Noom adopts outcomes-based pricing for wellness, prevention programs

by | Jan 3, 2017

While the path to value-based care is necessarily a slow one for hospitals and health systems, prevention programs – focused on a single outcome measure for a single condition – are in a position to lead the way in charging for outcomes.

Omada Health, the first digital diabetes prevention program, has been charging only for successful outcomes for a while. Noom announced yesterday that it will do the same, not only for diabetes but also for obesity, prediabetes, and hypertension.

“From my perspective as a CFO, to pay PMPM (per member per month) made no sense to me,” Noom CFO and COO Adam Fawer told MobiHealthNews. “Because what that means is if you work for an organization and that organization has 10,000 employees and they have a 10 cent PMPM, that means they’re paying $1,000 regardless of whether people are enrolling, participating, or getting results. It made no sense to me.”

The argument is that PMPM creates a misaligned incentive, where low engagement leads to higher profits for the company offering the prevention program. Noom first made the move from PMPM to charging only based on the employees who enrolled in the platform, but Fawer said that results were consistent enough that it made sense to take the next step and charge only for employees who actually benefit from the program. The combination of high success rates and the ability to measure outcomes easily and accurately — because of connected devices — created an ideal environment for outcomes-based pricing, Fawer said.