A spoonful of sugar helps the medicine go down," Julie Andrews sang in the Disney classic Mary Poppins. It is an immortal lyric that was meant as a lesson for children, but it contains an implicit truth about healthcare: Taking medicine is often hard, and sometimes an extra incentive makes it a little easier.
For the millions of adults who don't regularly take their medicine as prescribed by their doctors, insurers and others in the healthcare industry are trying to figure out what incentives may improve medication adherence and, in the long run, improve quality and reduce costs.
Estimates put the percentage of those who don't comply with prescription instructions somewhere between one-third and one-half of all patients. Studies have found that nearly one quarter of patients with heart disease discontinue treatment within six months, and compliance for patients taking statin drugs may be below 60% after a few months. Many of those patients end up back in the hospital with a stroke, heart attack, or other severe condition that could have been prevented.
The poor compliance not only affects quality—nonadherent patients have higher hospitalization and mortality rates, according to research—but it also makes healthcare more expensive. The overall cost of poor adherence, measured in otherwise avoidable medical spending, may account for as much as $290 billion per year, or 13% of total healthcare expenditures, according to an estimate from the New England Healthcare Institute.
Insurers have yet to find the right "spoonful of sugar" to cut some of these alarming statistics, but many are experimenting with new incentives and getting creative in their approaches. For instance, Aetna Inc. is funding several pilot projects that test how giving medications to patients for free, rewarding patients for lowering blood pressure, and even giving financial incentives for compliance can improve adherence, says Edmund Pezalla, MD, MPH, national medical director and chief clinical officer for Aetna Pharmacy Management
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The latter approach has been one of the most successful so far. Funded in part by Aetna, a group of researchers from the University of Pennsylvania recently set up a daily lottery with potential financial rewards for patients who had been prescribed warfarin. Each day when patients remembered to take their medicine, they had a one-in-five chance of winning $10, or a one-in-100 chance of winning $100. When they missed their medicine, they could still see what they would have won, but didn't, that day.
The point wasn't to simply pay patients or reward those who were compliant, but to engage patients and increase their motivation, says Stephen Kimmel, MD, lead researcher on the project and associate professor of medicine and epidemiology at the University of Pennsylvania School of Medicine.
"We hoped that it would just be fun to participate in this activity," says Kimmel. "The ultimate goal is to help people help themselves. If it works, it becomes a habit for them."
Although it didn't eliminate noncompliance, patients did start taking their medication more often and said they were more interested in taking it on a daily basis. The researchers chose warfarin in part because patients often have trouble with it. Complications can arise from taking either too much or too little or taking it at the wrong time, so improving compliance can have a significant impact.
As Kimmel had hoped, it wasn't all about the money for patients. Initially researchers paid out an average of about $150 per patient a month, but when they dropped that down to $90 there was no change in compliance. It was the daily engagement that the patients seemed interested in.
That raises questions for insurers that might be interested in rolling out a similar program on a larger scale. One reason that the program is still in the research stage is because some of the cost details have yet to be figured out, says Pezalla. "But the question is, how low an incentive is still an incentive? That's an important thing for the researchers to help us find out. What are the appropriate levels of incentives? What are the appropriate intervals?"
Aetna is testing other strategies because such a large problem takes a variety of solutions and effort from everyone involved in healthcare. Physicians can improve compliance with better communication and patient education, pharmacists can reduce nonadherence with regular counseling, and hospitals can improve discharge processes and utilize case managers.
While an incentive program may engage some patients, Pezalla doesn't expect it to fix the medication adherence problem by itself. Instead of a single, magical spoonful of sugar, the solution instead has to be multifaceted and patient-centered. "The focus really has to be on the particular member, on their willingness to participate and their desire to be healthier," he says.
WASHINGTON -- A new government study says President Obama's health care law will have negligible effects on total national health spending in the next 10 years, neither slowing nor fueling the explosive growth of medical costs.
About 32.5 million people will gain coverage, and health spending will grow slightly faster than projected under prior law at an annual rate of 6.3 percent, rather than 6.1 percent, the report said.
The government report, by the office of the chief Medicare actuary, undermines the claims of the law's fiercest critics and some of its biggest champions.
Cuts in Medicare spending, which start in the next few months, and a tax on high-cost employer-sponsored health plans, which takes effect in 2018, will largely offset the cost of expanding Medicaid and subsidizing private insurance for low-income people, said the report, being published online Thursday by the journal Health Affairs.
