In recent weeks, the market has reacted to a few noteworthy headlines, all involved with or touching upon value-based discretionary actions, and many with the not-so-hidden question: What’s In It for Me or WIIFM?
- CMS announced that by 2016 30% of fees in health care should be paid for through a value-based system, moving away from fee-for-service.
- ACO results have shown ambivalent outcomes.
- Outcomes-based contracts have permeated the Hepatitis C cost-nado (that’s a cost sharknado, the kind that fiercely defies cost controls and takes over all noise about payment reform and patient preferences).
- Reference-based pricing is a good/bad troublemaker in the middle of the value-based travails.
As one of the loudest proponents on value-based designs, I lift the curtain again to show the thinking behind the movement from fee for service to value-based designs. All of these items above discuss the message of payment reform, or system alignment, but they are intensely linked to the patient-consumer ability to make the right choices, choose the right sites for care, and pay the right amount for services rendered to achieve health security.
This last—health security—should be at the heart of the US health system.
▪ It’s the place where patient competency is built and tested over time, as the patient becomes aware of health risks and chooses to modify behaviors to lower the risk.
▪ It’s the place where, when there are acute or emergent symptoms, there is no question but that the patient will be able to access the appropriate and affordable care in the safest possible setting, hopefully receiving care that delivers the patient back to functional health.
▪ It’s the place where caregivers and administrators are paid a competitive wage for serving the needs of the patient and getting the patient back to the best health possible.
Inherent in these three components of health security is the patient-client making the right choices and the health care system responding in the safe, evidence-based, efficient care that is needed. Fee for service does not guarantee these conditions will be met. In fact, there is evidence that too many tests lead to too many services and often cause harm when none was observed. [AARP, Scientific American, AAFP]
In other words, value-based health reform is based on symmetry of incentives.
The Major Questions in Value-Based Health Reform
A catalogue all of the incentives (“levers”) in value-based benefit design was created through years of surveys and over 140 personal interviews with large to small employers and plan sponsors. The levers were mapped by attributes on a scale of 1-50 and became known as the Health Value Continuum.
The lack of symmetry in the rewards to the patients (benefits) was so obvious it led to calls in 2009 for system rewards generally aligned with the patient adherence.
The first call was for pharmaceutical alignment in which at least a portion of the drug payment was linked to quality indicators. But white papers and seminars called for system-level reforms in which providers and administrators were incentivized for quality, such as reduction in readmissions and improvement in managing complex cases.
New Payment Schemes
Health care reform included value-based designs and incentives. Using the pathway of the Health Value Continuum, all of the parties would become more accountable (through experience and rewards) and inefficiencies would be reduced.
With that goal, let’s review some of the proposed payment schemes.
1 Reference-Based Pricing. In this scheme, prices for services are compared and the plan sponsor agrees to pay for one of the levels (not always the cheapest), with the transfer of any remaining balance to the patient. While it sounds reasonable there are a few problems.
A The plan sponsor is defining the preferred level of reimbursement, which of course hinges on the cost-efficiency of the provider(s). But nowhere is there a transparent level of quality, which could include in-hospital physical therapy, or adherence to American College of Cardiology qualifiers for stent versus bypass surgery, as examples.
B When the focus is on cost-efficiency, redundant screens and care will be eliminated. These are widgets, and they feed fee-for-service.
C Widgets can only be reduced so much until they impair the quality outcomes of returning the patient to functional health. This leads to widget pricing of caregivers, i.e., the eventual lowering of fees to providers or care teams, which means payment goes down, creating the exact problem that has haunted providers for years.
2 Bundled and global payments. Similar in nature, bundling is a group of services that focus on achieving better health outcomes of a defined time, such as all the services that go into a bypass operation, from pre-tests to discharge, rehab and home care. Global is the bundling of the services but includes continuity of follow up care, home care, adherence to treatments over time, and other longer-term measures. Again, there are problems.
A The definition of the bundle/global may be different from diverse plan sponsors. Yet, there may be one to three hospitals, for example, in the community. How can they accommodate all the different definitions within one health care system? Across all health care systems? Can they prohibit the patient from choosing a provider for part of the services outside of the bundle?
