Unbiased Analysis of Today's Healthcare Issues

Is value-based purchasing working for hospitals?

Written By: Jason Shafrin - May• 15•16

The Incidental Economist is one of my favorite blogs to read.  This week’s post on a recent BMJ article on the failure of P4P did not disappoint.  The article (Figueroa et al. 2016) looks at 4267 acute care hospitals in the United States that participated in Medicare’s Hospital Value Based Purchasing (HVBP) system.  During my time at Acumen, I even helped to implement HVBP’s Medicare Spending per Beneficiary (MSPB) measure. Aaron Carroll of the Incidental Economist summarizes the findings below and his thoughts on P4P in general.

In the pay-for-performance hospitals, the mortality rates of the incentivized conditions dropped 0.13% in each quarter in the pre-intervention period in the study hospitals, compared to a drop of 0.14% in the control hospitals.In the post-intervention period, study hospitals dropped 0.03% each quarter compared to 0.01% in the control hospitals. This was not a statistically significant difference. In fact, there was no difference in any subgroup of hospitals.

I gave a talk last week to a bunch of hospital executives on how policy often fails to be evidence based. My last example was pay for performance. They seemed least likely to accept that example as correct.

It’s not that I think we can’t incentivize physicians to practive better. I’m sure we can. My problem is that we assume that we can pick an easy to measure metric (30-day mortality), tell everyone that this is the one to measure, that it translates into improved quality, and then expect results.


Friday Links

Written By: Jason Shafrin - May• 13•16

Is Obamacare working?

Written By: Jason Shafrin - May• 11•16

The answer is yes and no. According to a study Holahan, Karpman, and Zuckerman (2016), the health insurance exchange plans are good at insuring individuals against financial losses, but not everyone is happy with the care they are receiving.

Low- and moderate-income adults with Marketplace coverage are no more likely to report problems paying medical bills or have high out-of-pocket costs than those with employer-sponsored insurance (ESI).

Low- and moderate-income adults with Marketplace coverage are as satisfied with their health plans as those with ESI in terms of premiums charged, but are less satisfied with their choice of providers and the protection their plans provide against high medical bills.

Although access to physicians was better for patients in marketplace plans than those on Medicaid, 1 in 7 patients covered by an Obamacare plan had trouble getting a doctor’s appointment in the last year. Clearly, having an Obamacare health plan is better than being uninsured and is likely better than receiving Medicaid coverage. However, these health insurance exchange plans do have some limitations.


Do ACOs reduce spending?

Written By: Jason Shafrin - May• 10•16

Medicare’s Shared Savings Program (MSSP) is a program that created accountable care organizations (ACOs).  Providers in get bonuses if they are able to reduce health care costs and also maintain quality.  In theory, the program makes sense, increase reimbursement for high-quality, low-cost providers.  The key question, however, is whether it works.

A recent study in NEJM by McWilliams et al. (2016), used a difference-in-difference approach to compare patient quality of care and cost among patients assigned to ACO providers compared to those who were not.  Note that ACO election is determined administratively and patients do not commit to seeing only providers in that ACO.  Using Medicare claims data from 2008-2013, the authors find that:

Adjusted Medicare spending and spending trends were similar in the ACO cohorts and the control group during the precontract period. In 2013, the differential change (i.e., the between-group difference in the change from the precontract period) in total adjusted annual spending was −$144 per beneficiary in the 2012 ACO cohort as compared with the control group (P=0.02), consistent with a 1.4% savings, but only −$3 per beneficiary in the 2013 ACO cohort as compared with the control group (P=0.96). Estimated savings were consistently greater in independent primary care groups than in hospital-integrated groups among 2012 and 2013 MSSP entrants (P=0.005 for interaction). MSSP contracts were associated with improved performance on some quality measures and unchanged performance on others.

The authors also comment on the larger improvement form primary care groups noting that “independent physician groups have stronger incentives to lower inpatient and hospital outpatient spending than groups integrated with hospitals because their shared-savings bonuses are not offset by forgone profits from reductions in hospital care.”  This is a point I with co-authors Tom MaCurdy and Diana Zheng in our 2011 report to CMS.

