Unbiased Analysis of Today's Healthcare Issues

Are bundled payments the solution? Five key barriers to implementation

Written By: Jason Shafrin - May• 15•17

Alternative payment models, bundled payment and episode-based payments are the latest trend in reducing unnecessary care and making sure care is delivered efficiently.  However, what is a “bundle”?  Based on a recent report from the Health Care Payment Learning and Action Network (HCP LAN), bundled payment can be designed at three levels:

  • At the setting level, whereby the episode is focused on a hospital stay;
  • At the procedure level, in which the episode encompasses a defined surgical procedure; or
  • At the condition level, whereby the episode is defined around a condition. Conditions for which episode payment can be used range from asthma to diabetes to cancer.

So is the solution just to do bundles, bundles and more bundles? Well, there are at least five key challenges for implementation.

First, what services would be included in the bundle at baseline?  The HCP LAN report makes the following point:

Using historical data to determine the episode price creates challenges for payment and care transformation: Setting the episode price is a critical aspect of episode payment design. Yet, it creates a significant challenge. Historical data is crucial to giving payers and providers an understanding of the resources needed to deliver high-quality care and optimal outcomes. However, that same historical data may likely reflect care that was unnecessary or inappropriate, and may not reflect the potential for low-cost, high-value services that have traditionally not been used because the providers do not get paid for them. These include care coordination services, lifestyle change support (in the case of coronary artery disease), or pre-natal parenting education support (in the case of maternity care).

Second, how will prices be set in the bundles?  Currently, payers and policymakers can use market prices of historical component in the bundle to estimate bundle reimbursement rates.  If bundles begin to make up a larger share of payment, however, there will not be market prices for individual components of the bundle.  As the practice of medicine evolves and the composition of the bundle changes, it will become increasingly difficult to price the bundle without market prices on individual components of the bundle.

Third, bundles must be designed with improving patient health always in mind.   The HCP LAN report states that including the patient voice in bundled payment design “involves engaging consumers, patients, families, and their advocates in meaningful participation in the design, implementation, governance, evaluation, and quality improvement of episode payment models.” Although most all stakeholder support patient engagement broadly, what exactly patient engagement means and insuring stakeholders do more than just offer patients token gestures is a challenge.

Fourth, it is difficult to manage and share “…the vast amounts of data necessary to assess, manage, and mitigate risk and to use [these data] to improve quality and outcomes for patients.”  In particular, physicians in small practices or small mom-and-pop providers (e.g., home health agencies) will have difficult analyzing data to see if they are going over or over budget on their budget and may have problems coordinating reimbursement with other organizations that may be in the bundle.

Fifth and finally, there are regulatory barriers to implement bundled payment.  In particular, three regulations which could impede the implementation of bundles include: “physician self-referral law, the anti-kickback statute, and the civil monetary penalty (CMP) laws.”

In short, bundled payment offers the promise of improving the efficiency of how health care is delivered, but there are significantly operational issues that may make bundled payment challenging to implement in practice.

Will MACRA kill small physician practices?

Written By: Jason Shafrin - May• 14•17

Depending on the source, 34% to 59% percent of physicians are employed in practices of less than 10 physicians.  On the other hand, 39% of physicians are employed by hospitals.  How will these proportions change over time?

An interesting paper by Casalino (2017) examines the impact of the  Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) on the likely composition of physicians in the future.  MACRA provides incentives for physicians to join Advanced Alternative Payment Model (AAPM) programs which include:

  • Accountable Care Organizations (e.g., Next Generation ACOs)
  • Comprehensive End-Stage Renal Disease Care Organizations
  • Oncology Care Model
  • Comprehensive Primary Care Plus (CPC+) medical home program

AAPMs require physicians to accept both upside and downside financial risk.  Those participating in an AAPM receive a 5% payment bonus between 2019-2024 and have a 0.75% payment increase compared to only a 0.25% payment increase for physicians participating in Merit-Based Incentive Payment System (MIPS).

CMS is investing $20 million annually for the next 5 years to provide technical assistance to physician practices of 15 or fewer patients.  Additionally, physicians in CPC+ programs only need to take on nominal risk.  Additionally, physicians with fewer than 100 patients or with less than $30,000 of billings are also exempt from both quality measure reporting as well as positive and negative payment adjustments.

Are these incentives sufficient to keep small practices alive in the U.S?  Casalino thinks not.

Nevertheless, I believe it likely that MACRA will accelerate the movement of physicians into corporate employment. Participating in the CPC+ program or creating an Oncology Care Model practice requires the investment of capital and of substantial physician and staff time, both of which are scarce in small practices, and it involves taking some financial risk for the cost of care.

More importantly, the complexity of MACRA will, I believe, be too daunting for many physicians. The material presented in this article may seem somewhat complex, but it is a very simplified version of the 823-page MACRA final rule.