B In the end, the bundle or global payment is a grouping of widgets to reduce redundancy of care and inefficient use of dollars. Like Reference-Based above, eventually all of the costs that are not accumulated by the provider teams are reduced, and the only place left to reduce is in the payments to the providers.
3 Accountable Care Organizations were defined to accumulate sets of caregivers and create a population-based system of care for a defined population. Health systems picked up the early efforts, but physician practice networks also moved in to manage populations that were defined by geography, age, condition, or some constellation of these subgroups.
A In the early proposals, the population would be assigned, which would provide stability for the ACO, but the final rulings allowed patients to move from one caregiver to another, who could be outside the defined ACO.
B ACOs had several payment designs to choose from, but the risk-reward scheme proved unwieldy. That was no surprise, as the ACO really needed the first year to define the priority risks to the populations, which meant technology had to enable them…and the technology was not always available.
C First and second year results for predictable cost and health trends have shown results to be ambivalent at best. But, if we compare the path to the Health Value Continuum and mirror the success against the results of the plan sponsors, we would know that it would take three years for the early models to achieve success, at the very least.
So what should be done? Can we equalize the efforts and steps, can we move from reference-based and bundled to the big value-based purchasing scheme?
Data, Design, Delivery, Dividends
The movement to value-based payments is achievable and can be accelerated if we use the Health Value Continuum as a framework for each stakeholder. We begin with the 4 steps of the value-based process.
1 DATA: What is the waste or risk that we are seeing in the data?
A How are we measuring the waste or risk?
B Are there benchmarks to tell us where our levels measure up to others’?
2 DESIGN: What metrics will we use to define improvement? To define the end goal?
A Over what timeframe?
B Benchmarks? Standards?
C What are the priorities for change: government regulations? Other?
DELIVERY: Who manages these metrics? The people involved could be providers, payers, plan sponsors, patients, consultants who recommended a vendor, Rx and device companies, HIT vendors or managers, government entities—anyone or any group that influence the change that is warranted.
A For each stakeholder, what financial, performance or other incentive can be offered?
B Are there relationships between the parties that we need to understand? (How often does the patient see the provider? Is there a software app that is monitoring the adherence? If so, where is the data housed and how do we get measures?)
DIVIDENDS: How will we measure success in the first 30 days, 90 days, 6 months, year? YOY?
A Will the success for one stakeholder be at the cost to another?
B Are incentives to stakeholders (example: radiologists) dependent upon the number of MRIs while we are reducing the number for any one or more procedures (perverse incentives)?
What this shows is that the quality objectives are on a path to sequenced achievement. The sequence unfolds over time, and it is cumulative over time. Required measures and goals grow larger over time.
A shift to value-based purchasing does not have to be as complicated nor as hard as the early pioneers in value-based designs (benefits or purchasing). They had no roadmap; they conferred at worksites, conferences and seminars. When the patient-client is included in the new goal-setting, the process is smoother. When there is peer-to-peer support, whether patient-to-patient or worker-to-worker or physician-to-physician, the changes are more easily achieved and sustainable.
Value-based designs are an engagement tool for a quality-improvement process. They are easily described and sometimes frustrating to implement. But they do deliver better adherence to protocols, reduction in safety and risk, improvement in care measures, and satisfaction over time.
We are enabled to move faster based on the earlier work, and we have much more technology to support our efforts. The hardest part now is the use of data for measures across technologies, without the invasion of privacy.
Interoperability, such as that demonstrated by Apple on yesterday’s launch of the Research Kit, is a terrific starting point for the expansion of knowledge and benchmarks. [ICYMI, Research Kit is a two-way input of information between patients and providers in clinical trial. For the first time, Apple is opening its platform so that patients on other phones/browsers that are not Apple—such as Android, Google, etc.—can also participate]
Quality can be achieved, can be scaled and can be rewarded. We do it in steps, share the results, accelerate the good news and go to the next level. It’s how we learned to dance after we learned to walk; it’s how we learned to land on the moon after we learned to fly. Each step costs money, and rewards were not always measured in money.
Of course, elegance is in a few words that sum it up beautifully. “Price is what you pay. Value is what you get.” – Warren Buffett, Chairman and CEO, Berkshire Hathaway
Cyndy Nayer is the CEO and Founder of the Center For Health Engagement