Sunday, March 03, 2013

Payment Reform Barrier #4: Lack of Data for Setting Payment Amounts

Most of the literature on payment reform has focused on how to change the method of payment, but there has been relatively little attention to how to set an appropriate payment amount (i.e., the price). Regardless of how good the payment method is, if the payment amount is too low, providers will be unable to deliver quality care, and if the payment amount is too high, there will be no savings for purchasers/payers and little incentive for providers to reduce costs.

A major barrier to setting good prices in new payment systems is the difficulty providers have in getting good data on the utilization and costs of services that they do not deliver themselves. For example, in order for a physician to accept an episode of care payment for the type of treatment he or she delivers, the physician needs to know about all of the services that those types of patients have been receiving from the hospital, other physicians, and post-acute care providers, how much all of those providers are being paid, the frequency with which adverse events occur, and the extent to which any of those elements can be changed. Different prices will be needed for patients with different types of health conditions, and the impacts of risk adjustment and risk limits will need to be determined. The payer will need to have matching data so it can be sure the total episode price is lower than the average amount being paid today. (Similar data are needed under shared savings programs so that the provider can determine whether bonuses will cover its costs and whether it will be at risk for paying a share of cost increases.)

Electronic Health Records (EHRs), even if they are linked to Health Information Exchanges (HIEs), do not have enough information to fill this need. The only truly comprehensive information about all of the healthcare costs associated with an episode of care or with a group of patients, particularly the prices being paid for the services delivered, comes from claims data maintained by payers. Consequently, providers would be more willing and better able to participate in new payment models if they could get access to claims data from health plans, Medicare, and other payers.

Even if providers have access to claims data, however, most would not have the analytic capacity to assemble and analyze large claims databases, particularly if the data come from multiple payers. Also, there would be privacy concerns about giving providers patient-identifiable data in order to combine multiple claims records for the same patients.
The best solution is for all payers to contribute their data to a multi-payer database managed by a multi-stakeholder Regional Health Improvement Collaborative that can help providers analyze the data while protecting patient privacy. For example, the Maine Health Management Coalition and the Oregon Health Care Quality Corporation are combining and analyzing claims data from multiple employers and health plans to help healthcare providers in their states successfully participate in new payment models.

Some health plans are providing Regional Health Improvement Collaboratives with data on the services that patients received, but not the amount that was paid for those services. Although these limited data sets are helpful for analyzing opportunities for reducing unnecessary utilization of services, they are inadequate for designing new payment systems and for helping providers redesign care under those new payment systems. In order to determine whether a different way of delivering care is affordable under a new payment model, both the provider and the payer need to know whether the cost of the new care delivery approach will be lower than the existing approach, and this can only be determined accurately if information is available on the payment levels for all of the involved services. Health plans need to release claims data files to Regional Health Improvement Collaboratives that include “allowed amounts” (i.e., the prices paid for services) in order to accelerate the implementation of new payment systems. Employers and other purchasers need to demand the release of this data from their health plans, and if necessary, switch to health plans that will agree to release the data.

To date, one of the biggest gaps in the ability to create all-payer databases and help providers use them to redesign care and payment has been the inability to obtain Medicare claims data. Fortunately, this is finally changing: in November, 2012, the Centers for Medicare and Medicaid Services began giving access to Medicare claims data to organizations that meet legislative and regulatory standards as “Qualified Entities;” the first four such Qualified Entities are all multi-stakeholder Regional Health Improvement Collaboratives – the Oregon Health Care Quality Corporation, the Maine Health Management Coalition, the Kansas City Quality Improvement Consortium, and The Health Collaborative in Cincinnati. However, changes in the authorizing legislation for this program are needed so that the Medicare claims data can be used for analyzing opportunities to reduce costs, not just to produce publicly-reported quality measures.

(For additional details on this and other barriers to payment reform, download CHQPR’s report Ten Barriers to Payment Reform and How to Overcome Them.)



