payment reform

Jack CochranThe Health Care Blog recently featured our Open Letter to Primary Care Physicians,generating quite a bit of reaction. A commenter made the point that “we cannot expect” primary care physicians “to act differently until and unless they get paid differently.” [Emphasis added]

The comment refers to a doctor in solo practice and notes that “the first step is changing how you are paid, in one way or another. And there are many ways that work better than the current code-driven fee-for-service model.”

Does waiting for payment reform make sense? Or should primary care practices act now to change the way they practice in anticipation of payment shifts?

Moving Toward Value-based Care

Some physicians groups seem somewhat frozen – unsure exactly where health care payment is headed and thus waiting until there is a clearer signal.

But it seems to us that the payment reform signal grows louder and clearer and support for that contention comes in a recent research report* from McKesson, the international consultancy:

We can now say with certainty that healthcare delivery is moving in one direction: towards value-based care.

This is care that is paid for based on results – on measurable quality – as opposed to the traditional fee-for-service approach that pays for volume. McKesson notes that

The affordability crisis is causing unprecedented changes in the healthcare landscape, the most significant of which is the transition from the current volume-based model [fee-for-service] to myriad models based on measures of value.

To remain relevant and competitive, payers, hospitals, health systems, and clinicians must respond now to integrate value-based models into their existing systems.

Continue reading “Waiting For Payment Reform?”

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Clinic Construction

When the Cleveland Clinic announced job and expense reductions of 6% in 2013, the healthcare sector took notice.

Did the world-renowned hospital and healthcare research center, with 40,000 employees and a $6 billion budget, really believe it did not possess the heft to take on the increasingly turbulent sea changes in American healthcare? Or was this yet another stakeholder using Obamacare as cover to drive draconian change?

Both sides of the political aisle were quick to make hay of the announcement, with conservatives blaming reform for eliminating jobs while liberals questioned the timing of the cuts when the Cleveland Clinic was posting positive growth. The answer from Eileen Sheil, corporate communications director, was apolitically straightforward: “We know we are going to be reimbursed less.” Period.

The question of reimbursement reform and the unintended consequences of the Affordable Care Act are weighing on the minds of hospital executives nationwide as independent, regional and national healthcare systems grapple with a post-reform marketplace. The inevitable conclusion that the unsustainable trend in American healthcare consumption is now at its nadir seems to have finally hit home.

These days, America’s hospitals are scrambling to anticipate and organize around several unanswered questions:

  • How adversely will Medicaid and Medicare reimbursement cuts affect us over the next five years?
  • Can we continue to maintain our brand and the perception that any employer’s PPO network would be incomplete without our participation?
  • Can we become a risk-bearing institution?
  • Can we survive if we choose not to become an accountable care organization (ACO)?
  • Will the ACO model, by definition, cannibalize our traditional inpatient revenues?
  • Can we finance and service a hard turn into integrated healthcare by acquiring physician and specialty practices?

Go It Alone or Join a Convoy?

Mergers and acquisitions remain in high gear in the hospital industry—“the frothiest market we have seen in a decade,” according to one Wall Street analyst. “Doing nothing is tantamount to signing your own death certificate.”

Many insiders believe consolidation and price deflation is inevitable in healthcare. Consolidation, however, means scarcity of competition. If we operate under the assumption that scarcity drives costs higher, we may not necessarily feel good about consolidation leading to lower costs unless mergers are accompanied by expense cuts that seek to improve processes, eliminate redundancies and transform into a sleeker, more profitable version of one’s former self.

Bigger may not always be better, but bigger seems to have benefited a select group for the last decade.

Continue reading “The Perfect Storm: Health Reform and America’s Hospitals”

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Farzad MostashariSeveral of the provisions included within the Affordable Care Act in 2011 designate Accountable Care Organizations (ACOs) as formal, contractual entities.

However, in the real world ACOs come in a variety of shapes and sizes.

When compared to larger, hospital-sponsored ACOs, rural and small physician-led ACOs face a tough challenge, because despite limited resources they need to come up with substantial upfront capital and infrastructure investment to establish a strong ACO foundation.

To help ease this burden, 35 ACOs were selected to participate in the Advanced Payment Model ACO demonstration through a grant program from the Center for Medicare and Medicaid Innovation (CMMI). The grants provided a portion of upfront capital to determine whether or not this financial assistance would help ease the startup burden for smaller ACOs, and increase their success rate.

One of those 35 organizations includes the central Florida-based Physicians Collaborative Trust ACO, LLC (PCT-ACO). They are participants in the January 2013 Medicare Shared Savings Program (MSSP) ACO cohort, along with 106 other ACOs.

Larry Jones, PCT-ACO’s CEO, describes his personal mission as an effort to “preserve and protect the independent practice of medicine.” For over 25 years he has been advocating for physicians through their efforts to organize, negotiate with health plans, and other challenges.

