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Measuring Hospital Efficiency

May 20, 2012 in Hospitals, Medicare, P4P, Quality | No comments

Medicare recently released the Medicare Spending per Beneficiary (MSPB) measure on Hospital Compare. This measure includes all payments to doctors, hospitals or other facilities for services provided to a patient during the three days before the hospital stay, during the stay, and during the 30 days after discharge from the hospital. Kaiser Health news provides an analysis of this measure and also provides an interactive graph of state level efficiency and a list of hospital MSPB scores.

The Kaiser Health News article notes that:

“Patients treated at most or all hospitals in Las Vegas, Fort Lauderdale, Newark, Miami, Los Angeles and Orange County, Calif., tended to cost more than the national median, which is $17,988. Patients treated at most or all hospitals in Anchorage, Des Moines, Honolulu, Minneapolis and Portland, Ore., tended to cost Medicare less.”

The article also recaps the opinions of a number of industry and policy thought leaders.

Jennifer Faerberg, director of health care affairs at the Association of American Medical Colleges stated that differences in the MSPB measure across hospitals is primary due to how well hospitals  can control post-acute costs.  This is generally true. The MSPB measure controls for the type of admission (i.e., MS-DRG) of the index admission.  Thus, differences in the MSPB measure are due principally to differences in post-acute spending and the frequency with which the patient is readmitted to the hospital within the 30 days after the initial hospitalization.

Some policy experts were critical of the MSPB measure:

Nancy Foster, a vice president at the American Hospital Association, said the data do not answer key questions: Did the patients that got more services fare better than others? Could the patients that cost Medicare less actually have benefitted from more care? ”What we don’t know is if those additional investments yield differences in outcomes,” Foster said.

Foster makes a good point; the MSPB measure should not be analyzed in isolation.  CMS does not only measures hospital efficiency, but also includes a number of hospital quality measures.

Elliott Fisher, one of the main researchers from the Dartmouth Atlas, questioned the practical usefulness of the new information.  “As a hospital administrator I would go, how does this help me?” he said. “We just don’t know whether a lot of specialists are running through the hospital doing everything they can to every patient who is horizontal, or whether they’re discharging every patient to a rehab facility. Those are two very different causes of high costs.”

However, CMS did distribute a “hospital specific report” that detailed where the average spending went (e.g., inpatient, skilled nursing facility, home health physician) in the periods before, during and after the index hospital admission.  Each of these quantities is compared to the state and national average spending levels for each type of service.

Disclaimer: The Healthcare Economist worked with CMS and a team at Acumen to develop the MSPB measure.

 

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Medicare Spending per Beneficiary

April 30, 2012 in Hospitals, Medicaid/Medicare, Medicare, My Papers, P4P, Quality | 1 comment

Medicare’s Hospital Compare website evaluates hospital quality.  One of the most recent measures to be added to Hospital Compare is a measure of efficiency.  The measure calculates a price-standardized, case-mix adjusted measure of spending during period before, during and after a hospital admission. The Healthcare Economist (Jason Shafrin) and a team at Acumen (including Tom MaCurdy, Sajid Zaidi, Elen Shrestha, and David Pham) worked closely with CMS to develop this measure.  Additional information on this measure is available here or see the results for San Francisco General Hospital here.

“The Spending per Hospital Patient with Medicare measure shows whether Medicare spends more, less, or about the same per Medicare patient treated in a specific hospital, compared to how much Medicare spends per patient nationally. This measure includes any Medicare Part A and Part B payments made for services provided to a patient during the 3 days prior to the hospital stay, during the stay, and during the 30 days after discharge from the hospital.

This result is a ratio calculated by dividing the amount Medicare spends per patient for an episode of care initiated at this hospital by the median (or middle) amount Medicare spent per patient nationally.

A result of 1 means that Medicare spends ABOUT THE SAME amount per patient for an episode of care initiated at this hospital as it does per hospital patient nationally.

