Value-Based Purchasing

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Hospital VBP gains the attention of the New York Times

May 31, 2011 in Current Events, Hospitals, Medicare, Value-Based Purchasing | No comments

The Healthcare Economist has already commented on the impending Medicare implementation of a hospital value-based purchased (VBP) system.  Now, Medicare’s hospital VBP program has garnered the attention of the popular press.  According to the New York Times:

“The administration plans to establish ‘Medicare spending per beneficiary’ as a new measure of hospital performance…Hospitals could be held accountable not only for the cost of the care they provide, but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital…

In calculating Medicare spending per beneficiary, the administration said, it wants to count costs generated during a hospital stay, the three days before it and the 90 days afterward. This, it said, will encourage hospitals to coordinate care “in an efficient manner over an extended time period…

Medicare will begin computing performance scores in July, for monetary rewards and penalties that start in October 2012.“

Do hospitals like the plan? Some do, but many do not.

This plan has drawn fire from hospitals, which say they have little control over services provided after a patient’s discharge — and, in many cases, do not even know about them…Without opposing the change, lawmakers from higher-cost states like Massachusetts and New York say the payment formula needs more work…Kenneth E. Raske, president of the Greater New York Hospital Association, said the formula ‘tends to discriminate against inner-city hospitals with large numbers of immigrant, poor and uninsured patients.’

By contrast, J. Kirk Norris, president of the Iowa Hospital Association, welcomed the new plan. ‘Medicare ought to pay for value,’ he said.

Will Medicare adequately risk adjust provider payments? Can hospitals coordinate post-acute care once their patients leave the hospital? Will additional coordination lead to increased industry consolidation and–in the long-run–increased health care cost? Will hospitals be able to game the system? How will Medicare monitor quality?

I have discussed these issues in series of previous posts on value-based purchasing. Hopefully, Medicare will get it right this time and improve quality while reducing cost. At this point, however, with Medicare Trust Fund set to be exhausted in 2024, reducing cost may be the priority which trumps all others.

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Does WellPoint care about quality…or reducing cost?

May 19, 2011 in Health Insurance, Hospitals, Value-Based Purchasing | 2 comments

One large insurer is planning to begin paying hospitals based on quality.

“WellPoint is replacing the system it uses to help offset rising medical and other costs at hospitals in 14 states that serve its Blue Cross Blue Shield plans, which cover 34 million people. In recent years, it has raised its payments to those hospitals by an average 8% a year.

Under the new system, the company will pay increases only to hospitals that score high enough on a test based on 51 indicators of treatment quality. The indicators include whether the facility tries to prevent patients from relapsing after they leave the hospital, whether it follows a safety checklist and how satisfied the hospital’s patients say they are with their treatment.”

Does Well Point really care about quality?  The answer is maybe.

Improving quality of care could improve WellPoint’s bottom line.  If patients demand improved quality of care, implementing a hospital VBP system could attract more members. Further, WellPoint could just be altruistic and this may be an attempt to improve the health of its members (the Healthcare Economist is skeptical of this point).

It could also be the case the WellPoint does not care at all about quality.  High-quality hospitals will get the same annual increase they did before; low-quality hospitals will get less.  The chairman of the Federation of American Hospitals (FHA) accurately notes that hospital quality measures are far from perfect and are less-than comprehensive.  Nevertheless, even if the selected metrics measured quality inaccurately, certain hospitals would still receive lower payments and WellPoint would benefit either through increased profits or increased market share (by lowering premiums).

Rather than responding to pressure to increase qualityof care, WellPoint’s VBP efforts may in fact be a response to employer and beneficiary pressure to reduce premiums.

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Oregon’s Test of Value-Based Purchasing

February 2, 2011 in Health Insurance, Quality, Value-Based Purchasing | No comments

More quality at lower cost has been the mantra of payers for many years.  But how do we make  this goal a reality?

Value-based insurance alters cost sharing structure so that beneficiaries have low levels of cost sharing for cost-effective services and high compayments for low value items.  I report by Joan Kapowich (2010) looks at Oregon’s public employee benefit boards decision in 2010 to adopt an improved value-based insurance design system.  ”Oregon’s Public Employees’ Benefit Board and Educators Benefit Board design and purchase benefits for the two largest employee groups in the state: 128,000 state and university employees and dependents, and 155,000 public education employees and dependents.”

The revised value-based purchasing structure eliminates cost sharing for 17 preventive services.  For instance, patients have $0 out-of-pocket costs for periodic health appraisals; vaccinations;  screenings for breast, cervical, colon, and prostate cancer; and tobacco and weight management programs.  Copayments for generic drugs were minimal.  All these services fall into Tier 1 coverage.  ”Tier 2 is a standard commercial plan designed to include cost sharing. Tier 3 is designed to reduce the use of preference-sensitive or supply-sensitive services but not to impede access to essential care…Tier 3 includes a separate deductible, higher out-of-pocket maximums, and a coinsurance percentage double that of tier 2 for specific types of care, including emergency room visits; arthroscopy; hip and knee replacement; hysterectomy; magnetic resonance imaging, computed tomography, and positron emission tomography scans; upper endoscopy; coronary angioplasty and stents; and spinal surgery.”

Yet these plans did face some opposition.  For instance, using the term “preference-sensitive” or  ”supply-sensitive” did not fly with patients.  Instead, the board renamed Tier 3 as the “additional cost tier.”  In addition, treatments and hysterectomies were originally included in Tier 3 coverage, but this move was considered “too contentious” and they were moved to Tier 2.  The reasoning: “Certain cardiac treatments are performed for emergency care, and certain hysterectomies are performed for cancer care. Emergency treatments and cancer care were excluded because they require prompt treatment.”

Will the VBP work?  The spending and patient outcome measures from 2011 will reveal the results.

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