Continue reading “What a Physician-Led ACO Can Teach Us about Getting It Right”

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The problem of pain, from the viewpoint of British novelist and theologian C. S. Lewis, is how to reconcile the reality of suffering with belief in a just and benevolent God.

The American physician’s problem with pain is less cosmic and more concrete. For physicians today in nearly every specialty, the problem of pain is how to treat it responsibly, stay on the good side of the Drug Enforcement Administration (DEA), and still score high marks in patient satisfaction surveys.

If a physician recommends conservative treatment measures for pain–such as ibuprofen and physical therapy–the patient may be unhappy with the treatment plan. If the physician prescribes controlled drugs too readily, he or she may come under fire for irresponsible prescription practices that addict patients to powerful pain medications such as Vicodin and OxyContin.

Consider this recent article in The New Republic:Drug Dealers Aren’t to Blame for the Heroin Boom. Doctors Are.” The writer, Graeme Wood, faults his dentist for prescribing hydrocodone to relieve pain after his wisdom tooth extraction.

As further evidence of her misdeeds, he says, first she “knocked me out with propofol–the same drug that killed Michael Jackson.” Wood uses his experience–which sounds as though it went smoothly, controlled his pain, and fixed his problem–to bolster his argument that doctors indiscriminately hand out pain medications and are entirely to blame for patient addiction.

But what happens to doctors who try not to prescribe narcotics for every complaint of pain, or antibiotics for every viral upper respiratory infection? They’re likely to run afoul of patient satisfaction surveys. Many hospitals and clinics now send a satisfaction questionnaire to every patient who sees a doctor, visits an emergency room, or is admitted to a hospital.

The results are often referred to as Press Ganey scores, named for the company that is the leading purveyor of patient satisfaction surveys. Today these scores wield alarming power over physician incentive pay, promotion, and contract renewal.

Now hospital payments are at risk too.

Continue reading “The Problem of Pain: When Best Medical Advice Doesn’t Equal Patient Satisfaction”

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The Sustainable Growth Rate mechanism creating a zero-sum game for Medicare Part B reimbursement rates (dropping rates as volume picks up) has long been unsustainable, and so Congress has been messing around with short-term SGR fix legislation for years now. Every six to twelve months we’ve been hearing about the impending 20% or 30% Medicare pay cut about to hit physicians’ pocketbooks, and the likely exit of physicians from the rolls of participating providers.

However, the stars are now aligned in such a way that real progress seems likely: multiple powerful Congressional committees have signed off on a deal to replace the SGR rule with something more workable: A unified approach to financial incentives to physicians and other medical professionals who are Medicare participating providers intended to promote quality and enrollment in alternative payment arrrangements.

The full text of the bill will be available here: It’s H.R. 4015. Check out the SGR fix section-by-section-summary and the websites of the House Energy & Commerce Committee and the Senate Finance Committee too. The substance of the proposal is discussed below.

How has this happened?

One of the sticking points involved in fixing this problem is that the price tag for a permanent SGR fix has long been seen as too high. How do we know the price? and How high is too high? you may ask. Well, Congress looks at CBO projections of the cost of implementing legislation over a ten-year planning horizon. When physician cost trends are on a steep increasing slope, that ten-year budget number looks bigger. When the trends flatten out a bit, the big number gets smaller. At present, that ten-year cost projection is “only” $125 billion, and Congress has spent over $150 billion on short-term fixes. So the time is right.

Continue reading “The Fine Print: In Which We Go over the SGR Fix Line by Line with a Yellow Highlighter”

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My wife Mary and I recently got a series of early morning calls alerting us to the declining health of Mary’s mom, who was in her 90s. She died later that week. We were stricken and so sad, but took comfort that she died with dignity and good care on her own terms, and at her home in San Francisco.

Ten years ago, we received a very different early morning call, about my father.  An otherwise healthy and vigorous 72-year-old, Dad had fallen at home. Presuming he’d had a stroke, paramedics took him to a hospital with a neurosurgery speciality rather than to the university trauma center. That decision proved fatal.

A physician in Seattle at the time, I arrived the next day to find Dad in the intensive care unit on a ventilator. Dad’s head CT revealed a massive intracranial hemorrhage. Dad also had a large, obvious contusion on his forehead.

The following day, the physicians asked to remove Dad from the ventilator.  He died that night. We were profoundly devastated by his death and upset with the care he’d received.

Our family wasn’t interested in blame or lawsuits. We did, however, want answers:  Why hadn’t Dad been treated for a traumatic injury from a fall? Shouldn’t he have had timely surgery to relieve pressure from bleeding? What went wrong?

I’ve spent the last decade searching for answers, for myself and countless others, to questions about how to improve health care.  I’ve had the honor of working with many people pushing health care toward high value, at the Robert Wood Johnson Foundation(RWJF) and elsewhere.

