Value-Based Health

flying cadeuciiIn 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.

The latest rampages have appeared on two national and highly-regarded blogs: The Health Care Blog [Value-Based Reform] and The Health Affairs Blog [Go Slow on Reference Pricing].

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.

HVC 2015

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.

Lessons Learned

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



36 replies »

  1. “Whose value?… patient and the provider … But the value can be accumulated by aggregating key preferences.”

    Cyndy I’m glad to see that you are reconsidering your earlier response. Value like other things is in the eyes of the beholder. I don’t want to belabor the point, but who determines the value of the questions on the questionnaire? No matter how we try to distance the patient from being the one to assign value and no matter how much we try to create checklists to demonstrate value, in the end it is the patient that determines such value. That is why fee for service is so valuable in health care and in every purchase a consumer makes. It is the ultimate voting machine where trade offs are made all the time.

  2. “when it’s the patient-provider relationship that is the trusted one”

    Cyndy, for me that is never one of trust, especially in a hospital. Patients always need to be wary of their treatment and the reasons for it. Not being an advocate either for yourself or for a loved one is putting the patient at risk.

    “As noted, value-based doesn’t always mean cheaper for the payer, but I will agree that it often does.”

    Who is the “payer”. I will argue it will never be cheaper for the patient. When words like “value” are in a sentence relating to cost – be afraid, be very afraid.

  3. As noted, value-based doesn’t always mean cheaper for the payer, but I will agree that it often does. What scares me a little about this proposition of indemnity payment, William, is that it’s counterproductive to put the patient on the other side of the professionals, when it’s the patient-provider relationship that is the trusted one. On the other hand, maybe we need the tension to get the payment system to change.

  4. I do know that. But there are billing codes for consultations, and, if I’m denied reimbursement by my health plan, I’m willing to pay for time, make a donation to a personal cause, etc. I don’t want to work for free, neither should others.

  5. ” Yes, I’m willing to pay for that. Actually, I offer it when I need the time. Only had one doc say yes.”

    You do realize that in-network physicians are contractually prohibited from taking money outside the negotiated fee schedule?

  6. Allan, I’ve been thinking about your comment. Whose value? We must find the commonalities among the most significant stakeholders. To be very clear, I see that as the patient and the provider. But the value can be accumulated by aggregating key preferences. What this means: we now have have several series of validated questionnaires that ask patients about priorities of engagement: are there financial risks to the household/job, etc., is there a family crisis, what outcome (select from several on the drop down) they are hoping to achieve with the visit/treatment, etc. If you are interested, you can find these documents on HHS NIH PCOR questionnaires. Before we ask the questions, we must have some data on key risks to the population and the system, so that we can identify a goal (reducing safety risks from too many MRIs? building alignment with the AAFP rules for decreasing numbers of unnecessary tests? purchasing high-cost specialty drugs with an outcomes-driven contract and shared risk-reward? as a few examples). Then we ask, “who is the most likely population to benefit from the shift?” the answer could be “women with in situ carcinoma,” or “non-smoker adults who should not be getting lung X-rays” etc. THEN we can find the questions to ask the patients with those characteristics to see what THEY want from their health care and how suggesting these changes might benefit them. Only then can we develop a plan for paying providers for the time to ask and report the questions as well as the time to counsel or refer the patient to appropriate educ/counsel/care coordinator.

  7. In my experience, ER docs don’t order a lot of MRI, but do order a lot of CT, Ultrasound and other imaging.

    And as for ER docs meeting patients for the first time – that is sort of the definition of being an ER doc. And “treat em and street em” is pushed by the hospital and the patient that both want short turnaround.

    As for the differences in prices for imaging – much of that is urban legend based on charges not actual prices paid. Still, there are differences that are not necessarily based on quality.

  8. We can have instant Press Ganey by allowing the claim money to flow through the patient who then pays the Provider (he hopes)…as in indemnity.

    Or put the patient in the ACO and let him help divvy up the dough and keep some himself ( as a cooperator. )

    Value does have mostly to do with the patient, but this is a faux definition and it actually means cheaper health care for the payer. We should hold them to the original definition and bring the patient into the determination of value….somehow. To actually pay attention to the patient would separate stakeholders into two groups: docs and nurses would be in one group…

  9. You offered pay for the extra time that YOU felt provided more value.

    You made a deal with a provider willingly on both sides and both of you were happier for the deal.

    That is classic marketplace fee for sevice.

  10. You didn’t answer my questions, but instead added one. You write “ value must also be explained to the patient” Who explains the value to the patient? Add that to can we adequately measure value? Whose value?

    “Fee for service is really not built on the patient’s perception of value”

    It certainly is. (assuming fee for service is meeting the normal definition of a market place, the willing buyer and the willing seller.