 Comments (0)

Sunday, March 08, 2009

Four Ways that Federal Healthcare Reform Could Improve Healthcare Value

1. Encourage Reductions in Hospital Readmissions

Many people believe that healthcare costs can’t be reduced without rationing of services, but in fact, there are ways to significantly reduce healthcare spending without taking away anything that consumers want. A perfect example is hospital readmissions. Research shows that 15-25% of people who are discharged from the hospital will be readmitted to the hospital within 30 days or less, adding billions of dollars to healthcare spending. Many of these readmissions are preventable through simple, low-cost interventions, both inside the hospital and after discharge. But hospitals and doctors lose revenue if they reduce readmissions, and in many cases, Medicare and other health insurers won’t pay for the services that would keep patients out of the hospital, even though they will pay every time they go into the hospital.

Most hospitals and doctors have no idea how many of their patients are readmitted, so the first step in reducing readmissions is producing reports on readmission rates, similar to what Florida and Pennsylvania now do. The second step is to change Medicare and other payment systems so they support programs that will reduce readmissions and stop rewarding hospitals and physicians that have high readmission rates.

2. Create “Medical Homes” With a Focus on Improved Outcomes

A major reason for high rates of emergency room use, hospitalization, and readmission is the inadequacies in the current primary care system.  A number of efforts are underway to improve the quality of primary care delivery through programs to create “patient-centered medical homes.”  Most of the medical home programs that have been proposed or implemented to date make higher payments to primary care practices that meet certain standards, most commonly the medical home standards developed by the National Committee for Quality Assurance (NCQA). But there is no guarantee that merely meeting such standards will result in either better outcomes or lower costs, leading payers and providers to try and keep the payments for medical homes as low as possible.

But this creates a Catch-22: if the payments are too low to allow the primary care practices to make the changes in care needed to improve patient outcomes, then all that will happen is that costs will go up, and the medical home projects will be labeled failures.

The solution is to have medical homes explicitly focus their efforts on improving outcomes and controlling costs, such as by reducing preventable hospital admissions and readmissions, emergency room visits, etc. For example, the largest number of hospital readmissions occurs among patients with chronic disease, and studies have shown that with better patient education, self-management support, and coordination of services -precisely the kinds of improvements medical homes are intended to make – hospital admission rates for these patients can be dramatically reduced, thereby creating a clear business case for the financial investment in medical home services. Medicare and other payers should provide increased funding for medical homes based on improving outcomes, rather than merely meeting process standards, which would help to reduce spending as well as improve the quality of life for patients.

3. Support Regional Health Improvement Collaboratives

Reducing hospital readmissions and creating outcome-driven medical homes would represent a major step in transforming today’s volume-driven healthcare system into a value-driven system. But to be successful, any such step requires coordinated changes in multiple areas – reforming payment systems and benefit designs to reward quality and value, redesigning care delivery systems to be more efficient and better coordinated, creating effective performance measurement and reporting systems, and educating and assisting consumers to take an active role in maintaining their health and choosing high-value healthcare services.

Moreover, these changes will need to be designed and implemented differently in different parts of the country, in light of the tremendous diversity in payer and provider structures across the country. No single national solution is likely to be successful.

Fortunately, a growing number of communities have formed Regional Health Improvement Collaboratives to build consensus among healthcare providers, health plans, employers, consumers, and others on the changes needed in their local healthcare systems and to help support and coordinate the implementation of those changes. Over 50 Regional Health Improvement Collaboratives across the country provide critical services supporting transformation, ranging from public reporting on healthcare quality and costs to training and technical assistance to providers to help them improve the quality and value of their services.

Regional Collaborative Roles

Federal support is needed to help Regional Health Improvement Collaboratives continue and expand these important roles. In addition to the technical assistance that is currently being provided through the Agency for Healthcare Research and Quality (AHRQ), the Federal government needs to (1) provide funding for Regional Health Improvement Collaboratives to help them maintain and expand their services, and (2) authorize Regional Health Improvement Collaboratives to analyze Medicare claims data and to publicly share standardized measures of the cost and quality performance of providers and practitioners based on those data.