In short, the effect of ACOs on spending was very modest.  Likely the ACOs that joined early were more motivated or more able to reduce cost than those that joined later, brining into question the generalizability of any cost savings ACOs can generate.


The Terrorist Economist?

Written By: Jason Shafrin - May• 09•16

Truth is stranger than fiction. The Washington Post reports:

she’d seen had been her seatmate’s cryptic notes, scrawled in a script she didn’t recognize. Maybe it was code, or some foreign lettering, possibly the details of a plot to destroy the dozens of innocent lives aboard American Airlines Flight 3950. She may have felt it her duty to alert the authorities just to be safe. The curly-haired man was, the agent informed him politely, suspected of terrorism.

The curly-haired man laughed.
He laughed because those scribbles weren’t Arabic, or another foreign language, or even some special secret terrorist code. They were math.
Yes, math. A differential equation, to be exact. Had the crew or security members perhaps quickly googled this good-natured, bespectacled passenger before waylaying everyone for several hours, they might have learned that he — Guido Menzio — is a young but decorated Ivy League economist. And that he’s best known for his relatively technical work on search theory, which helped earn him a tenured associate professorship at the University of Pennsylvania as well as stints at Princeton and Stanford’s Hoover Institution.

On a lighter note, the Economist gives “Ten ways to tell you might be sitting next to an economist.”

“Adjustments” drive variation in Medicare hospital reimbursement rates

Written By: Jason Shafrin - May• 08•16

In my previous work, I have examined regional variation in Medicare and Medicaid costs through reports to the Institute of Medicine and publications in peer-reviewed journals.  We found significant variation in health care costs across regions, that high-cost regions tended to remain high cost over time, but that a region that is high-cost for treating one medical condition may not be high cost for another medical condition.

A new paper in Health Services Research by Krinsky et al. (2016) examines the causes of regional variation in Medicare inpatient cost between 1987 and 2013.  In the current Medicare inpatient reimbursement system–the Inpatient Prospective Payment System (IPPS)–hospitals are paid:

…based on patients diagnosis related groups (DRGs), and it also compensates hospitals for exceptionally costly patients through outlier payments. While each DRG is assigned a base price that applies to all U.S. hospitals, hospitals receive payment adjustments designed to account for differences in area wages, care for low-income patients under the disproportionate share hospitals (DSHs) program, and the indirect costs associated with graduate medical education (IGME), among other adjustments.

The size of these adjustments have varied over time.  For instance, the the Affordable Care Act (ACA) “reduced DSH payments by 75 percent and introduced a new uncompensated care adjustment, beginning federal fiscal year (FY) 2014.”

Using Medicare hospital cost reports, Krinsky et al. (2016) decomposed Part A payments into seven components: operating, capital, outlier, DSH, IGME, DGME, and an “other” category. The authors measure the share of these adjustment payments relative to the base DRG payment.  

The studies find that a growing share of Medicare payments for Part A inpatient care are for payment adjustments rather than the base DRG payments (see figure below).  As the adjustments are more likely to vary across regions, we see that over time, variability in Medicare hospital reimbursement rates has increased over time as well.

Figure 3

The authors summarize the results as follows:

Over the 27 years of the IPPS covered in our study, adjustments represented a large and increasing share of Medicare expenditures for acute inpatient care. The highest rates were paid to hospitals that received large payments both for DSH and medical education. Community hospitalsreceived the lowest rates.

The authors also measure variation in reimbursement within hospital referral regions (HRRs).  However, use of HRRs is not the best approach.  The Medicare Hospital Wage Index–used to adjust hospital payments for regional differences in labor costs–is defined by metropolitan statistical area (MSA) and rest of state areas.  Whereas HRRs are agglomerations of ZIP codes, MSAs are agglomerations of counties.  Thus, there may be heterogeneity in reimbursement rates within HRR by design due to CMS policy.  Nevertheless, the finding that adjustments make up a larger share of IPPS reimbursement is certainly an interesting one.