  11. Honestly, I don’t have any idea how your reply focus’s on my response to Perry.

    I do see in the following response that you want to pay for better outcomes. Don’t we all, but who is to determine on an individual case when an outcome is better and how will that determination be made?

    We need specifics. Not a lot of them, but a few to demonstrate that they exist.

  12. You forgot Press-Gainey scores. We can just prescribe limitless Dilaudid on demand and eliminate all the scans and make everyone happy. It is bad medicine, but that is what all this is about. Good medicine is practiced at the bedside, not at the blog.

  13. Who owns/buys/maintains/recapitalizes/replaces the equipment and for what return? Sounds like atrophy in the making like the British hospital system.

    Many situations require a negative study.

    Should every CT for appendicitis be positive? Just skip the imaging and operate. That would be the good old days.

  14. I wonder what percentage of MRI’s and other imaging is ordered by emergency room doctors treating patients who they don’t know, never met before and may never see again, and, at the same time, are at least partly evaluated based on throughput – treat ‘em and street ‘em.

    I’ve long suggested that sensible tort reform which I define as safe harbor protection, especially from failure to diagnose lawsuits, if evidence based guidelines were followed could reduce at least some of the CYA testing.

    Unfortunately, patients tend to like imaging because it’s not invasive or painful, they see it as contributing to thorough care and, more often than not someone else is paying the bill. I do think imaging is one area of medicine that lends itself especially well to reference pricing. If an MRI costs $500 at the local independent imaging center and $4,000 at the regional academic medical center, perhaps patients should be made at least somewhat sensitive to that price difference through reference pricing.

    The other aspect of reference pricing that I really like is that payers don’t have to worry about annoying contract details like confidentiality agreements with providers that preclude disclosure of contract reimbursement. They can just say this is what we pay, no matter where you get the test. End of story.

  15. Actually it’s more time with the X-rays, CT scans, MRIs, etc. but you get the point.

  16. Lowering the price should come with the estimation of quality delivered if we are seeking value. The question would be: what are the barriers to better outcomes for xyz; what are the care steps needed; how much do the steps cost; who are the patients [attributes in my practice–am I a clinic for low income v concierge practice, etc]… the value comes when people are returned to functional health, a state of health that the doc and patient agree on, not that the patient is pushed into. Yes, some patients are ready and willing to own their health and decide on their health care–there’s growing movement in social media.

  17. The price for the patient would come down if we lowered the price, not sold unmeasurable “value”. Everyone likes to sell value because they get to invent an imaginary number higher than the selling price to hoodwink you into thinking you’re getting a good deal.

    As for unnecessary screens and treatments, take it up with docs who hide behind tort fear. The patient is in no position to determine appropriate care.

  18. William, I appreciate the view that insurers want deals. But your metrics are valid, too, and they need to have a timeline to resolution. I’m in it with you. Where would you like to start, who wants to be at the table, and let’s be sure we invite the payers, too, so we aren’t blindsided when we leave the room. Finally, let’s be sure we remove the lobbying money for either side of the equation, because Lobbyers have families to feed, too.

  19. The price for the patient would come down if we removed the unnecessary screens and treatments. But the “market” would drive the prices up eventually. The goal is to get the patient to see where real quality lies, and, unfortunately, paying for a treatment or screen “because the doctor said so and I really like him” is not a business model that manages extraneous use.

  20. Allan, correct. Again, perverse incentives. Recommendations for benefit design are rarely built on levels of patient-worker engagement in the current programs being sold to employers, or to unions/medicare/medicaid. I built the first tool to show hospitals-as- employers as well as employers of all sizes what they were spending on programs and what value they were receiving. It was pitiful that they hadn’t been asking those questions, were paying pmpm when people didn’t participate. Put some of that contract at risk for participation defined as 10% increase over last year’s rate, as an example. Hold the recommender at risk for the outcome, just as we hold the provider/dentist/ surgeon, etc accountable for the outcome. Again, let’s line everyone up so we are all moving the same direction. Yes, I know it’s hard. Yes I know it scares folks. But “stakeholders” are at cross-purposes and patients-workers-families are in the crosshairs.

  21. Value just means that the insurers want deals. We can do that for increased volume of patients. Or for mal-practice relief or for speed-up in claim payments or for easing MU timelines or flexibility in ICD-10 adoption or for permanent fix of the SGR or for broader panel sizes, or national claim format uniformity or giving physicians more input on fee schedules or….? Come on guys, compromise.

  22. I want to pay for better outcomes. Sometimes, and sometimes more often than not, time to discuss the options with the doc, not the payment-administrator in the doc’s office, is what is needed. Yes, I’m willing to pay for that. Actually, I offer it when I need the time. Only had one doc say yes.

