Home All Stories Health Care Payors Look To Move Away From Fee-For-Service

Health Care Payors Look To Move Away From Fee-For-Service

Over the past few years, the United States health care ecosystem has made tremendous strides in moving away from fee-for-service payment models and toward more innovative approaches that focus on paying for outcomes. With support from the Center for Medicare and Medicaid Services, along with private payors and physician organizations, many parts of the country have seen the adoption of a variety of outcomes-based models that support the “Triple Aim,” which includes:

  • Improving the patient experience of care (including quality and satisfaction)
  • Improving the health of populations
  • Reducing the per capita cost of health care

Pharmaceutical companies have been noticeably absent from these discussions, however, and recent growing awareness about the cost of drugs and questions about what purchasers are getting for their money have led to greater interest in frameworks that tie reimbursement to the value of pharmaceuticals versus simply “paying for pills.”

On October 21, the Center for health Care Management and Policy hosted an event titled, “Outcomes-Based Pharmaceutical Contracting,” with keynote speaker Michael S. Sherman, MD, MBA, MS, CPE, FACPE, chief medical officer and senior vice president at Harvard Pilgrim Health Care.

While highlighting some of the recent innovative collaborations that have occurred between payors and pharmaceutical companies, Sherman pointed out three main tools for regaining profitability in pharmaceutical contracting:

  1. Raise health care insurance premiums
  2. Raise health care insurance deductibles
  3. Increase member cost share

The other alternative, he indicated, is reducing the cost of providing care.  This last option has proven to be quite elusive for the health care industry, but still worth examining.

Sherman warned, “The cost of pharmaceuticals is going up disproportionately fast…We need to look at more aggressive policies regarding prior authorization, trying drug A before drug B, and closed formularies.”

He went on to explain that a majority of insurance companies are playing defense, not offense, and that negotiations with pharmaceutical companies might consider options like:

  • Reducing drug cost if the drug proves ineffective or fails to meet expectations
  • Reducing costs if the number of hospitalizations is not decreased
  • Increasing the return to drug companies if a percentage of patients using a specific medication are hitting targets

“Putting your money where your mouth is,” said Sherman, is the direction the health care industry needs to be going.


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