Surgical services are a leading source of revenue for many hospitals. The OR increasingly acts as a financial engine for the organization, and more complex surgeries and greater volume typically add up to a better bottom line.
But from the patient’s perspective, surgery is scary and unknown. Whereas hospitals and physicians increasingly depend on surgical volume, patients want to be cut open as infrequently as possible—ideally, never. However, these disparate views on surgical services converge in the growing movement to make healthcare more patient-centered. As one of the most frightening and expensive stages in the care continuum, surgery has the most to gain from a more patient-centric approach. And although there are many idealistic reasons for emphasizing the patient’s needs, doing so is also perhaps one of the best ways to achieve the volume and efficiencies needed for financial success.
“A patient that has a nice experience is going to come back again. They might be one of my best marketers or referrers out there,” says Holly Lorenz, vice president of patient care services and CNO at University of Pittsburgh Medical Center (UPMC) Presbyterian, a 765-staffed-bed trauma center.
So what is the difference between a surgical process that is patient-centered and one that isn’t? The Institute of Medicine defines patient-centered care as establishing a partnership between providers and patients and giving patients the support they need to make decisions and participate in their care.
That’s easier said than done, though. No hospital is as patient-centered as it can be, says Lorenz. There are many reasons patient-centered care remains a struggle: The engaged, highly informed patient of the future is still a rarity; healthcare consumerism has stalled because the system lacks the transparency that makes markets work; and the reimbursement system discourages care coordination and integration.
Despite these obstacles, many providers are making strides in involving patients and families in the surgical care cycle. Those that are successful often enjoy better outcomes, lower costs, and higher overall patient satisfaction. “It’s so much more appropriate and easier to provide a good patient experience than to do service recovery on a bad experience,” says Lorenz.
Link the care continuum
Making surgery more patient-centered begins well before surgery. Each point of the care continuum should involve the patient in his or her healthcare decision-making. Often, the most important step is determining whether surgery is the best treatment approach, says Frank G. Opelka, MD, FACS, vice chancellor for clinical affairs at the Louisiana State University (LSU) Health Sciences Center, which coordinates care for the seven-hospital LSU Health System.
“Sometimes the best surgical care is making the decision when not to operate. Thinking about it in that sense, we’re no longer focused on surgery; we’re focused on the patient,” Opelka says. In a truly patient-centered system, the patient would have a clear view of the entire pathway—from diagnosis to surgery to recovery.
UPMC Presbyterian has developed what it calls “patient flight plans” to map out the surgical process, much like airline flight plans give pilots an idea of what to expect from takeoff to landing. “They know here’s what to expect, here’s how long you’ll be in the hospital, here’s the physical therapy you might need,” says Lorenz.
The flight plan also gives providers a better idea of whether a patient is on track to be discharged on time. The hospital color-codes patient doorways red, yellow, or green to indicate throughout the process whether patients are on track for a timely discharge. The preplanning and scripting has enabled patients to leave the hospital sooner, cutting two days off the average length of stay, says Lorenz.
The flight plans depend on members of a diverse team—outpatient physicians, surgeons, nurses, and office staff—all being on the same page. That type of coordination can be tricky from a leadership perspective, but Lorenz says there was virtually no resistance to the program because providers were aware of the benefits. “If the surgeons realize that their patients will always get a bed in the ortho unit because there is always a bed available, that’s a win from their standpoint,” she says.
Involve families
Care is not really patient-centered if it doesn’t involve the patient’s family, says Anthony M. DiGioia, MD, an orthopedic surgeon at Magee-Womens Hospital of UPMC, a 278-bed teaching hospital in Pittsburgh. DiGioia pioneered a patient- and family-centered care methodology through a total joint replacement program.
Family members often shape the care experience more than patients, who aren’t always active participants after undergoing sedation or when recovering from surgery. “If you don’t include [family], not only are you not tapping into a tremendous resource, but you also may lose an opportunity to show that you’re providing exceptional care,” says DiGioia.
Family involvement begins with the initial office visit. Family members are included in the education process and have the option of viewing x-rays and other health information with the patient, says DiGioia. Before surgery, patients take part in an education session that prepares them for their care experience, including the rehabilitation exercises. Family members—or close friends, in some cases—are encouraged to attend as “coaches.” This helps improves compliance after the surgery, he says.