  23. Allan, good message. Part of the answer is that there are still folks punishing people for not getting the right scans, not being transparent with pricing, not including the patient in the decisions. 1/ sticks do NOT engage, and more neuroscience is showing exactly how. At the risk of pushing my posts, I’ve detailed some the new findings on my website. 2/ value must also be explained to the patient, and questions openly received by the physician or care practitioner. I can tell you that what happens in my area of the country is often a complete shutdown or a handoff to the practice manager for pre-payment—not encouraging if we are aligning goals between the patient and the provider. While there are certainly those who will do anything the doc says, the trend of patients asking questions is growing. 3/Fee for service is really not built on the patient’s perception of value–it’s based on a charge master and negotiated fees and promoted through the salesmanship of the provider–neither of which entices the patient to own her own health and choices.

  24. I gave up singing Kumbaya long ago, folks. Legacy and Perry, I’m committed to solving this answer, both how we pay and over what time period. But it can’t be done around you, it has to include you in the discussion.

  25. Great question. BTW, I heard similar questions re: Rx risk/reward schemes, medical device and operating room quotas, and the like. It’s exactly the right question, and I’ve shown the biz model in the Sovaldi posts that you’ll find on THCB. It makes more sense for your wife to get off the treadmill and take more time with the patients, for which she should be paid. Also BTW, that’s how we built out the biz case for patient centered medical homes–pay the docs more to take time with the patients, answer questions, help patients to own at least a part of the solution. Too often, the “system” slashes payments without considering the talent and time that would go to waste. Value-based should be able to stabilize the equilibrium, but it does take time.

  26. Hi, Legacy Flyer,

    The post was meant to offer a framework for deciding on the quality indicators that are most relevant to the organization. That’s why the Health Value Continuum is used, to show the questions should advance from those concerning risk and cost to those concerning the buildup of individual competency and more. As for the radiology, it comes from my experience. Too often we say, “well, we need to stop redundant MRIs,” or xyz procedure. But it’s how you make a living. So how do we create incentives that don’t put you out of business, and if we don’t face that reality, then how does value-based improve your practice satisfaction? I regret that the example wasn’t so clear, although I’ve written books/whitepapers/blogs on this very subject. We can’t “gore one ox,” while feeding the others and expect everyone to engage.

  27. “It’s the place where, It’s the place where , It’s the place where.”

    Yes, but is it the place where costs and prices will come down – for the patient?

  28. Perry, that is one reason to consider moving towards a free market. Though some might call the market we have been functioning under free that is not the case. Example: The buyer of insurance is generally the employer, not the one that uses the insurance.

    The middlemen advocate all sorts of management styles because in a free market system there is no need for most of them.

  29. I always have a problem when we are trying to incentivize for “doing less”.
    As you pointed out, it’s easy to say something wasn’t indicated when it is negative, but if it’s positive, there are major consequences to consider.
    In our current tort system, no jury is going to have mercy on a physician who didn’t do something to gain money for the ACO.

  30. Value-based: Can we adequately measure value?
    Who(se) value?

    Based upon today’s accumulation of medical knowledge value-based as a replacement for fee for service is pie in the sky. We have to remember that fee for service is significantly based upon the patient’s evaluation of value. You haven’t provided detail that would make one think otherwise.

  31. Perry,

    One answer is capitation.

    We as Radiologists would be paid a set amount for all imaging on a group of patients. In theory this is a wonderful idea, happy Radiologists and Internists/Surgeons/etc. working together for the patient and singing Kumbaya together. The kind of scenario Cyndy envisions.

    In reality, it is a lot more complex. Fully half of imaging is done to CYA (in my opinion) These studies are all “un-indicated” – except in the rare cases in which they are positive. So, who is going to be the fall guy when an “unindicated study” isn’t done and retrospectively turns out to be positive? That is the $64,000 question.

  32. 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)?

    My wife is a radiologist. She has said she would be more than happy to be paid for doing less. In fact, there is more than enough work for her and her group, the problem is getting paid. MRIs are ordered by clinicians, not radiologists, so how do we incentivize, or pay radiologists for not doing what they are paid to do?

  33. I am 100% in favor of value based health. Who isn’t? Now all we need to do is define “value” and be able to measure it.

    However, I am afraid that we do not have a consistent definition of “value”, nor for the most part do we have good ways to measure it.

    Take for instance physician prescribing of narcotics. Patient satisfaction (Press Ganey) scores and best practices dictate widely divergent approaches. So what provides more “value”, high patient satisfaction, or better compliance with recognized guidelines? The same is true in many other areas.

    As for any concrete suggestions, the above post is fairly thin on details. (“Where’s the beef?”). And I found the comment directed toward my own specialty (Radiology): “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)?” to be rather opaque.