4. Authorize Medicare Participation in Local Payment Reform Pilots

A major cause of many other cost and quality problems in health care today is that payment systems reward providers for delivering more services and penalize them for providing better-quality services and improving health. As a result, many Regional Health Improvement Collaboratives are working to design a range of reforms to health care payment and delivery systems and to encourage the payers in their regions to implement those reforms. However, since Medicare is often one of the largest payers in a region, it is very difficult for health care providers in a particular community to improve the way they deliver care if private payers improve their payment systems but Medicare does not.

Although the current payment reform demonstrations developed by the Centers for Medicare and Medicaid Services (CMS) are laudable and should continue, CMS also needs to have the authorization and resources to participate in regionally-defined payment and delivery system reform projects that can present a
clear business case for controlling costs as well as improving quality.


 Comments (4)

Monday, February 16, 2009

The Network of the Future

Today, most people who are covered by a commercial health insurance plan get their care from some kind of a “network” established by the plan.  If they select a healthcare provider that’s included in the network, they pay less for care than if they select a provider outside the network.  But they generally pay the same price for care inside the network, no matter which provider they pick, even if that provider’s costs are higher than another’s. 

As a result, it’s up to the health plan to keep costs down by negotiating with providers about the price they will accept to be included in the network.  As in any negotiation, success depends heavily on the ability to walk away from a negotiation.  Small providers rarely feel that they can walk away no matter what a plan demands.  And that leads to pressures for small providers to consolidate or organize themselves to increase their negotiating power.

However, because most consumers like to have maximum choice of providers, health plans also seek to make their networks as broad as possible.  As a result, the plans’ ability to walk away from the negotiation is diminished, and consequently their ability to hold costs down through this method is also diminished.

This has led to a desire to make networks narrower, in order to create stronger negotiating pressure.  Indeed, there have been recommendations that Medicare should be authorized to estabish a network like a commercial plan and to extract even greater price concessions from providers for being included.

The phrase “we need to think outside the box” was invented for situations just like this.   As long as people perceive that the only way to organize healthcare is for payers to create networks of providers that consumers will use, it will be impossible to ever find a solution to the “broad access” vs. “cost control” tradeoff.

A completely different paradigm is needed, and fortunately, it’s already been tried and it works.  Let providers form networks, and let consumers choose between them based on cost and quality.  The Patient Choice system in Minnesota has done this — providers organize themselves into care systems (they don’t have to be formal integrated systems under a single corporate ownership).  The care systems define their prices for providing comprehensive care to consumers, and the consumers pay more if they use a higher-price system.   Consumers have complete freedom as to which care system they use – they’re not constrained to choose from a subset selected by the plan.  Consumers pay more if they use systems with lower value, but it’s not because the provider is in or out of a plan’s network, it’s because that provider is part of a system that has decided to charge more.  Importantly, care systems function more like true coordinated systems of care with a focus on managing cost and quality, whereas current “networks” are little more than lists of uncoordinated providers.   Providers organize themselves into systems to do a better job of managing costs and quality, rather than to increase their negotiating power with health plans.

It’s hard to imagine how Medicare would ever be able to establish a network in the way commercial health plans currently do.  But it’s not hard to imagine how Medicare could create a Patient Choice-style system.  It would simply ask Medicare providers to form networks/care systems and “bid” to provide Medicare services, i.e., define the price that they will charge for caring for beneficiaries.  Medicare wouldn’t select the winning bidder — the Medicare beneficiary would.  Lower-price networks/care systems with equivalent quality would get more Medicare beneficiaries as patients, which would encourage the providers in the other networks to become more efficient so they could lower their costs.  It’s worked in Minnesota with much smaller patient volume — imagine the impact if Medicare were to participate. 

It may sound radical, but it’s not all that different from the Medicare Advantage program, where beneficiaries choose a health plan based on its cost and quality, and the health plan then contracts with providers to deliver the care.  The Patient Choice model uses the existing fee-for-service structure for both billing and payment, which makes it easy for providers to participate.


 Comments (0)

Friday, February 13, 2009

Which Comes First — EHR or Quality Improvement?

Many people seem to believe that the only thing standing between us and a completely transformed healthcare system that has higher quality and lower cost is the lack of Electronic Health Record (EHR) systems in every physician’s office. 

That’s a little like saying that the only reason the country is in a recession is that every American doesn’t have a Blackberry to improve their productivity.