DiGioia also solicits feedback from family members after surgery. “Families are really concerned about the transitions of care—meaning going from outpatient to inpatient, but particularly coming home. They’ll be the care providers when the patient comes home. Everything we do by including the family and starting the education process weeks ahead of time sets the stage to reduce anxiety,” he says.
Family-centered initiatives must be sensitive to patients’ individual circumstances. Some patients may not have close family available; others may not want family participation. But it’s important to offer family education as an option because it helps not only with recovery, but also with the quality of the care experience.
Listen to patients
The best way to find out how to make surgery more patient-centered is to ask the patients. What do they find most frustrating in the current care process? What do they like about it? Ask them, and they’ll tell you.
Surveys are one of the most common tools for collecting and quantifying patient feedback, but many hospitals aren’t getting quality information because the go-to survey for patient feedback, the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey, wasn’t really designed for surgery, says Opelka. That could change soon, however. The American College of Surgeons has been working with the Agency for Healthcare Research and Quality to tailor a new CAHPS survey specific to surgical services. New questions will dig into issues unique to OR procedures and give surgeons a better idea of what patients think after their surgery.
Keep in mind, too, that soliciting feedback can involve much more than surveys. DiGioia encourages care teams rolling out new patient-centered initiatives to shadow patients and families throughout their care, then redesign the care experience completely from the patient’s perspective. “When you force everyone to look through the patient’s eyes and the family’s eyes, you begin to knock down those silos, which are extremely important to get rid of if you’re going to deliver exceptional care,” he says.
Improve OR efficiency
Although a lot of the changes to make surgery more patient-centered happen before and after the actual surgery, the quality and speed of the operation is one of the most important elements of patient satisfaction.
OR teams have been working for years to improve the efficiency and safety of hospital ORs, and many of the best improvements have come from other industries, says Opelka. The surgical checklist, similar to what pilots use before takeoff, is perhaps the most well-known example. But many surgical teams have also adopted simulation team training from the airline industry to prepare for emergency situations.
After-action reports adopted from other industries and other methods of analyzing performance are also helping OR teams learn from every operation to improve the overall process and, most importantly, the performance.
To discover ways to improve OR work flow, DiGioia and his team mounted several video cameras in the OR to record a series of hip and knee operations. This enabled surgeons and nurses to perform their normal routines while timing each stage of the operation and identifying areas for improvement.
For example, simple steps such as introducing the anesthesiologist in the room could take anywhere from two to nine minutes. The care team learned that they could standardize some of those steps and cut down overall turnaround time.
“OR efficiency is not only good for the hospital and the OR team, but the patient as well,” says DiGioia. “But remember, it’s good to look at OR efficiency, but the patient’s care experience involves a lot more than just the surgery.”
Surgical CAHPS
The new surgical Consumer Assessment of Healthcare Providers and Systems (CAHPS) has questions not found on the original CAHPS survey, including the following:
During your office visits before your surgery, did this surgeon tell you there was more than one way to treat your condition?
After you arrived at the hospital or surgical facility, did this surgeon visit you before your surgery?
Before you left the hospital or surgical facility, did this surgeon discuss the outcome of your surgery with you?
After you arrived at the hospital or surgical facility, did this anesthesiologist visit you before your surgery?
During your office visits before your surgery, did this surgeon or a health provider use pictures, drawings, models, or videos to help explain things to you?
Did this surgeon make sure you were physically comfortable or had enough pain relief after you left the facility where you had your surgery?
For a while now, signs have been pointing to increased merger and acquisition activity among hospitals and health systems. Hefty IT requirements, rising costs, and reimbursement concerns are pushing hospitals to seek efficiencies through consolidation and expand market share before millions of newly insured patients enter the market.
But healthcare consolidation has begun to attract the attention of anti-trust officials, journalists, and other watchdogs, and the added scrutiny may create a headwind for hospitals looking to make a deal.
The FTC is currently investigating mergers between Dartmouth-Hitchcock Medical and Catholic Medical Center in Manchester, NH; Hartford Healthcare Corp. and Central Connecticut Health Alliance; and ProMedica Health System’s and St. Luke’s hospital in Maumee, OH, according to Bloomberg news. The DOJ is also reportedly investigating Partners Healthcare in Massachusetts and the University of Pittsburgh Medical Center for potentially “anticompetitive agreements.”