Quotation of the Day

Written By: Jason Shafrin - May• 05•16

Doubt grows with knowledge.

J.W. von Goethe

The comprehension of truth calls for higher powers than the defence of error.

J.W. von Goethe

HWR is up

Written By: Jason Shafrin - May• 05•16

Brad Wright has posted Health Wonk Review: Pivoting Towards the General Edition at Wright on Health.  Check it out!

The problem with bundled payments

Written By: Jason Shafrin - May• 05•16

Bundled payments sound like a great idea for improving efficiency and in the short-run they are. Bundled payments involve paying a fixed fee for the treatment of a specific patient over a specific time period.  For instance, CMS have considered using a singled bundled payment to reimburse providers for both acute and post-acute care providers.  This approach gives providers the incentive to provide care in a more cost effective setting. On the other hand, bundled payment–like capitation payment–incentivizes providers to offer fewer services or lower cost services to patients.

Whatever the merits and and demerits of bundled payments are in the short run, the key issue is how to price the bundle in the long run. Over time, the price of services will change and could become more or less expensive.  Thus, payers using bundled payments must have an accurate source for tracking costs over time.

More importantly the services provided in the bundle may change over time.  NPC gives one example:

For example, a payment bundle for Hepatitis C treatment in 2014 would have needed to evolve as new oral therapies such as Sovaldi and Harvoni became available. Although these drugs have been shown to be cost effective in the long term, their use would likely have been discouraged by an outdated Hepatitis C bundle.

Although Medicare updates its Outpatient Prospective Payment System (OPPS) annually, providers may have little incentive to use innovative treatments unless bundle payments are sufficient to reimburse providers for this cost.

Does Medicare or large commercial insurers have sufficient clinical and market expertise to update thousands of treatments to ensure patients receive high quality care?  Will the bundles be sufficiently risk adjusted or stratified so that providers are not incentivized to avoid the sickest patients?  On both accounts, the answer is likely no.  Thus, bundled payments can be successful in the short-run, but the long-run issues of updating the services and prices included in the bundle make this approach extremely problematic.

VBID in practice

Written By: Jason Shafrin - May• 03•16

In a typical insurance plan, patients have a fixed copayment, insurance and deductible regardless of whether the treatment they receive is considered high or low value.  However, an alternative insurance structure–known as value-based insurance design (VBID)–uses a different approach.  Under VBID, patient cost sharing is higher for low-value treatments and lower or eliminated for high-value treatments.

One such VBID program was Connecticut’s Health Enhancement Program for its state employees. Enacted on October 1, 2011, the program:

…introduced incentives to align patient costs with the value of care, including the elimination of office visit copayments for chronic conditions (a savings of $15 per visit) and the reduction or elimination of copays for medications associated with the management of the five following chronic conditions targeted by the program: asthma or chronic obstructive pulmonary disease (COPD), diabetes, heart disease, hypertension, and hyperlipidemia….Additionally, the program assessed a new $35 copay for emergency department (ED) visits when there is a reasonable medical alternative and the member is not admitted to the hospital…A novel feature of the program is its attempt to engage patients in preventive care by holding them accountable for receiving it. Members who desire to maintain Health Enhancement Program benefits must satisfy a number of requirements, including obtaining health risk assessments, screenings, and physical examinations that are appropriate for people of their age and sex.

Although the program was voluntary, Connecticut state employees that enrolled in the Health Enhancement Program were exempt from a monthly $100 health insurance premium surcharge and and also were exempt from any deductibles.

Using data for enrollees aged 18-64 between July 1, 2010 and June 30, 2013, a study by Hirth et al. (2016) compared changes in health care cost and utilization between Connecticut state employees and state employees from other states. The authors found that:

During the program’s first two years, the use of targeted services and adherence to medications for chronic conditions increased, while emergency department use decreased, relative to the situation in the comparison states. The program’s impact on costs was inconclusive and requires a longer follow-up period.