Public Health Field Guide: How to Engage Payers in Addressing the Social Determinants of Health

February 21, 2018 | Deborah Fournier

Many policymakers recognize there is ample evidence to suggest the social determinants of health (SDoH) greatly influence health outcomes and spending. Research indicates that social factors, like childhood adversity and toxic stress, are so profound that they can alter gene expression and result in life-long effects on health. The healthcare system is ill-equipped to deal with these subsequent problems because 80 percent of factors that contribute to health status occur outside of clinical settings.

A multisector approach to SDoH involving public health and payer entities is vital to improving health outcomes for all populations. State and territorial health officials (S/THOs) possess essential leadership skills to bring stakeholders together under a common vision. S/THOs have the data and expertise necessary to drive new payment and delivery models, as well as convene multidisciplinary partners to leverage and align a jurisdiction’s health resources.

There are at least four ways S/THOs can spearhead multisector movements to address SDoH with payers, including:

1. Introducing payers to the powerful evidence base and data surrounding SDoH.
2. Discussing financing and payment strategies with Medicaid partners. Medicaid managed care pays for some nonclinical social services related to SDoH (e.g., home meal delivery following a hospital discharge) and determines outcomes-based payments, which sets the foundation to pay for the types of services that influence SDoH.
3. Developing metrics to measure SDoH and improve risk-based payments.
4. Developing or utilizing existing SDoH surveillance data to inform and improve payer rate-setting.

Each of these strategies is explored below in more detail, along with discussion about how S/THOs can build upon existing capabilities within the health agency to address SDoH with payers.

Addressing SDoH at the Health Department: Providing the Evidence and Expertise

S/THOs are well-versed on the unique needs and challenges of the populations they serve, as their knowledge is shaped by the results of state health needs assessments, disease surveillance and tracking systems, and other public health programs. Health department staff also have the training and expertise to identify evidence-based practices and interventions that could be scaled for enhanced impact on SDoH and cost-savings, in partnership with payers and healthcare providers.

Addressing SDoH in Medicaid: Outcomes-Based Payment and Nonclinical Services

Insights from the Commonwealth Fund’s 2017 and 2018 briefs point to the newer Medicaid managed care rule as a vehicle for moving to payment for SDoH factors. The briefs highlight that the 2016 “mega rule” allows state Medicaid programs to use alternative payment models, encouraging payment for outcomes rather than process. Under this new rule, Medicaid can also incentivize health plans to address social needs by allowing certain nonclinical services to be included as covered services when calculating the rate paid to health plans (per member, per month) and when measuring how much of premium dollars health plans are spending on services for their clients. This rate-setting for Medicaid and managed care is the process through which the state negotiates with private health plans who will be contracted to provide health services through risk-based fixed periodic payments for a defined package of benefits, consistent with federal statutes. This negotiation typically takes place every few years and can serve as an opportunity for S/THOs to initiate dialogue with the Medicaid agency in their states.

Since addressing SDoH can lead to better health outcomes, payment models should evolve to reward healthcare organizations and communities for outcomes, such as lower tobacco use, obesity, or diabetes prevalence. It will be incumbent on the public health sector to push all payers beyond clinical markers and advocate for payment related to SDoH indicators, such as improved high school graduation rates.

S/THOs should expect efforts to move payers to invest in SDoH improvements to generate questions about the expected duration of a payer’s coverage for its population. In other words, a covered population may achieve improved health outcomes through investments in their SDoH; however, if that population moves to another payer in a short time span, the return on investments in SDoH will be enjoyed by those new payers. This dynamic will frustrate efforts to move payers in this direction unless the expected duration of coverage is addressed.

Tracking SDoH and Making the Case for Alternative Payment Models—A “Win-Win”

As the Center for Health Care Strategies has observed, the United States has not yet adopted consistent approaches to measuring SDoH. Although efforts are underway to define which data elements for SDoH should be collected and by whom, there are early steps any payer can take in the short-term using ICD 10 codes.

ICD 10 codes are billing codes that include a category called Z codes, which capture important data on patients’ social circumstances and reflect some, but not all, domains of SDoH. As HRSA’s Health Information and Technology, Evaluation and Quality Center points out, “Chapter 21 of the ICD 10 covers factors influencing health status and contact with health services. For SDoH coding, Z55-65 persons with potential health hazards related to socioeconomic and psychosocial circumstances is the most relevant section.”

If Z codes are routinely required by payers and subsequently collected by providers, the initial work of correlating certain SDoH with high-cost claims can begin, which may lead to advancements in paying for SDoH generally and standardizing coding and billing for SDoH. In fact, accounting for SDoH in payment models can more accurately reflect the health status and healthcare and social service needs of a community, which may create better alignment between risk and payment amount.

For example, Massachusetts incorporated a neighborhood stress measure into its actuarial model for developing rates for its health plans. The measure is a composite of economic stress, income, employment, education, and transportation. To push further use of SDoH approaches in the payer context, public health agencies could use existing population-level SDoH information or create surveillance data on SDoH factors to create better alignment between population and risk in rate-setting activities by public payers.

Conclusion

SDoH are powerful actors on health outcomes, health status, and spending. While uniform data collection and standardization for SDoH is developing, payers can begin rudimentary tracking of SDoH through ICD-10 Z codes. Moreover, payers can utilize alternative payment models to trial SDoH strategies, as well as take SDoH into account in Medicaid managed care rate-setting to begin reflecting the impact of SDoH on healthcare delivery systems.

S/THOs can lead multisector efforts by building relationships with public and private payers to tackle SDoH challenges through enhanced use of surveillance data and advocating for transitions to alternative payment models that reimburse for outcomes. For additional resources on multisector leadership and clinical to community connections, please see ASTHO’s Center for Population Health Strategies resources.