There’s no question that many aspects of care coordination and quality improvement are very difficult for healthcare providers to deliver without appropriate health IT support.  It’s inefficient and impractical to flip through paper patient charts to find out which patients are due for an immunization or a diabetic checkup, when a simple query of an electronic database could provide the answer quickly and easily.  It’s inefficient and problematic for hospitals and primary care practices to be faxing each other admission and discharge information in order to coordinate care transitions when the information could be electronically transmitted and stored in a common electronic health record.

But merely having an EHR doesn’t guarantee that providers will, in fact, deliver better care to diabetics or more effectively coordinate hospital care and discharges.  The physician practice and/or hospital must still redesign the actual processes of care to achieve those goals.  The EHR can make that possible, or at least much easier, but only if the EHR is designed in a way that actually supports the improved care processes. 

And therein lies the rub — it’s hard for today’s EHR systems to be designed to support improved care processes, when the improved care processes don’t exist.  Indeed, it’s likely that, if anything, today’s EHRs will best match the way providers work today, rather than the way we want them to work in the future.

For example, most studies have found that the key computer support for improved management of chronic disease patients, preventive care, etc. is a patient registry.  Yet most commercial EHR systems do not have, or do not come with, a registry component.  Similarly, it’s not surprising that the only research showing an impact of EHRs on quality is from healthcare systems which developed EHRs in-house, since it’s more likely that an EHR will match care delivery processes if it’s developed in cooperation with the practitioners who will use it, rather than independently by an IT company.

Does that mean we should not be pushing aggressively for development and implementation of EHRs?  No, but it means that we shouldn’t be pushing for EHRs in isolation – they should be developed and implemented as integral parts of quality improvement initiatives, ideally at a regional level, rather than provider by provider.


 Comments (3)

Sunday, January 25, 2009

Marrying the Medical Home and Hospital Readmissions

Demonstration projects are underway all across the country to improve the quality of primary care delivery by encouraging implementation of the “patient-centered medical home.”  The most common approach is to convince health insurance plans and/or other healthcare payers to increase their payments to a primary care practice if it meets certain standards, most commonly the medical home standards developed by the National Committee for Quality Assurance (NCQA). 

However, payers, and the purchasers they represent, are reluctant to pay more for medical home services without assurances that patient outcomes will be better and that costs will be saved elsewhere.   And since there is no guarantee that meeting the NCQA standards will result in either better outcomes or lower costs, payers want to hedge their bets by making the payments as low as possible.  But this creates a Catch-22:  if the payments are too low to allow the primary care practices to make the changes in care needed to improve patient outcomes, then all that will happen is that costs will go up, the medical home projects will be labeled failures, and the healthcare system will return to its ineffective status quo ante

Is there a way out of this dilemma?  The answer could lie in the policy discussions being held around the country about ways to reduce preventable hospital readmissions.  As noted in a previous post, many hospital readmissions aren’t directly the fault of the hospital.  The largest number of readmissions occurs among patients with chronic disease, and their frequent admissions to the hospital reflect gaps in the primary care they’re receiving — which is precisely the problem the medical home projects are trying to fix.   Studies have shown that with appropriate education and self-management support, hospital admission rates for chronic disease patients can be dramatically reduced, but today, payers don’t pay adequately or at all for those patient support services.

So on the one hand, we have a primary care improvement initiative without a clear outcome, and on the other hand, we have an outcome improvement goal without a clear strategy for achieving it.   Could a marriage of the two can address the weaknesses of each?  Absolutely:  Payers should pay primary care practices adequately to provide evidence-based medical-home services to chronic disease patients at risk of hospitalization, and those practices should agree to an explicit focus on reducing the rates of hospital admissions and readmissions among those patients.  The savings achieved by payers from reduced hospitalizations would more than offset the costs of the improved services, justifying funding those services at levels sufficient to achieve the desired results.


 Comments (2)

« Older Posts

©2008-2011 Center for Healthcare Quality and Payment Reform. All rights reserved.
320 Ft. Duquesne Blvd., Suite 20-J - Pittsburgh, PA 15222 - (412) 803-3650 -