A result that is more than 1 means that Medicare spends MORE per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

A result that is less than 1 means that Medicare spends LESS per patient for an episode of care initiated at this hospital than it does per hospital patient nationally.

Lower numbers are better.“

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All-or-Nothing P4P

April 4, 2012 in P4P, Pharmaceuticals, Quality | No comments

Many of Medicare’s value-based purchasing (VBP) initiatives offer a continuum of rewards based on provider performance.  Whereas all-or-nothing VBP initiatives only grant bonuses to providers who exceed a single threshold, the Medicare VBP programs–such as its hospital VBP program–reward hospitals based a value-based modifier that is proportional to its quality score.

One of the reasons to avoid the ‘all-or-nothing’ framework is that providers who are far from the threshold may give up; they may not invest significant efforts to improve quality since the change of reaching the threshold may be small.

A paper by Dowd, Feldmand and Nersesian (2012) finds that providers do in fact ‘give up’ in practice if the threshold is set too high.  The paper examines a physician network’s efforts to improve their generic prescription rate (GPR).  The authors find that:

“The GPR-maximizing target would induce an improvement in average GPR from 58.3% to 65.8% or 7.5 percentage points.  When the target is set above 80%, practices with equilibrium GPR below 58.3% will ‘give up’ in the sense that they will not improve relative to their equilibrium value.”

Source:

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Where is the Quality Incentive Program for End-Stage Renal Disease Facilities heading in 2013 and 2014?

March 14, 2012 in Medicare, P4P | No comments

Medicare payments for End Stage Renal Disease rely on a value-based purchasing (VBP) system known as the Quality Incentive Program (QIP). Today I review proposed changes to the QIP that will effect the payments for dialysis centers in 2013 and 2014.

Payment Year 2013

Two measures have been adopted for the payment year (PY) 2013 ESRD QIP

  • Percentage of patients with hemoglobin levels greater than 12 g/dL (Hemoglobin Greater Than 12 g/dL) Lower percentage indicates better care
  • Percentage of patients with a Urea Reduction Ratio (URR) of 65% or greater (Hemodialysis Adequacy) Higher percentage indicates better care

To qualify for a score, facilities must have at least 11 patients eligible for each measure.

Each facility that meets or exceeds performance standard for a measure receives 10 points (for each measure).  For other facilities, the scoring is more complex.

  • Facility does not meet the performance standard for a measure: 2 points subtracted from 10 points for every 1% below the performance standard
  • Total Performance Score = Sum of the Two Measure Scores x 1.5

The payment reduction for payment year 2013 depend on the total performance score (TPS) as follows:

  • 30 points: 0%
  • 26-29 points: 1.0%
  • 21-25 points: 1.5%
  • <21 points: 2.0%

 

Payment Year 2014

In PY 2014, the ESRD QIP will add one clinical measure (vascular access type (VAT)) and three reporting measures.  The reporting measures include:

  • Dialysis event data submission to the Centers for Disease Control and Prevention (CDC) National Healthcare Safety Network (NHSN) system
  • Patient Satisfaction (measured by In-center Hemodialysis Consumer Assessment of Healthcare Providers and Systems (ICH CAHPS) survey)
  • Monthly mineral metabolism monitoring (serum calcium and serum phosphorus)

For PY 2014, there is a significant lag between when the data are collected and when payments are adjusted.  PY 2014 is based off a performance period of CY2012 and a baseline period of July 1, 2010 to June 30, 2011.  The baseline data is used to measure an improvement score.

 

The payment reduction for payment year 2014 depend on the total performance score (TPS) as follows:

  • 53-100 points: 0%
  • 43-52 points: 0.5%
  • 33-42 points: 1.0%
  • 23-32 points: 1.5%
  • <23 points: 2.0%

The scoring system and performance standards are outlined in more detail here.