The big red flag seems to be the favorable contracts that consolidated systems are able to negotiate. Bloomberg highlighted the Sacramento market, where an MRI at a local imaging center costs 45% less than the same procedure at Sutter Davis Hospital, which benefits from the market leverage of its parent company, Sutter Health Co. With nearly a third of the market between San Francisco and San Diego, Sutter is able negotiate prices 40%-70% higher than most competitors. (See Bloomberg’s chart comparing the prices of select procedures in major markets around the country).
Greater negotiating power is one of the incentives for consolidating in the first place. Whether you are a group of physicians or a large hospital system, an increase in market share is often an advantage when sitting down to sign a payer contract.
But according to a study from a former DOJ economist, higher prices resulting from hospital mergers between 1997 and 2006 add about $12 billion to annual healthcare costs. With so much focus at the federal level on cutting waste and bending the long-term cost curve, officials will likely have a close eye on the line between competitive advantage and anticompetitive pricing.
Earlier this week the Federal Trade Commission (FTC) and the Department of Justice released revised horizontal merger guidelines, designed to help businesses understand how agencies will evaluate the competitive impact of proposed mergers. The guidelines—which hadn’t been revised in 18 years—don’t just apply to healthcare, but will impact hospital mergers and acquisitions going forward.
The revisions include explanations of how agencies set concentration thresholds and measure the impact of a merger, as well as new sections on powerful buyers and partial acquisitions.
It’s unlikely that the added attention will grow intense enough to stop the merger and acquisition trend. The conditions for consolidation were after all created in part by the federal government, which encourages the efficiency and integration that can result from the right type of consolidation.
But as M&A activity picks up, so will the scrutiny from those who want to make sure the deals don’t add even more to the cost of healthcare.
Most patients don't really care about the costs of their healthcare. Or, more to the point: Most insured patients don't directly bear the cost of care, and even if they did, it's nearly impossible to find and compare the price of a given procedure. So most don't bother.
This unfortunate reality is one of the reasons consumer-directed care never really took hold as a primary means for reforming the system. The notion that patients can influence healthcare cost and quality with their dollars has been largely replaced with the notion that payers (starting with the government) can influence cost and quality with their dollars.
Only a little more than one-quarter of CFOs in this year's HealthLeaders Media Industry Survey said consumer-directed healthcare was a primary concern for their revenue stream in the next three years. It's easy enough to see why: Even those that agree with the principles consumer-directed reform have come to realize that the current system isn't transparent enough to send clear market signals.
But as consumer-directed care has faded as a buzzword, the conditions necessary to make it work are growing more prominent. For instance, 22.7% of consumers said they would decide to go to a lower-cost hospital in a recent survey by Professional Research Consultants, Inc. That number looks small, until you consider the fact that it is the highest result PRC has gotten since it began asking the question in 1984. Another quarter of respondents said they would maybe consider hospital pricing, and the overall trend has been toward greater price sensitivity.
At the same time, health savings accounts are adding about 2 million covered lives each year, and many employers are switching to high-deductible health plans in droves to save money. In other words, patients are assuming a little more direct responsibility for the costs of their care.
There's a catch, though. Only about 10% of those who weren't very price sensitive in the survey said it was because their insurance picks up the cost. The vast majority of those consumers, more than 71%, said they don't make decisions based on cost because quality of care is more important to them.
Ideally, patients would consider both quality and cost to choose the provider with the most overall value, but healthcare doesn't work like most markets. I suspect there are quite a few patients that associate higher prices with higher quality, so unless they have clear information about both, they are going to be suspicious of lower-priced care.
The growth in hospital price sensitivity in the PRC survey is tied in part to the economy. The group that said it was likely to consider hospital pricing was also more likely to have lost insurance because of a job loss or to have a household member not receiving care due to the economy. In hard times, consumers tend to get more sensitive about prices across the board.
What if the job market improves and the economy recovers fairly quickly? Will the uptick in patient interest in hospital pricing vanish? Unless something is done to control spiraling healthcare costs, I don't think so. Patients will probably continue to pick up a higher share of initial expenses, and the added burden will make them more aware of those costs.
But there's a difference between being price sensitive in theory and in practice. Just because more patients say they would consider a lower-cost hospital doesn't mean they can or do actively compare hospital prices. Despite significant strides toward transparency, healthcare pricing is still incredibly muddled. And I can't imagine it will become easier to figure out when individual procedures become bundled together.
