Health IT

How do private insurers set reimbursement rates? CMO sheds light on WellPoint’s process

“Coin-toss medicine” was the preferred term that Dr. Samuel Nussbaum used on Wednesday to describe the problems with today’s healthcare system. Nussbaum, the chief medical officer and executive vice president, clinical health policy at WellPoint Inc. (NYSE:WLP), was referring to a study by the RAND Corporation which found that patients treated for asthma and other […]

“Coin-toss medicine” was the preferred term that Dr. Samuel Nussbaum used on Wednesday to describe the problems with today’s healthcare system.

Nussbaum, the chief medical officer and executive vice president, clinical health policy at WellPoint Inc. (NYSE:WLP), was referring to a study by the RAND Corporation which found that patients treated for asthma and other obstructive lung diseases get only half of the proper medical care. Speaking at the CED Life Science Conference in Raleigh on Wednesday morning, he also pointed to commonly cited statistics that 30 to 40 percent of healthcare spending is wasteful and inefficient.

Of course that’s part of the drive behind the Patient Protection and Affordable Care Act. And to do its part in this whole bit, WellPoint has led a push to tie payment for medical treatment to their demonstrated effectiveness, in much the same way that the government is tying Medicare reimbursement for physicians and hospitals to outcomes.

Here’s a skeletal look at how it does that, according to Nussbaum. At the core of every decision is not cost but scientific evidence. For drugs, that’s a two-step process.

“There are about 30 physicians and scientists and practicing physicians, none of whom are employed by WellPoint, who actually review the science,” Nussbaum said. They designate certain medicines for certain conditions.

Then drugs are reviewed by the Value Assessment Committee, which looks at clinical trial data and comparative effectiveness to determine their clinical value. “It involves looking at the overall cost of a treatment, looking at a treatment beyond a specific drug, and its adoption by patients in the real world setting,” he said.

The idea is that before WellPoint is willing to invest in new technologies, it needs to know the impact of the technology. But how is it getting all of the data on which it bases those decisions?

There are a few ways. Several years ago, the insurer bought an outcomes research company called HealthCore through which it collaborates with a string of universities to evaluate effectiveness of treatments. That company also helped develop the Sentinel System with the FDA to track the safety of drugs, biologics and medical device once they’re approved. And, WellPoint has been working with IBM to use its Watson technology to help determine best treatment options.

Moving forward, WellPoint’s philosophy is to pay only for quality and performance. “If a treatment is truly superior, let’s embrace it and let’s make sure everyone can get that treatment,” Nussbaum said. “If it’s comparable, then let’s look at the value and the affordability versus the outcome. If it’s personalized, we need to invest in that future. And if it’s ineffective, let’s stop doing it.”

And while it does that, the insurer with 34 million customers is also putting a priority on keeping patients in the loop. “All of our policies – we’re very transparent about this – are available on our website,” Nussbaum added. “We give detailed rationale behind them, we invite participation and comment. Ultimately, these policies need to be reviewed frequently because science changes.”