 

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Medicare Reforms Linking Reimbursement Rates with Hospital Performance

February 23, 2012 in Health Reform, Hospitals, Medicare, P4P | No comments

Health reform not only changes the health care market for the demand side (e.g., patients, insurers), but also for the supply side (e.g., hospitals, physicians).  In the Medicare setting, a number of initiatives have aimed to pay providers who provide high-quality or low-cost care more money, and pay providers who provide low-quality or high-cost care less money.  CSC provides a nice overview of some of these initiatives.

  • Performance Value-Based Purchasing (VBP) — Offers increased update to diagnosis-related group (DRG) payment rates to hospitals according to demonstration of performance or improvement in designated performance areas relative to performance standards and benchmarks.
  • Shared Savings Program — For groups of providers who form an Accountable Care Organization (ACO), potentially shares a portion of financial savings in caring for Medicare patients if performance standards are met, according to performance rated on a sliding scale against benchmarks.
  • Readmission Reduction Program (RRP) — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for excess readmissions of Medicare patients with selected discharge diagnoses.
  • HAC Payment Limitation — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for a designated set of Hospital-Acquired Conditions (HACs).
  • Bundled Payments for Care Improvement Initiative — One of several initiatives of the CMS Innovation Center to give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare. Bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay. Applicants pick conditions to target and one of four ways to define the extent of pre- and post-hospital care included in the bundled payment.

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Do Disease Management and Value-Based Purchasing Programs Work?

February 15, 2012 in Medicare, P4P | 2 comments

In short, the answer is no. The CBO released an issue brief examining two types of demonstrations.

  • Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly.
  • Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

“The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees.”

Today, the healthcare economist looks at these programs in more detail.

Disease Management Demonstrations

These demonstrations were made up of 34 programs operated by disease management companies. “The programs used nurses as care managers to educate patients about their chronic illnesses, encourage them to follow self-care regimens, monitor their health, and track whether they received recommended tests and treatments. In most programs, the care managers were not integrated into physicians’ practices, and their contact with patients was primarily by telephone.”

These programs targeted Medicare beneficiaries with specific chronic diseases. Most programs were not tailored to focus on chronically ill beneficiaries who were expected to have the highest cost of care. The results are displayed in the chart:

test

CBO found that the lack of integration into the physician practice and the lack of physical presence made most of these disease management programs not useful.

Value-Based Purchasing Demonstrations

The list below describes the four major VBP demonstration programs and their findings.

  • Physician Group Practice (PGP) Demonstration. 10 large practices were permitted to keep some of the estimated savings if they reduced total Medicare spending for their patients. In the second year of the demonstration, average Medicare spending excluding the bonuses paid to physician groups was about 1 percent below projections; with bonuses included, average
    Medicare spending was just 0.1 percent below projections—about $7 per beneficiary. Results for years 3 and 4 of the PGP demonstration are currently being analyzed.
  • Premier Hospital Quality Incentive Demonstration. 278 hospitals were offered bonuses if their scores on quality-of-care measures were in the top tier of participating hospitals.  This demonstration had no net effect on Medicare spending.
  • Home Health Pay-for-Performance Demonstration. This demonstration allowed 273 home health agencies to keep some of the estimated savings if they reduced total Medicare spending for their patients and met certain criteria regarding quality of care.  Initial results indicate that this demonstration had no net effect on Medicare spending.
  • Medicare Participating Heart Bypass Center Demonstration. Medicare made bundled payments to cover all inpatient hospital and physicians’ services for coronary artery bypass graft surgeries conducted at seven participating hospitals. Bundled payments reduced Medicare’s expenditures for heart bypass surgeries by about 10 percent, and there were no apparent
    adverse effects on patients’ outcomes.

Whereas the first three VBP programs aimed to give providers bonuses for reducing cost and increasing quality, the Heart Bypass Center demonstration relied on bundled payments to align the financial incentives offered to hospitals and physicians. The bundled payments reduced cost without decreasing quality. Of course, measuring quality is difficult and it is possible that the Bypass demonstration did not fully capture all important aspects of quality. Nevertheless, these initial results indicate that bundling may be a more promising cost-saving mechanism than provider bonuses.