If the recession is any indicator, then the interest in hospital pricing may continue to grow. But patients may also respond by avoiding or postponing care, rather than looking for cheaper options.
When Paul Weygandt was presenting to a room full of hospital CFOs about the potential ramifications of the not-yet-passed healthcare reform legislation last year, he asked for a show of hands of how many in the room were involved in their organization’s clinical quality program. Not many went up.
But they should have, argues Weygandt, whose credentials include an MD, JD, MBA, and MPH. He is currently vice president of physician services with Atlanta-based consulting firm J.A. Thomas & Associates.
When an industry undergoes a major transformation, the priorities and skill sets of its leaders often change as well. We can already see the impact of reform and recent changes in healthcare, as physicians rethink how they deliver care and hospital CEOs shift their strategic priorities. Hospital CFOs are adapting, too, and in the future they will need to be much more focused on and involved in quality improvement than in the past, he says.
For the last couple of years, financial leaders have been captains in a storm. While long-term strategy hasn’t completely faded, weathering the recession has been priority number one. Now that the storm is breaking, the future is starting to become clear: Accountable care organizations (ACOs), bundled reimbursement, pay for performance, and other value-based purchasing systems will become the norm.
As revenue becomes increasingly tied to quality, the financial management and quality improvement efforts within a hospital or healthcare system will grow interdependent. “CFOs now recognize that linkage of revenue and quality, and they’re going to be seriously concerned about quality metrics,” he says.
A CFO looking at the bottom line is now not only concerned with costs and revenue growth, but also with poor communication among clinicians, hospital-acquired infections, patient follow-up, and a host of other quality issues. Documentation and measurement will also be front-of-mind, because that will be the basis for reimbursement. An organization with high-quality clinical care will not get paid for it if the documentation is poor.
Beyond Medicare pay-for-performance systems, many private payers are already paying a premium for higher quality, which is becoming a bargaining chip in contract negotiations.
On a practical level, that means CFOs and Chief Medical Officers and clinical improvement leaders will need to start attending more of the same meetings and reading more of the same literature, he says. In addition to financial spreadsheets, CFOs should be able to review case-mix index, acuity reporting, and other major metrics.
Does this mean financial leaders of the future will need a clinical background or will spend an equal amount of time focused on clinical issues? Probably not. But the silos need to be broken down, and communication between the two areas will need to improve.
The entire healthcare system is in the process of transforming based on the notion that money and quality are not only connected, but that one can influence the other. That means hospital CFOs will not only have to take more interest in quality improvement efforts under a new payment system; they will have to lead them.
Last week, the Commonfund Institute released a report on the status of investments by nonprofit healthcare organizations, and the findings mirror in a way what’s going on in the overall healthcare economy.
There is definitely good news. The average return on investment was 18.8% for Fiscal Year 2009, which was the best year in nearly a decade. After average losses of 21.2% the previous year, that’s an impressive turnaround.
But there’s also plenty of reason to remain unenthusiastic about even record-setting improvement. That 18.8% growth came from already-diminished funds; it takes more than 20% growth to offset 20% losses. Even after the turnaround, the three-year average for nonprofit investment returns was -0.2%, and the five-year average was only 3.5%. When you consider inflation and the rising cost of healthcare, those numbers are less impressive.
The big problem is FY 2010. If the trend holds and investments continue their double-digit growth, then those multi-year averages will start to look a little better. But at this point it’s tough to predict what comes next. Some are warning about a double-dip recession. Others foresee a recovery that will take years.
For leaders, that uncertainty can be debilitating. “I think many healthcare organizations are staying the course with their investment portfolios but have become somewhat conservative and are trying to be defensive to avoid a second round of losses if possible,” says Craig Goodrich, CFO at Virginia Mason Medical Center in Seattle.
In some ways, there’s more uncertainty now than in the middle of the recession. At least then it was clear that the economy was in free fall and drastic action was needed. It is now more difficult to read economic signals because the overall economy is stuck in limbo between recession and recovery.
Other economic indicators also have that same basic mixed bag of good news, bad news, and uncertainty. Take employment: Hospitals have reported 15,200 payroll additions in the first seven months of 2010, which is more than double the growth of the same period in 2009. And analysts have been predicting solid job growth in healthcare all year.
