable organizations.

READ MORE: Top 5 Common Conditions Driving Employer Healthcare Spending

The Choosing Wisely list of low-value care services is a trustworthy resource for this. The list compiles data from a broad spectrum of clinical organizations. The compilation of lists from 2012 to 2018 alone amounts to 245 pages and represents recommendations from over 80 clinical organizations, underscoring how massive and widespread this issue is.

Payers may also turn to the US Preventive Services Task Force’s recommendations, which mark low-value care services with a D grade. Currently, 19 services have received a D grade in the US Preventive Services Task Force’s system.

In order to contextualize the prevalence of low-value spending in their regions, many payers can leverage All Payers Claims Databases (APCDs).

Twenty-one states across the US have developed APCDs in order to gather data on payment for services, according to a Commonwealth Fund report. Eleven more states may soon join them.

These states gather data from commercial and Medicare Advantage plans. The practice may be mandatory or voluntary, depending on the state. In addition to quality information, states may request data on alternative payment models, prescription drug pricing, and provider financial performance.

Payers may also rely on vendors to analyze their low-value care spending data.

What strategies can payers use to reduce low-value care?

The specific strategies for reducing low-value care may vary based on the low-value services that a payer is targeting.

For example, the top five low-value care services that VBID outlined may respond to five reduction strategies. VBID recommends employing clinical decision support, payment models, coverage policies, network design, and provider profiling to diminish low-value care spending in these five areas.

Overall however, payers should identify “levers” that will help diminish or eliminate the implementation of low-value care. Some levers will be provider-facing and some patient-facing, VBID explains in a fact sheet.

For levers that can influence providers’ low-value care spending, payers should employ alternative payment models that incentivize value-based care. These care models should exclude reimbursement of low-value care services.

For levers that address patients’ low-value care spending, payers should consider aligning out-of-pocket healthcare costs. Additionally, they should guide patients toward providers who will endorse high-quality healthcare spending patterns.

A few organizations convened in October 2019 to discuss low-value care. The Academy Health conference resulted in a five-year agenda for reducing low-value care spending.

Most pertinent for payers were the conversations on effective interventions and incentives alignment.

Among the approximately 2,000 articles on low-value care interventions from 2015 to 2019, experts found that the ones related to insurer restrictions emphasized the impact that payers could have on back pain. Utilization reviews lowered low-value care spending on back pain, the relevant study discovered.

When it came to aligning financial incentives, researchers at the conference asserted that common methods like bundled payments had only afforded slight relief in low-value care spending.

They traced the cause to internal budgeting pressures within physician organizations, the complexities of determining performance-related incentives, and lack of feedback combined with lack of incremental rewards.

Increasing the reward to an amount that would significantly impact providers’ salaries and decreasing the number of performance measures could be useful in aligning incentives. Rewarding providers for improvement and establishing opportunities for recognition might also help decrease undesirable spending habits.

Payers could also adjust payments—both upside and downside—based on low-value care spending.

Employers may establish definitions for episodes of care to help improve episodes of care bundles, the researchers added.

Experts at the conference recommended that joint ventures between payers, providers, and social agencies could produce low-value care spending interventions. Medicaid programs and waivers also provide excellent opportunities to experiment with potential solutions, the experts pointed out. Employers could also increase their focus on improving health at lower cost.

Taken together, the VBID and Academy Health solutions to low-value care spending reveal that it will require a concerted and deliberate effort among payers and other stakeholders to meaningfully reduce low-value care spending.