We’ve worked hard to find solutions.  We all get it:  The health care problem is a big, complex one without silver bullet answers. Still, we’ve made incredible progress with efforts like RWJF’s Aligning Forces for Quality Initiative in which community alliances work to improve the value of their health care.

We’re searching for ways to help us all make smarter health care decisions.  We’re helping health care professionals improve and patients and families be more proactive.  We’re exploring the price and cost of care, and ways to automate health care information with technology.

And importantly, we’re working to align the incentives that health care professionals need to support and deliver great care.  We strongly believe that unless we reward great results, we won’t get them.  That means payment reform, with a focus on financial incentives for those who hunt for waste, resolve safety problems, sustain improvement, and, most of all, innovate to save more lives.

But do financial incentives to promote and reward behavior work?

Continue reading “Aligning Physician Incentives Doesn’t Do It”

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There’s been a great deal of discussion about health care payment reform. Prominent in this discussion is “Pay for Performance” (P4P). The idea is simple — rather than pay providers based on volume of care (fee-for-service) or number of patients (capitation), tie their payment to a measure(s) of performance. There has been substantial concern about the quality of care delivered to patients, so pay for performance appears to make a lot of sense. Don’t we want to reward providers for good performance? Shouldn’t this encourage them to provide high quality care?

Unfortunately, this is not as straightforward as it might appear. While the idea of pay for performance is very appealing and intuitive, there are some major pitfalls in implementation.

Continue reading “The Promises and Pitfalls of Pay for Performance”

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Last week veteran analyst Vince Kuraitis reviewed a report from the consulting firm Oliver Wyman (OW), arguing that the trend toward reconfiguring health systems to deliver more accountable care is more widespread than any of us suspect.

“The healthcare world has only gotten serious about accountable care organizations in the past two years, but it is already clear that they are well positioned to provide a serious competitive threat to traditional fee-for-service medicine. In “The ACO Surprise,” our analysis finds that 25 to 31 million Americans already receive their care through ACOs-and roughly 45 percent of the population live in regions served by at least one ACO.”

OW provides a well-reasoned analysis and conclusions, but I’m skeptical. In discussions with health system executives around the country, I hear some movement toward change, but relatively few organizations are materially turning their operations in a different direction. The specter of policy change is looming, but it is still abstract. As I’ve described before, market forces are intensifying, but they’re mostly still scattered and immature.

Fee-for-service remains the prevailing paradigm, and there is no palpable threat to the health care excess that is business-as-usual. Several health system CFOs have told me: “Why should we take less money until we have to?”

There’s no question that Medicare’s ACO programs have the bulls-eye on reimbursement for health systems, which are a convergence point for a large percentage of appropriate and inappropriate health care costs. But there is a silver lining. American health care is so replete with waste – on the order of half or more of all health care expenditures – that any system that tries could deliver dramatically lower costs and improved outcomes.

Continue reading “ACOs: We’re NOT There Yet”

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In the battle over health care that lies ahead, how strongly will the public rally around the need for innovation in confronting health care costs?  Does the public view innovation as relevant to the challenge in the first place?

These aren’t idle questions. The news that growth in overall national health care spending has been moderating has raised speculation that innovations in payment and health care delivery are already paying off, notwithstanding the unquestioned impact of the Great Recession.

Looking ahead, uncertainty over the fate of the Affordable Care Act and the likelihood of federal budget cuts yet to come has many fearing that innovations will be vulnerable. And it is not just federal spending that will be at risk. Hospitals and health plans will all be watching their margins carefully to assess how far and how fast they can keep making investments that support innovation (such as investments in healthcare IT, analytics and care coordination) but that may take months or years to generate a return.

All of which places the role of innovation in controlling costs center stage. After all, this is what undergirds the Triple Aim that so many health care leaders have embraced as the only realistic alternative to arbitrary cutbacks in health care services and spending. Health care leaders can defend innovation if they have public support. But do they?

Continue reading “Innovation is Key to Controlling Health Care Costs”

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Are the House and Senate giving us a false choice for how to control health care costs in Massachusetts? Aren’t there other options?

A few major themes have emerged from the two payment reform proposals and highlight the fact that they fail to align incentives for patients to be more involved in the purchase of their health insurance and their health care.

For example, even with full transparency of cost and quality (which is a huge lift on its own) for many patients, high-cost still correlates with higher quality in medicine. A recent report from Attorney General Coakley proved this theory wrong, but simply providing patients with cost data without placing the right incentives in their health plan to choose the low-cost high-quality provider will result in many selecting the most expensive care. As a result, these proposals will fall short of sustainably bending the cost curve.

Continue reading “Red or Blue Pill for Payment Reform? Both Won’t Work”

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