Are these layoffs just a downward blip in the longer recovery or the beginning of a new trend? As a leader, how do these mixed signals affect your labor management decisions?
A recent AHA survey shows that in some areas hospitals have not started moving forward again, even though the economy has showed improvement. Sixty-seven percent have not resumed capital projects that were put on hold because of the recession, and 89% have not added back staff or increased hours.
That doesn’t mean hospitals haven’t recovered at all or are worse off now than they were when investments and patient volume were on the decline and unemployment was rising. But healthcare won’t be in the clear until the overall economy is back on track.
The roughly $9 billion that CMS spends on dialysis treatments each year is relatively insignificant when compared to the trillions the U.S. spends on healthcare. But dialysis reimbursements may soon become the key to healthcare’s future when CMS begins a new bundled payment system and quality incentive program for dialysis services.
Beginning next year, CMS will provide a single, bundled payment for outpatient dialysis treatment, supplies, related clinical laboratory tests, and certain related drugs (some oral drugs won’t be included until 2014). The year after next, CMS wants to begin a value-based purchasing system that would tie reimbursement to performance on three quality measures related to end-stage renal disease.
This isn’t just another pilot program. It is a first step in what will most likely be a long transition to a new payment system where bundled reimbursements and pay-for-performance are the norm.
“For the first time in any of our payment systems, the quality of care facilities furnish to patients will be reflected in their payment rates,” says CMS Administrator Donald Berwick, MD. CMS can reduce facility’s payment rates by up to 2% if it fails to meet performance benchmarks.
For a while now, there have essentially been two healthcare systems affecting how hospital leaders make decisions and think about the future. There is the current system--plagued by rising costs, misaligned incentives, and reimbursement pressures—which affects day-to-day operations.
But hospital leaders have also been mindful of a future, hypothetical system. It features bundled payments and rewards quality instead of volume; it encourages coordination and cooperation between providers. It doesn’t yet exist, but it might as well. Its seeming inevitability already influences strategic planning.
Not knowing when or if the transition will occur, though, has made it difficult for hospital leaders to simultaneously plan for today and prepare for tomorrow. Many CEOs and CFOs know that tighter integration and smoother care transitions will be essential to thriving in the new system, and that will require new infrastructure and changes in organizational priorities, in some cases. But it is difficult to justify spending much of today’s strapped budgets to prepare for a new system with a question mark for an implementation date.
The bundled program for dialysis at least gives both providers and CMS a chance to get their feet wet before jumping in. Everyone still has a lot to learn, and bundled payments won’t necessarily be any simpler than today’s complicated system.
Even though the new rule sets a base payment of $229.63 for a dialysis treatment, there can be adjustments for case mix, new patients, pediatric patients, co-morbidities, low-volume facilities, geographic wage index, training for self-dialysis, and high-cost outlier cases. If each bundled service has a similar number of adjustments and exceptions, the unintended consequences could be problematic.
Although most of the end-stage renal dialysis facilities affected are freestanding, about 600 of them are hospital-based. Those hospitals get their own mini pilot programs to test what it takes to succeed with bundled payments and value-based purchasing. What they learn will be valuable as the system expands to other diseases and treatments.
CMS hasn’t really indicated when that will be. Many questions remain about how bundled payments and true pay-for-performance will work and when they will be implemented. It will be a long transition from the fee-for-service system of today to the hypothetical value-based system of tomorrow.
Last week the nation’s largest health insurers received a letter from the American Medical Association and 46 state medical societies that sharply criticized the accuracy and reliability of the cost-profiling mechanisms that many payers use to rate and tier physicians.
The physician groups called the profiling systems “Rube Goldbergesque,” evoking the complex, over-engineered machines that rely on chain reactions and intricate contraptions to accomplish what in the end is a simple task. Instead of simply pushing a button on toaster, a ball rolls down a ramp and hits a lever, which launches a spring, which hits a trigger, which releases a weight that falls and... pushes a button on a toaster.
For insurers, the simple task is to reward physicians for efficient and high-quality care. But the AMA and others not only think that the formulas for measuring efficiency are too complicated, they think the formulas don’t actually accomplish their goal very well--the bread isn’t getting toasted.
A series of studies from the RAND Corporation, for example, found that nearly one-quarter of physicians may be misclassified by a common cost-profiling system, and in some specialties the misclassification rate may be much higher.