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How Health Reform will affect Hospital’s Business Strategy

January 19, 2012 in Health Reform, Hospitals, P4P | No comments

For many years, fee for service payment was the status quo. FFS model encourages hospitals to adopt the following strategies to maximize market share and profits:

  • Centered on short-term acute care
  • Focused on specialist alignment
  • Driven by a volume-based service-line strategy
  • Using expensive medical equipment purchases to encourage physician referrals
  • Attracting patients with new construction in support of market share growth
  • Short-term acute hospitals focus on profitable service lines such as oncology, cardiology, neurology, and orthopedics.

Specific examples of this growth are abundant.  In Indianapolis, all four of their hospital systems built coronary surgery centers at a combined cost of $210 million.  A community hospital 15 miles north of the city opened a smaller, open-heart surgery program.  In Cincinnati, nine hospitals performed open heart surgery. Eight Boston Hospitals Have da Vinci System, which may indicate that robotic surgery may be used for marketing purposes.

However,  health reform has started to change these trends.  Medicare is instituting more bundled payment (e.g., dialysis payments)  rather than pure fee-for-service.  Further, Medicare’s Shared Savings Program (MSSP)  aims to use Accountable Care Organizations (ACOs) to coordinate patient care improve quality and reduce the rate of growth in health care spending.

How will hospitals respond to the changing market landscape?  One way hospitals can improve their margins is to only treat healthier patients to improve their performance in the case where risk adjustment methods are imprecise.  Also, provider mergers may be a trend. Access larger populations will lessen risk providers must bear under new payment models.  Larger size also means that hospitals can negotiate better rates with suppliers.  Hospitals will likely sell redundant or non-core assets.

Hospitals will also adopt new technology to better manage care. For instance, Henry Ford Health System in Detroit uses an embedded specialized software called RadPort in its electronic physician order entry system that prompts physicians to enter specific information when ordering radiology tests.  The pilot, funded with a CMS grant, will see whether these prompts will reduce utilization levels.

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Medicare reducing reimbursement for low-quality docs

January 16, 2012 in Medicare, P4P, Physician Compensation | 4 comments

In 2015, Medicare will begin implementing a value-based purchasing (VPB) program for physicians.  Initially the program will target only certain physicians and groups of physicians, but by 2017 all physicians is participate in this program.

The VBP program will evaluate physicians along two broad dimensions: quality and cost.  In the final rule:

Section 1848(p) of the Act requires the Secretary to ‘‘establish a payment modifier that provides for differential payment to a physician or a group of physicians’’ under the physician fee schedule ‘‘based upon the quality of care furnished compared to cost *** during a performance period.’’ The provision requires that ‘‘such payment modifier be separate from the geographic adjustment factors’’ established for the physician fee schedule. In addition, section 1848(p)(4)(C) of the Act requires that the value modifier be implemented in a budget-neutral manner.

 

Quality

The current quality measures to be used include:

  1. The measures in the core set of the Physician Quality Reporting System (PQRS);
  2. All measures in the Group Practice Reporting Option (GPRO) of the Physician Quality Reporting System; and
  3. the core measures, alternate core, and 38 additional measures in the Electronic Health Records (EHR) Incentive Program measures.

Cost

The current measures of cost CMS is using are total per capita cost measures and per capita cost measures for beneficiaries with four chronic conditions (COPD; heart failure; coronary artery disease; and diabetes).

By January 2012, however, CMS will choose an episode grouper which can evaluate physicians based on episodes of care. Specifically:

Section 1848(n)(9)(A) of the Act requires us to develop by January 1, 2012, an episode grouper that combines separate, but clinically related items and services into an episode of care for an
individual, as appropriate.

Other Issues

One of the main problems of the physician VBP is attribution of patients to doctors. In managed care organizations, patients are assigned a primary care doctor or gatekeeper who are responsible for the patient’s overall care. In Medicare, the patient can see any willing provider; because the primary care doctor cannot restrict the patient’s choice of care, it is more difficult to hold them responsible for the care. Specifically, Medicare beneficiaries never have to choose a primary care doctor, so identifying the doctor to be ultimately responsible for each patient’s overall care is difficult.

