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Paying and Charging for Health Management, Round 3: Per Eligible

by Scott MacStravic

Charging and paying on a “per eligible” basis may be perceived as more appropriate than charging on a flat fee or per population basis.  After all, only members of the population that are identified as having a particular health risk behavior, risk condition, or chronic illness figure to benefit from participating in an HM intervention designed for each such challenge.  Why pay for members of the population who have no chance of returning any benefit, since they will not be eligible for nor participate in any intervention?

Of course, since people are more likely to have more than one risk behavior/condition or chronic disease, there may be many who are “eligible” for more than one HM intervention.  When charges are set for each separate HM intervention based on fixed fees or numbers in the population, there may be no added cost if some members enroll in more than one intervention.  If charges are set per participant, there will automatically be multiple charges for members who enroll in more than one intervention.  If charges are set per eligible, the question of whether multiple enrollments will be permitted, and if so, whether there will be added charges for “double dippers”, will have to be settled between provider and client.

HM interventions tend to be specific to the behavior, risk condition, or chronic disease in most cases.  Some providers may offer a generic approach to more than one chronic disease, when the program is aimed at promoting similar adherence to medications and lifestyle changes.  But most tailor the intervention to a specific aim, such as smoking cessation, diet improvement, increased exercise, or to managing a specific risk condition such as weight loss, stress reduction, or insomnia, or disease, such as asthma, diabetes or congestive heart failure.  Most chronic diseases are sufficiently unique as to warrant a customized, separate intervention, and many risk behaviors and conditions are equally unique.

Moreover, in most cases, those eligible for particular HM interventions have multiple risk behaviors, conditions, or chronic diseases.  It will often not be until the HCO or a client chooses which and how many HM interventions to offer that any guess can be made as to what total costs will be.  And until individual members of the population choose which to enroll in, since most will participate in one at a time, it is difficult to predict what the numbers of participants will be.  Knowing the fees to be charged per eligible at least gives purchasers and providers a reliable prediction of costs and benefits, once the average benefit for HM programs is known.

Of course, the benefit to purchasers will vary widely depending on the particular HM intervention.  Smoking cessation, for example, has been found to yield relatively low cost savings to many clients, because the number of people who smoke is relatively small, roughly 20%, and the number who succeed in long-term abstinence from tobacco is often even lower than that.  Even a 20% prevalence rate times a 20% quit rate would mean only 4% of members will yield any benefit.  By contrast, for an HM intervention such as chronic pain, where prevalence may be as high as 50% across all categories of pain, and the numbers who gain significant relief may be as high as 50%, the number of good eligibles can be as high as 25% of the entire population.

The biggest advantage to paying/charging per eligible is that the charges/payment can be predicted as soon as the prospect or client knows how many members of the risk population will be eligible.  When the client is an insurer, or even an employer only interested in reducing sickness care costs, the numbers eligible for particular HM interventions can often be determined based on claims analysis for sickness care and prescription drug use.  This analysis can be performed before approaching any HM provider, and predictions of costs based on per-eligible fees, together with savings per HM category, made prior to choosing an HM provider.

Once fees are set based on the number of eligibles in each HM intervention purchased, the client can promote participation among those eligible without worrying about any added costs for participation. Fees that are based per eligible will not vary, whether 10% or 100% of those eligible choose to participate. Of course, if incentives are used to promote participation, these will apply to each participant, in addition to the per-eligible HM provider fees.  It is then up to the client to judge for how many and which participants the incentive costs make sense.

Like flat or per population fees, per eligible fees make most sense when prospects or clients wish to know early on what their costs are likely to be – before they invest in an HRA or other means of determining eligibility, or when they have invested in the HRA, but not yet chosen the HM provider.  Once the per-eligible fee is established, they can judge whether the number of those eligible warrant investing in particular HM interventions, given the probable participation without vs. with particular incentives.  Then the incentive costs per participant, added to the fees, can be used to decide how much it makes sense to offer and pay in incentives.

To compare flat fee/per population HM provider quotes to per-eligible quotes, the percentage eligible, i.e. the prevalence rate of the risk behaviors, risk conditions or diseases in question, can be determined, then this rate is simply divided into the flat fee rate to yield an equivalent rate.  If one HM provider offers a flat fee that amounts to $10 per population member for smoking cessation, for example, and the percentage of smokers in the population is 20%, then the equivalent fee is $10 divided by 20% or $50.  That would be equal to another provider that charges $50 per eligible.

While per eligible-fees may seem more sensible than per population or flat fees, the latter can be translated into the former equivalent as soon as the numbers eligible have been determined.  So they are comparable for decision making, as long as the HCO or prospect/client concerned has at least some basis for determining up front how many members of the at-risk population will be eligible for which HM interventions.  If per-eligible savings and other economic benefits have been reliably measured in the past, and if the at-risk population is close enough in important characteristics to the populations for whom such value has been measured, this may prove sufficient for decision making, and comparison between providers who offer one or the other of these charging methods.

To use charges per eligible in projecting different results based on participation rates, the charge per eligible is divided by different participation rates to calculate the “effective” charge per participant.  For example, if the charge per eligible were $50, and 10% participation were planned, the effective charge per participant would be $50 divided by 10% = $500.  This is what makes fees per employee or per eligible troublesome if the numbers of eligibles and then the numbers of participants are both low.

For example, with smokers, if fixed cost per employee is $25 and only 12% of employees smoke, $25/12% = $208.  If smoking cessation saves $1000 per quitter, but the quit rate is only 15%, for example,  then there is no way a participation rate of even 100% in the smoking cessation program could produce a net savings.  Even if all 12% participated, only 15% of the $1000 = $150 value of quitting would be achieved per eligible, while the cost would be $208 per eligible.  The challenge is always to translate the method of setting charges into the way financial benefits will be achieved so that they can be compared directly in planning, implementing and evaluating HM interventions.

A simple way of translating fixed fee, per eligible and per participant charges and payments will be described in the final posting in this series.


1 Comment »

  Charlotte Cardiac Resource Center wrote @ September 11th, 2007 at 7:25 am

Cardiac Care wellness plan at our Cardiac Resource Center - Heart Bright Foundation. Empowers the individual to be an integral and active participant in their individual wellness plan.

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