Paying patients for saving money
The term “shared savings” usually brings to mind the CMS’ accountable care programs and the shared rewards for hospitals that save money over the benchmark costs of care. But a select number of technology companies are bringing the concept of shared rewards directly to consumers, designing programs that give them cash incentives for going to a lower-cost provider or getting routine preventive screenings.
Vitals, a Lyndhurst, N.J.-based company known for its doctor ratings, acquired Smart-Shopper in 2014 and refashioned the software as a tool for online comparison shopping—with a twist. Consumers sign up for the service through their health plan or employer and receive cash incentives for choosing the most cost-effective care.
The average savings per episode of care was $625 in 2015, according to Vitals. Employers saved $12 million while consumers took home nearly $1.5 million in rewards. Health plans and employers pay out the rewards under the Vitals brand to avoid the appearance that they’re directing care. Checks to consumers range from $50 to $500, said Mitch Rothschild, Vitals’ founder and executive chairman. “It’s enough to change behavior,” he said.
In December Vitals raised $41 million in a Series D financing round led by Goldman Sachs. It expects to offer SmartShopper in up to 20 states by yearend, up from five at the end of 2015.
Another company selling such services is Chicago-based HealthEngine, which was founded in 2012 by a physician and an economist who say they saw a similar program work well in Europe. HealthEngine also pays people for getting preventive care. Last month, during National Colon Cancer Awareness Month, it offered up to $500 to people who received colonoscopies.
Employers say the partnerships help them lower their insurance costs.
The state of Kentucky sent out a request for proposals in 2013 to select a price transparency vendor and chose Vitals because of the rewards component. “We had a lot of people who didn’t think about healthcare costs beyond their copay,” said Jenny Goins, the state’s deputy commissioner for employee insurance. The state has seen $10 million in savings since 2013 and offers SmartShopper to all state employees and retirees who are eligible for insurance coverage.
Yet it remains to be seen how much control consumers really have over their healthcare dollars, especially when the most expensive episodes of care are typically the unplanned ones.
Using 2011 claims data, the Health Care Cost Institute calculated in a report released last month that only 7% of outof-pocket costs, or $27.7 billion, was spent on “shoppable” services. Of that amount, 44% was spent on outpatient physician services while knee and hip replacements—the sort of expensive procedures that capture the most attention in discussions about price transparency— represented only 0.3% of out-of-pocket spending.
Still, the number of people in high-deductible plans has grown about 15% annually over the past five years, according to America’s Health Insurance Plans. And studies have shown consumers can save money if they shop online. What’s less clear, though, is whether they’re getting highervalue care or just less-expensive care.
SmartShopper includes both quality and price data for Kentucky health plan members, Goins said. She also asserted that the tool is valuable because it nudges people to take an active role in their health. “We’re encouraging our members to do what they do in most other areas of their lives.”
DuringColon Cancer National Awareness Month, Chicago-based Health Engine offered up to $500 to people who received colonoscopies.