End of the Week Links

Written By: Jason Shafrin - May• 11•17

Interpreting evidence on value

Written By: Jason Shafrin - May• 10•17

Value is the latest jargon to hit the health care sector.  One potential way value could manifest itself is through value-based insurance design (VBID).  Under VBID, patients would pay lower copayments for treatments that are highly effective and/or low cost would pay higher payments for treatments that have low effectiveness or high cost to the payer. An editorial by Shrank, Saunders and McClellan (2017) examine the reactions to a study that examined the effect of eliminating cost sharing for certain cardiovascular medications after an acute myocardial infarction.  The results showed a $5000 decreases in cost, but these results were not statistically significant from a control group with standard cost sharing.

How were these results interpreted? Generally, academics concluded that there was no effect–because the results were not statistically significant–whereas private insurers saw a large decrease in cost and some readily adopted the approach.  Why the difference?  The authors explain.

The universities and academic medical centers that conduct evaluations prioritizerigorous, high quality evidence. To be published in the highest-impact journals, researchers aim to conduct studies to minimize the possibility that their results are due to random chance or other confounding factors. This requires a sufficient sample size; well-defined interventions; similar, preferably randomized control groups; and a sufficient period to minimize transitory effects…

In contrast, the business community prioritizes speed and timely information for ongoing adjustments. If a company waited for statistically significant, as well as clinically and financially meaningful, results to be sure an intervention would deliver long-term improvements in outcomes, costs, or both, it would lose precious months or years before it could scale innovations. A health care payer may pilot and expand a new payment model well before there is definitive evidence of its success if the approach is intuitive, is consistent with the mission of the organization, is supported by a compelling business rationale, and has prior evidence trending in the right direction. This can be risky, sometimes leading to wasted resources and effort on “fads.”

In short, academics want to be 95% sure that their conclusions are right.  Businesses just need to be right over half the time; although individual interventions may not work out, as a portfolio, the expected benefits would outweigh the costs on average.


Do Incentives for Healthy Behaviors Work? A Case Study of Medicaid in Iowa

Written By: Jason Shafrin - May• 09•17

One of the primary changes in the healthcare system directed by the Affordable Care Act was providing funding for states to expand Medicaid.  Many states did so; many others did not.  Some states expanded Medicaid but put additional hurdles in front of beneficiaries to receive this coverage at no cost.  Consider the case of the State of Iowa.   A paper by Akelson et al. (2017) writes:

the State of Iowa used a section 1115 waiver to expand Medicaid by establishing its own Iowa Health and Wellness Plan (IHAWP)…the state also created the Healthy Behaviors Program…[which] was designed with four components: a wellness exam and health risk assessment for members, incentives for providers who assist members with completing their health risk assessment, incentives for members’ healthy activities and behaviors, and a premium to be paid by members who did not complete the wellness exam and health risk assessment in the first twelve months of their coverage. To meet the wellness exam requirement, members had to have an annual preventive exam from any plan-enrolled physician…The health risk assessment component required the completion of a standardized instrument…[that]…assessed members’ health and their experiences with receiving health services…”

Some would argue that this is a positive development.  If the government is providing health insurnce to individuals and is responsible for most of their health care costs, the government should incentivize individuals to engage in healthy behaviors, both to improve their health and save on the government’s bottom line.  This type of policy could be considered a productive “nudge”.  Others would claim that this just one instance of the nanny state telling people what to do.  Forcing individuals to undergo wellness visits and standardized instruments for which they may or may not what to complete is in essence devaluing the time of people on Medicaid.

Regardless of what you think of this program, there is one question we can answer: did people actually get the wellness examine and fill out the risk assessment.

The study by Akelson et al. (2017) used qualitative interviews with Iowa staff, IHAWP patients and providers, and quantitatve analysis using claims and enrollment data.

Even though completing both items was a requirement for getting free Medicaid insurance, they found that:

Overall, we found that the proportion of members who completed a health risk assessment or wellness exam was very low. Even more important, the proportion who completed both, which was required for the member to avoid paying a monthly premium in the following year, was extremely low: Approximately 83 percent of Wellness Plan members and 92 percent of Marketplace Choice members in our sample failed to complete both activities in 2014

Why did so few people do the wellness exam and assessment?  Based on interviews, most people were not aware of this program and those who were did not understand that they needed to complete these tasks to get free insurance. Further, clinicians and the managers at clinician’s facilities also often did not fully understand this program.

In short, did the Healthy Behaviors Program not incentivize healthy behaviors, it may have made people less healthy if they later disenrolled in Medicaid due to receiving bills for unexpected premiums.


The Case For Patient-Centered Assessment Of Value

Written By: Jason Shafrin - May• 08•17

Value assessments are all the rage these days. From ASCO to ESMO, from MSKCC to AHA/ACC, from AMCP to ICER, there are a variety of value frameworks (and acronyms) out there. In the Health Affairs blog today, Alan Balch and Darius Lakdawalla make the case that treatment value should be measured from a patient-centered approach. Although patient-centered measures of value clearly are sensible–as patients are the end consumers of medical goods and services–there are good reasons why value does not always take the patient’s perspective.