Because insurers often encourage or incentivize patients to see high-tier physicians, the tiering system, if flawed, could have serious consequences, the AMA argues.
“Physicians’ reputations are being unfairly tarnished using unscientific methodologies and calculations,” the organization said in the letter. “Moreover, these inaccurate reports and erroneous physician assignments not only have the potential to harm patients and physicians, but they divert scarce resources from meaningful efforts to help physicians evaluate and address unwarranted variation in health care delivery.”
But Karen Ignagni, president of AHIP, poked holes in the RAND studies, pointing out that they looked only at cost, whereas health plans also factor quality into rankings. “Quality, which includes patient satisfaction, is the most important factor used to create value-based networks for patients. Unfortunately, this research didn’t take this into account,” she said.
It’s an important distinction, because the ultimate goal for both payers and physicians shouldn’t be just cheaper healthcare, but higher value care. Our problem isn’t just that we pay more for healthcare than other industrialized nations; it’s that the extra spending isn’t translating into better care, according many major measures.
At least half-a-dozen healthcare leaders in the last few years have given me this simple definition: Value=Quality/Cost. The AMA and other physicians were really only addressing one variable in the equation when they attacked physician ranking systems based on the recent research. But their point about the complexity and transparency of the systems is still worth hearing.
The tiering systems, pay-for-performance formulas, reimbursement codes, and other methods of rewarding quality become more Rube Goldbergesque all the time. Finding simple ways to improve the value of healthcare is a challenge shared by everyone in the industry, and payers can help by ensuring the methods they use to reward quality or efficiency are as transparent and straightforward as possible.
Reimbursement incentives can be effective if they are comprehensible, but they won’t likely have their intended effect if there are too many levers, buttons, triggers, and springs in the system.
New CMS Administrator Donald Berwick, MD, has not yet been on the job a month, and he’s already finding himself in the middle of one of those reimbursement tugs-of-war that seem to define modern healthcare. How he responds may indicate what hospitals and physicians can expect from CMS during his tenure, particularly when it comes to getting paid.
Berwick’s reputation precedes him.
As former president of the Institute for Healthcare Improvement, his is one of the most recognizable names in the industry. It is no secret that he considers the system wasteful—he has said the waste level in medicine approaches 50%—and would welcome the opportunity to trim fat and redesign delivery. He has been one of the industry’s big thinkers and relentless reformers for quite awhile.
But now comes the interesting part. Can he translate his theories into concrete change? It will take more than big ideas to change an organization that has a budget larger than most nations’ GDP. The political pressure, not matter what he does, will be relentless.
Take, for example, a recent CMS proposal to reduce hospital inpatient payments by 2.9% for fiscal year 2011. The decision was made before Berwick took office, and CMS says it is not cutting payments so much as recouping overpayments from FY 2008 and 2009 that were due to improvements in the coding and classification of patients, rather than real case-mix changes. The retroactive fix will save the organization $3.7 billion, and was given the thumbs-up by the Medicare Payment Advisory Commission.
When combined with the initial reimbursement update, the net change is only about a 0.8% decrease. But, a cut of that magnitude will have a big impact on the hospital industry, which has been lobbying hard to convince Berwick to eliminate the reduction, which is known as the "coding offset."
Just in the last week, Berwick has received letters from a group of 52 Senators, a coalition of 242 House members, and three hospital associations. All asked Berwick to revisit the math and reconsider the cut.
The groups claim that CMS used a flawed methodology to determine the coding change, and the AHA included supporting evidence from two new studies. An analysis by the Moran Company argues that CMS didn’t adequately isolate documentation and coding issues from other factors when calculating the case mix index, and a report from an economics professor takes issue with CMS’ claim that the severity of case mix has been on the decline.
To really drive the message home, hospital trade groups have even been buying television ads implying that the cut will ultimately hurt patient care.
So how will Berwick react to the growing chorus calling for the cuts to be delayed?
Don’t count on him giving in. Here’s Berwick talking about making healthcare more efficient nearly five years ago: “You’re going to run into stakeholders who are going to tell you that you’re harming care, and the knee-jerk reactions of doctors and others will be to reinforce that idea.”
Will Berwick the CMS Administrator have the same attitude and resolve as Berwick the IHI President, now that he’s in the political hot seat and responsible for all the unintended consequences of major change?