Physicians require additional information to understand why the received the VBP scores they did. For this purpose, CMS will create Physician Feedback Reports, confidential reports providing more detailed information of the underlying factors which produce these scores.

For the VBP modifier in 2015, CMS will use 2013 as the initial performance period 2013. This means that payment adjustments in 2015 will be on care provided 2 years ago. Although evaluating physician performance, allowing for appeals and adjusting payments takes time; two years is a long lead time.

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Medicare Physician Payment Adjustments

November 21, 2011 in Healthcare IT, Medicare, P4P, Physician Compensation, Quality | No comments

The Medicare billing system is complex.  There an alphabet soup of acronyms, (e.g., RVUs, CPT, HCPCS, GPCI) and each of these affects payments in different ways.  In addition to the standard payment terms, Medicare is also creating additional payment incentives.  These payment incentives fall into three broad categories:

  • Quality reporting
  • e-Prescribing (eRx)
  • Electronic Health Records (EHR)

CMS’s Physician Quality Reporting System (PQRS) allows physicians to report the quality of care their patients receive. Physicians can report PQRS measures through claims, registries, or EHR systems.  To incentivize physician participation in the PQRS, CMS has adopted incentive payments.  In 2012-2014, Physicians who meet the PQRS participation requirements will receive a 0.5 percent payment bonus.  In 2015 through 2017, however, who do not submit a sufficient number of PQRS measures actually will receive a payment reduction.

In addition to the PQRS incentive, beginning 2012, Medicare eligible professionals who are not successful electronic prescribers under the eRx Incentive Program to a payment adjustment. This payment adjustment applies to all of the eligible professional’s Part B-covered professional services under the Medicare Physician Fee Schedule (MPFS). From 2012 through 2014, the payment adjustment will increase with each new reporting period. Accordingly, for 2012, eligible professionals receiving a payment adjustment will be paid 1.0% less than the Medicare Physician Fee Schedule (MPFS) amount for that service. In 2013 and 2014, the payment adjustment increases to 1.5% and 2.0% respectively.

A table summarizing these incentive payments is below.

Year PQRS eRx
Incentive Payment MOC Incentive Sucessful
2011 1.0% 0.5% 1% N/A
2012 0.5% 0.5% 1% -1%
2013 0.5% 0.5% 0.5% -0.5%
2014 0.5% 0.5% N/A -2%
2015 -1.5% N/A N/A N/A
2016 -2.0% N/A N/A N/A
2017 -2.0% N/A N/A N/A

CMS also offers physicians incentive payments to adopt EHR.  Incentive payments can be as high as $18,000 per year or $44,000 over a five year period.

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Medicare’s Agenda for Hospital Accountability

November 14, 2011 in Hospitals, Medicare, P4P | 1 comment

CSC provies a nice overview of some of Medicare’s hospital quality initiatives. These initiatives include a value-based purchasing (VBP) program, reduced reimbursement for excessive hospital readmissions, and reduced reimbursement for hospital-acquired conditions (HAC).  Each of these three broad quality initiatives is described in more detail after the jump.

It is important to note that these quality initiatives are not voluntary and affect hospital payments through adjustments to the base DRG rate. Broadly, measures fall into three categories: i) claims-based, chart-abstracted, and patient satisfaction (i.e., HCAHPS).  Many of these quality measures will be part of the Inpatient Quality Reporting (IQR) program and will included in the Hospital Compare website.

Also, Medicare is implementing these three programs on top of similar programs which include:

  • Non-payment for care to treat specific HACs (see here)
  • A Medicaid program which also will not pay for care to treat HACs (see here)
  • Mandated review by QIOs of hospital readmissions within 31 days to assess standards of care and potentially recommend denial of payment (see here)

 

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