Economics, the science of measuring value, holds that the value of any good rests in the eye of its consumers. In health care, this has meant that value is defined by how patients perceive it, rather than by how much they actually pay for the services they receive. Unlike other markets, health care features payment arrangements that separate consumers from payers

Payers often restrict patient choice to reduce the risk of excessive pharmacy or medical cost and also to ensure that prescribing patterns do not deviate from clinical guidelines.  The solution to balancing patient choice with cost control likely isn’t either imposing narrow restrictions or allowing patients 100% free choice, but a middle ground.  The authors propose that:

A range of therapies might be clinically indicated for a given patient, but they may vary on non-clinical dimensions that matter to them. For instance, some treatment options may require less travel, such as an oral medication versus radiation treatment or surgical treatment versus continuing medical management. Others might possess a lower toxicity profile and fewer side effects, such as fatigue, nausea, pain, or neuropathy. And, some treatments might offer more certain short-term survival benefits, while others offer a riskier bet on the possibility of a longer-term gain. A flexible formulary might allow patients and their physicians to choose among these clinically valid therapies that nonetheless differ in ways that matter to the patient. In this way, the “guard rails” stay up around evidence-based care but become more aligned with the patient experience.

Please read the whole article. Interesting throughout.

Effect of Medicare Part D on Mortality

Written By: Jason Shafrin - May• 07•17

Huh and Reif (2017) have an interesting study of the effect of Medicare Part D on mortality.  The abstract is below.

We investigate the implementation of Medicare Part D and estimate that this prescription drug benefit program reduced elderly mortality by 2.2% annually. This was driven primarily by a reduction in cardiovascular mortality, the leading cause of death for the elderly. There was no effect on deaths due to cancer, a condition whose drug treatments are covered under Medicare Part B. We validate these results by demonstrating that the changes in drug utilization following the implementation of Medicare Part D match the mortality patterns we observe. We calculate that the value of the mortality reduction is equal to $5 billion per year.

Previous studies have shown that increases in Medicare Part D spending decrease medical spending (i.e., Part A and B). The CBO estimates that a 10% increase in Medicare Part D is correlated with a 2% decrease in medical care spending.

Adding in the results from Huh and Reif, we see that Part D drugs also reduce mortality as well.


Mid-week Links

Written By: Jason Shafrin - May• 03•17


Trump’s First 100 Days: A Healthcare Review

Written By: Jason Shafrin - May• 02•17

The Order to begin the ACA Repeal.
Appointing Neil Gorsuch to the Supreme Court.
Appointing Tom Price to run HHS.
Proposing the American Health Care Act (AHCA) to replace Obamacare.
Confirming Seema Verma to run CMS.
Delayed implementation of bundeled payments.
Trump decides to continue Obamacare insurance subsidies.

All this and more happened in Donald Trump’s first 100 days. The American Journal of Managed Care Pharmacy has a nice infographic that summarizes how the Trump administration is reshaping health care in the U.S.

Does the hedonic treadmill work in reverse?

Written By: Jason Shafrin - May• 01•17

The hedonic treadmill is a concept that people acclimate to changes in their life and improvements in quality of life. For instance, people who buy a new car have a brief short-term burst of happiness, but after people acclimate to having the car, their quality of life returns to the previous level. This concept can be true of most new purchases (e.g., clothes, technology, housing) in the developed world. Going from lacking shelter or food are a few of the exceptions where material gains affect quality of life for a sustained period.

One question is whether this concept works in reverse with respect to health. In other words, when previously healthy individuals have a new disease or ailment, do they eventually acclimate to their new quality of life and return to the status quo quality of life?

Some previous research indicates that patients “tend to self‐ report better subjective health over the disease trajectory, even if more objective health measures suggest that their condition is not improving.” Additionally, patient reference points may change when a person has a disease. For instance, in some clinical trials for cancer treatments, the patient subjective quality of life among cancer patients who had recently come off treatment and were progression-free was higher than for healthy individuals in the general public.

Cubí‐Mollá, Jofre‐Bonet, and Serra‐Sastre (2017) examine these questions in more detail. The authors analyzed the issue of adaptation by estimating the effect of the presence of a long‐ standing illness and the time since diagnosis on the construct of subjective self‐ assessed health.  The authors use data from the the British Cohort Study (BCS70), a longitudinal survey dataset of 17,287 individuals born in 1970 in England, Wales, and Scotland that captures patient measures of quality of life.   The surveys were administered when the individuals were aged 5, 10, 16, 26, 30, 34, 38, and 42.   The authors measure changes in self-assessed health (Excellent, Good, Fair or Poor) as a function of the duration one of the long-standing illnesses studied. The long-standing illnesses include: diabetes; depression; anxiety; epilepsy; high blood pressure (HBP); migraine; hay fever, rhinitis, and other diseases of the upper respiratory tract (URT); asthma; cancer; ulcer; Crohn’s disease; eczema; psoriasis; and back problems.

Using this approach, the author find that:

Despite the negative impact of suffering from an LSI, individuals are likely to report better health states the longer they experience a chronic condition. In particular, the APEs [average partial effects] for each of the SAH [subjective assessment of health] categories reveal that differences in the effect of the morbidity and duration variables arise between excellent and all other SAH categories (good, fair , and poor ). Suffering from a chronic illness decreases the likelihood of reporting excellent health, but longer durations counterbalance this effect; that is, duration increases the probability of reporting SAH as excellent.