Providing Incentives to Control Health Care Costs and Remain Competitive in the Marketplace

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Abstract
Few marketplaces in the United States have been subject to as much scrutiny, and undergone as much transformation in the 1990s, as has health care. Even based on the slowest growth rates experienced in the 1980s and 1990s, the United States is projected to be spending $3,140,221 per minute on health care by the year 2000. The purpose of this study was to examine how coordination between providers of medical care, and working with their customers (i.e., payors) might reduce costs without compromising quality. Providing incentives to these groups of businesses that form the health systems can be a means for achieving both individual health system objectives. Because of the importance of pharmacists in health care delivery systems, they were considered an excellent group for testing and measuring the impact of incentive programs. The study involved a before and after six month period involving dispensing patterns through a pharmacy benefit manager. Incentives were provided to pharmacies based on percent improvement in generic substitution rates and formulary compliance. A network of 342 independent pharmacies, with their dispensing patterns monitored through a pharmacy benefit manager under its contract program. The results of the study were that generic substitution rates rose from the pre-trial period of 68.5% to 73.7% in the first three months of the trial period, and to 75.6% in the second three months of the trial period. The overall increase in substitution was from 68.5% in the base period to 74.7% over six months. These differences were statistically significant at the 0.05 level. Estimated savings to health plans on an annualized basis would be approximately $3.4 million, and the payout per conversion to pharmacies was $3.23. While not measured directly, no adverse clinical effects were reported due to substitutions. Thus, an incentive system to reward those health care providers can effectively control expenses to achieve mutually desirable goals of all parties. If properly structured, the providers, health systems of which they are a part, and payors can benefit. Using an incentive program like the one designed for this study, health systems may be able to be more competitive in marketing their services to payors.

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