Study Shows Insurers Adopting New Provider Payment Models

Medical device executives saw this one coming for quite some time.

For years, industry leaders have warned of a paradigm shift in U.S. healthcare financing, claiming insurers eventually would tighten coverage requirements and abandon fee-for-service models in favor of outcome-based solutions.

The pundits were right, but they underestimated the pace at which this change would occur. A study released at the start of AdvaMed 2014: The Medtech Conference in Chicago, Ill., claims private insurers rapidly are adopting new provider payment models—including pay-for-performance and financial risk-sharing arrangements—and tightening coverage evidence requirements for new technologies.

The peer-reviewed study, “Evolving Provider Payment Models and Patient Access to Innovative Medical Technology,” is based on comprehensive interviews with nine private insurers responsible for insuring roughly 110 million Americans. The study was published in the Journal of Medical Economics.

Among the study’s key findings is the rapid rate at which insurance payment plans are evolving: The percentage of commercial lives subject to any pay-for-performance or risk-based payment provisions surged from roughly half (46 percent) three years ago to slightly less than two-thirds (62 percent) today. The report’s authors expect that percentage to reach 75 percent of commercial lives in 2017.

“This study highlights that patient access to innovative medical devices and diagnostics is facing a double hit,” AdvaMed President/CEO Stephen J. Ubl said. “Insurers are adopting new payment models that emphasize cost reduction and raising evidence requirements for coverage. The medtech industry generally supports the movement toward new payment models that encourage providers to reduce costs through greater coordination of care, as it continues to develop advanced technologies that will facilitate better health and reduced costs.”

The study also claims the new payment models can discourage providers from using new technologies that could help patients and the healthcare system, but add to near-term costs. All but one of the respondents said they have seen providers become more selective in adopting new technologies, particularly when they are more costly. All respondents said they expect to become more selective in using new technologies as providers become more at-risk financially for at least part of the cost of healthcare.

In addition, the study found that insurers are raising the bar for approving coverage of new medical technologies. Four of the nine respondents (44 percent of plans, 91 percent of lives) reported expecting a higher evidence requirement for approving new medical technologies in their organizations in the next three years. Five payers (56 percent of plans, 93 percent of lives) reported having become more selective in the past three years with regard to approving new technologies, citing either an increase in the demand for evidence, particularly with regard to comparative effectiveness, or increased cost sensitivity, including by providers that take on risk.

“There’s going to be less coverage of new technology unless there is a demonstration that it really is better than the present standard of care, and that demonstration in most instances will require some measurement of outcomes,” the analysis states.

While he supports insurers’ desire to raise their standards for coverage, Ubl contends their decisions could have unintended consequences.

“The most troubling finding in the new study was that more than 40 percent of respondents admitted that it will be more difficult for clinically appropriate but costly technologies to gain coverage,” he said. “It would be a mistake for policymakers not to address the potential for unintended consequences such as stinting on needed care or discouraging innovation.”

The study highlights the fact that new pay-for-performance and risk-sharing arrangements may have the effect of incentivizing providers to abandon their traditional roles as advocates of patient access to new technologies.

“This study dovetails with previous findings by others on declining Medicare coverage approval rates and rising evidentiary thresholds. We look forward to sharing the results of this new study with policymakers and other stakeholders as we continue to work with insurers, CMS, patient groups and other allies in Washington and around the country so that provider decisions are based first and foremost on what is the best option for the patient.”