Quality over Quantity: Reforming Payment

A new research report from the RAND Corporation and sponsored by the National Quality Forum offers insight into for medical services. A response to the leading trend among health care payers to pay for quality instead of quantity, the lengthy technical report divides existing and proposed payment systems into 11 categories. It would be impossible to summarize the entire 300+ page report in a condensed format such as this. Fortunately, some proposals ( for both physicians and hospitals) have been extensively discussed elsewhere and can be skipped.

Issues of the most concern and adding the most confusion to health care providers – global payments, bundled payments, , and prevention of hospital re-admissions – seem to be the most relevant topics for review and discussion. Others, such as payment adjustment for hospital-acquired conditions or “never events”, are better understood, less controversial, and will not receive mention.

Global Payments

Under a global payment scheme, health care providers – either hospitals or ambulatory group practices  – receive a single payment for a set of services provided to a cohort of patients during a defined time span in lieu of multiple discrete fee-for-service payments. Global payment strategies (common in the English NHS) are similar to capitation schemes and would incentivize for care coordination, cost and utilization reduction, and offer P4P. However, the financial risk of global payment falls directly on providers in the event that patient care is most costly than anticipated. Blue Cross/Blue Shield of Massachusetts operates an alternative quality contract which contains elements of global payment.

Cherry-picking of healthier patients is a genuine concern for this time of payment reform. Major questions remain including who receives the global payment, how are payments distributed among providers, and how to attribute rewards or blame for cost savings and cost overruns. Other concerns include the low likelihood of individual physicians to embrace a new payment system that poses financial risk for them.

Bundled Payments

Bundled payments are similar to global payments. However, bundled payments are made on behalf of the patient for an entire episode of care (perhaps an acute care diagnosis or for a specific procedure) instead of for a period of time. Incentives in this systems should drive clinicians and other providers to reward efficiency. Several examples of bundled payments currently exist with Geisinger Proven Care, Minnesota “Baskets of Care,” and the Prometheus Payment system. Successful “bundled payment” systems appear to revolve around discrete clinical entities that have well-established and evidence-based clinical guidelines. Again, the distribution of funds and attribution of bonuses and penalties for superior and inferior care must carefully be deliberated.

Accountable Care Organizations (ACOs)

The ACO Shared Savings Program, proposed by the Affordable Care Act, seeks to provide quality incentives to the traditional fee-for-service Medicare program for a group of providers (likely a multi-specialty physician group or hospital system with its affiliated physicians). As the fee-for-service model will not be completely abandoned under this model, estimates on how much  savings can be achieved are purely speculative. Also, because Medicare patients (with FFS) can go outside their own ACO for care, accurate cost attribution may prove difficult. In the latest blow to the ACO model of payment, several “poster boys” for the ACO concept (including the Mayo Clinic, the Cleveland Clinic, Geisinger Health System, and Intermountain Healthcare) have all declined to sign up as participants citing excessive reporting requirements and financial risks.

Hospital Readmissions

Similar to nonpayment for “never events,” hospitals will soon see penalties for having above average readmission rates for common conditions – heart failure, heart attack, and pneumonia. This policy (authorized by the ACA)  requires that policy makers first determine which readmissions are avoidable (by better discharge planning and follow up) and which are not (by worsening patient condition or other patient-related factors). Beginning in 2013, a 1 percent Medicare payment rate decrease could impact hospitals above the curve for readmission rates. New research from the Dartmouth Atlas Project shows little improvement in readmission rates over the past decade.

Commentary

New payments schemes hold promise to transform medicine into a prospective and more efficient system guided by guidelines and quality measures. However, providers and patients face significant risks.

As payers attempt to shrink or at least hold steady the amount of total payments made, individual providers will find themselves fighting over the same funds. New conflicts may arise between physicians, hospitals, nursing homes, and rehabilitation facilities. Specialists and generalists may argue over dollars under global or bundled payment schemes. Administrators could leverage significant clout over physicians whether or not to admit certain patients in order to balance readmission metrics.

Perhaps allowing the patients themselves to choose their payment system – dividing Medicare into discrete payment tracts – would drive provider re-organization as conceptualized by policy makers.

Schneider, EC, et al. Payment Reform: Analysis of Models and Performance Measurement Implications. RAND. 2011; TR-841-NQF.

by

Cedric Dark, MD, MPH

 

 

 

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