Episode Groupers

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Episode-Based Payment Bundling in Medicare

October 19, 2010 in Medicare, P4P, Part B | No comments

Bundled payment has been gaining popularity in the minds of policymakers.  In essence, a bundled payment structure gives providers a single lump sum payment to cover all related services for an episode of care.  In the private sector, the Texas Heart Institute and Geisinger Health System both charge a single lump sum for certain procedures. This payment scheme transfers risk from the payer to the provider, but also gives the provider an incentive an incentive to economize (in both the positive and negative senses) on care.

A paper by Birkmeyer et al. (2010) examines the services which would need to be included to create a bundled payment.  The authors examine 4 surgical procedures: coronary artery bypass (CABG), hip fracture repair, back surgery, and colectomy.  These procedures were chosen since they are 1) common, 2) expensive and 3) involve significant physician discretion in terms of the services provided. Their respective total cost were: $26,515 for back surgery, $27,572 for hip fracture repair, $28354 for colectomy, and $45,358 for CABG.

As the chart below demonstrates, there the paper presents two key findings. First, the vast majority of the costs went to hospitals, mostly for the index hospitalization.  Less than 15% of cost went for readmissions or payments to surgeons. Secondly, a large number of providers are involved in patient care for any one of these bundles. Thus, determining which of the many providers is actually responsible for episode cost may be difficult.

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Episode-Based Performance Measures: A reality?

December 15, 2009 in P4P | 2 comments

Pay-for-performance has become very fashionable of late. One way to measure physician performance is with episode groupers. This software groups together some or all of the services related to the care of a patient’s chronic or acute medical conditions. Policymakers can then use the episode as the unit of observation for: feedback on physician performance, public reporting, pay-for-performance, or ‘bundled payments for groups of services. These pay-for-performance measures could offer a significant increase in the scope of quality measures, which currently only evaluate process (e.g., did a heart attack patient receive a beta-blocker).

A paper by Hussey et al. (Health Affairs 2009) looks at the current state of the episode groupers. They note that these groupers are currently being tested in the following settings: (1) Geisinger Health System’s payment for cardiac care episodes; (2) the Medicare Acute Care Episodes (ACE) demonstration,(3) the Medicare Physician Hospital Collaboration demonstration; and (4) PROMETHEUS Payment’s pilot-testing of episode-based payments for several acute and chronic conditions.

One problem with assigning an episode to any individual physician is that Medicare patients are typically treated for many physicians, even within an episode. “Medicare beneficiaries receive care from a median of seven physicians, and the typical primary care physician must coordinate with 229 other physicians working in 117 practices.”

Secondly, it is unclear whether the physician should be the unit of analysis. Poor hospital hygine may be the cause of certain hospital-born infections. Any single physician likely has little input in the overall sanitation level of the hospital. Thus, it is unclear if one should assign an episode to a physician, a physician group, a facility (e.g., hospital) or a larger health care institution.

Finally, many Medicare beneficiaries have co-occurring health events. For instance, beneficiaries had an average of “…eight or more episodes of care during a year, some of which were for interrelated conditions. For example, many beneficiaries who had an AMI also had hypertension (63 percent), CHF (54 percent), or diabetes (35 percent) episodes.”

While episode-based performance measures offer much promise, there are many significant obstacles that need to be overcome before these measures will be able to significantly improve the efficiency of how medical care is delivered today.

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How has episode-based P4P worked in California?

November 30, 2009 in Health Insurance, Managed Care, P4P, Quality | No comments

Episodes of care are defined as the bundle of medical treatments used to treat an illness over  a specified time period.  Because all treatments are bundled together, these episodes have been thought to provide a superior unit of analysis in pay-for-performance (P4P) systems.  In fact, Oxford Health Plan pioneered episode payment in the 1990s.  [Later, the health plan abandoned episode payment due to data and computer system difficulties]

How has episode-based pay-for-performance worked in California?  A paper by Robinson, Williams and Yanagihara (2009) looks at Integrated Healthcare Association (IHA) initiative.  This association of health plans, hospital systems, and medical groups manages California’s P4P program.  The P4P program gives large physician groups a P4P score based on all of its commercial HMO patients. Using the Thomson Reuters Medical Episode Grouper (MEG), $264 million was spent on the California P4P between 2003 and 2007.  Although this is the largest P4P program in the nation, it amounts to less than 2% of California physician’s income.

Using medical groups rather than individual physicians has a number of advantages.  First, a larger number of patients are attributed at the medical group level compared to the individual provider.  Also, having multiple physicians within a single group treating a patient does not complicate the analysis.  Despite the use of medical groups rather than physicians, Robinson and co-authors found a number of problems with episode-based P4P:

  • Small Sample Size: The IHA technical committee stated that a physician organization must have a minimum of 30 episodes to be evaluated.  However, most physician organizations did not have enough episodes to be scored.  The main problem is that most enrollees are healthy during the year and thus do not generate as many episodes.  However, this may be less of a problem if P4P was to be applied to Medicare beneficiaries.
  • Data Completeness: “Prior to P4P, there was little incentive for the medical group to fully code what is done to the patient (procedures) and why it is done (diagnoses) on encounter forms.”  If P4P were applied to the Medicare population, procedure codes would likely be coded more accurately (because physicians are mostly paid by the procedure), but the diagnoses fields would likely suffer from similar problems.

Today in 2009, IHA has mostly abandoned episode-based P4P.  The metrics to be used going forward include: the percentage of prescriptions filled which are generic, the percentage of ambulatory surgery procedures that take place in freestanding centers compared to hospitals, ER visits per 1000 enrollees, non-maternity hospital visits per 1000 enrollees.

The authors note that episodes of care still may be appropriate for high-volume, high cost procedures in orthopedics and interventional cardiology, but California’s enthusiasms for episode-based P4P seems to be waning.

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