Value Indexing: Mayo Wants to Reform Healthcare Quality

When it comes to quality healthcare, is it possible to put an actual value on it when paying for it? The Mayo Clinic, along with several other healthcare organizations, think so and have been asking policymakers considering healthcare reform at the federal level to examine ways to compensate for value instead of volume.

The clinic’s solution: inserting a value index into various aspects of the Medicare payment system such as physician fee schedules and hospital rates.

"What the value index would do in our opinion is create incentives for physicians and hospitals to work better together to coordinate and integrate care for patients," said Bruce Kelly, Mayo Clinic's director of government relations.

"There are many examples around the country of areas that have very high quality of care and much lower overall costs. And the key to achieving that seems to be basically better coordination of care," he said. "[These are] the incentives that we're trying to build into the reimbursement system."

To get started, the use of a value indexing within a reimbursement system is proposed. An equation is used in which "V" stands for value: V=Q/C. Quality (Q), for instance, represents clinical outcomes, safety, and patient satisfactions, while cost (C) represents the costs over time.

"So the better your quality and the lower your total costs, then the higher your index number would be," Kelly explained. In turn, a provider's payment could be bumped up to reflect that quality care.

"We're trying to emphasize value. We're saying if you want value, you've got to pay for value. And so, if you're going to pay for value, you've got to measure it and then adjust reimbursements accordingly," Kelly said.

The use of value indexing can be applied using current payment formulas and payment areas, such as physician fee schedules. It also can use state-related data, for instance, obtained from the Commonwealth Fund or the Agency for Healthcare Research and Quality. No particular measures, though, are specified in the value index proposal since there are a variety of sources out there to measure quality, Kelly noted.

Aside from creating incentives for physicians, hospitals and other providers to better coordinate patient care, the approach Mayo advocates eliminates the need to focus on line items or micromanagement of services, such as imaging or lab utilization, Mayo told the Senate Finance Committee in a comment paper on policy options earlier this year.

Kelly does note that by looking at general quality measures that are out there—and looking at the Dartmouth Atlas data—"that we have a pretty good idea" of which states and small regions "are producing good quality at a lower cost—and so we could kind of in general figure out initially who would come out better under this and who would not."

"But, the beauty of this is that if you currently don't do well under this [model]—because your quality is not that good or your costs are real high, then that's even more incentive then to get the physicians and hospitals in that area to start working together and say: 'Hey, we've got to get our quality scores up and get our costs down; otherwise we're just killing ourselves,'" he noted. "That's part of the feedback that we think is a very integral part of this model."

And, attention is being paid at the federal. Two bills were introduced in Congress last month promoting the use of a value indexing. Sen. Amy Klobucher (D-MN) introduced S. 1249, the Medicare Payment Improvement Act of 2009, which proposes to create a value indexing mechanism for the physician work component of the Medicare physician fee schedule. Rep. Ron Kind (D-WI) introduced a companion bill (HR 2844) in the House.

During last week's deliberations by the House Ways and Means Committee during hearings on the Tri-Committee health reform bill (HR 3200), Rep. Kind told the committee that not enough was being done "to change the incentives so reimbursement will be based on the value, rather than the volume, of services."

So will Congress consider a way to incorporate value indexing immediately into healthcare reform as it continues deliberations in the House and Senate? The Mayo Clinic is hoping so. In a July 22 letter to Congress that it co-signed with a dozen other healthcare organizations, it said that "'pay for value' is the only tactic that will 'bend the cost curve'" and improve quality of care.

Now is the time to find out.