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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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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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MassHealth P4P: Did it work?

August 2, 2011 in Hospitals, Medicaid, P4P, Quality | 1 comment

Massachusetts’ Medicaid program instituted a pay-for-performance program in 2008.  Did it work?  According to this paper, the answer is no.

MassHealth P4P Background

The MassHealth pay-for-perfrmance P4P program was implemented in 2008.  At first the program was implmented using a P4P structure for pneumonia and pay-for-reporting for surgical infection prevention (SIP) and transitioning to P4P for both conditions in 2009. The program measures and incentivizes hospital quality for a subset of MassHealth [Massachusetts Medicaid program] patients who are enrolled in plans that directly bill MassHealth.

The Measures

For pneumonia:

  • oxygenation assessment,
  • blood culture performed in emergency department before first antibiotic received in hospital,
  • adult smoking cessation advice and counseling, initial antibiotic received within 6 hours of arrival, and
  • appropriate antibiotic selection in immunocompetent patients.

For Surgical Infection Prevention (SIP):

  • prophylactic antibiotic within 1 hour of surgical incision,
  • appropriate antibioticselection for surgical prophylaxis, and
  • prophylactic antibiotic discontinuedwithin 24 hours after surgery end time.

Evaluating Hospital Performance

The MassHealth P4P followed the Hospital VBP Report to Congress. Hospital performance on individual measures is aggregated to create a composite score; this composite score then is used to indicate the share of the bonus paymen that each hospital receives. More information on the Hospital VBP Report to Congress can be found here.

Identification Strategy

“We do not observe the quality of care provided to Medicaid patients in Massachusetts and other states, and instead we observe the quality provided to patients from all payers. Our identification strategy assumes that the financial incentives of the MassHealth program, which are based on quality performance
for only a subset of MassHealth patients, are reflected in the quality of care received by all patients.”

The authors control for:

  • Observed and unobserved hospital characteristics which remain fixed over time (i.e., fixed effects)
  • A secular trend in quality for each hospital (i.e., using a hospital-specific time trend)
  • Hospital case mix measured by a “difficulty index” to identify cases where hospitals choose patients selectively after P4P was implemented
  • In one sensitivity analysis, the authors use propensity scoring, nearest neighbor, one-to-one matching without replacement to create a sample of non-Massachusetts hospitals similar to those in Massachusetts. Hospitals were matched based on ownership, nuber of beds, urban/rural status, share of Medicare patients, and share of Medicaid patients.
  • The authors also test if hospitals with more Medicaid patients are more likely to have a larger increase in quality.

Evaluating Hospital Performance

The authors find that the MassHealth P4P has little effect on quality. “Estimates from our preferred specification, including hospital fixed effects, trends, and the control for measure completeness, indicate small and nonsignificant program effects for pneumonia (−0.67 percentage points, p>.10) and SIP (−0.12 percentage points, p>.10). ” The result could be due to the fact that P4P has, in actuality, no effect on quality. On the other hand, by using hospital-specific time trends, there may be little variation in quality over time to capture quality improvements after the P4P implementation.

Source

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Maximizing utility for end-of-life care

June 20, 2011 in Hospitals, Nursing Homes | 1 comment

Hospitals in Sacramento were concerned about the large number of nusring home transfers to its facility.  Were many of these tranfers unnecessary? Did patients with little chance of recovery benefit from these hospital stays?

To reduce end-of-life tranfers to hospitals from nursing homes, 3 Sacramento-area hospital systems and 18 nursing homes instuted the Preparing Residents for End-of-Life Plans and Respecting Endof-Life Decisions (PREPARED) project.  In the project, the hospital systems provided clinician educators with expertise in end-of-life care to work part of their time each week in nursing homes. The PREPARED intervention included provided advance care planning (ACP) education to patients as well as nursing home staff and administrators.

The study found that the initiative decreased hospitalization rates, increased nursing home as the the site of death, and improved perceptions of quality of care by family members.

How do family members perceive quality of care? The study shows that family members prefer the more intimate setting of a nursing home to a hospital, but this preference is likely conditional on a fixed death date.  By this I mean that if a family knew there loved one would die with certainty on a given date, the nursing home would be the preferred setting. If hospital care could extend the patient’s life, however, (i.e., more realistically not conditioning on death date) then family members may prefer to send their loved one to the hospital even though it is a less intimate setting.  A lot of these preferences may have to do with provider education. Providers who tell family members that their loved one has a chance (albiet small) of recover may be more likely to go the hospital route than those whose providers tell them there is basically no chance of recovery.

Further, most people would rather commit an error of commission than omission.  For instance, by not sending a loved one to the hospital, family members may feel guilt that they didn’t do all they could to save the patient.  However, sending the loved one to the hospital has its own risks (hospital acquired infections, complications, medical errors), but it seems that generally family members feel less guilty about death due hospital-related care.

Thus, although the study shows that family members are more satisfied when their loved one dies in a nursing home compared to a hospital, I do not believe that this is strong evidence of a long-term trend towards less hospitalization of terminally ill patients.

Source: Kathy Glasmire and Kathleen Kerr. Be Prepared: Reducing Nursing Home Transfers Near End of Life. CHCF, March 2011.

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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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Should chronically ill patients be treated in the hospital setting?

March 18, 2010 in Hospitals | No comments

Over the course of the past decade, there has been a trend to move more and  more treatment of chronically ill individuals outside the hospital and into ambulatory care.  There is good reason for this. Ambulatory care is much less expensive than hospital care.  In fact, the goal of treating patients more regularly in the ambulatory care setting is to reduce the probability that they need care in the inpatient setting.

However, Siu et al. (2009) claim that hospital do form an important link in the chronic care chain of treatment.  Their most compelling argument is that even under the best ambulatory care, some patients with chronic diseases will inevitably need to visit a hospital.  Thus, providing the highest quality care and integrating acute care with preceeding and following non-acute care is imperative.

However, is there a business case for hospitals to treat these chronically ill patients?  Siu and co-authors argue that the answer is yes.  How hospitals could improve chronic care treatment and improve their bottom line include the examples from the following three settings:

  • Pre-hospital: In the hospital at home program, the goal is to provide more intensive medical services at home to prevent hospitalization.  Providing care in this setting can reduce complications and iatrogenic injuries and also eliminate/improve transitions to the hospital.  The hospital can make money by reducing low- or negative-margin Medicare admissions and increase the bed capacity available for high margin admissions.  Also, the hospital can make money on the billable services provided at home.
  • Hospital: In examples such as the Hospital Elder Life Program (HELP), the goal is to move patients through the acute hospital admissions process safely and efficiently.  This hospital can increase profits through reducing the length-of-stay needed and the cost per day as well as reduce ED crowding.
  • Post-hospital: Transition programs can help patients smoothly move out of inpatient care.  This should reduce the need for readmissions. If Medicare stops paying for unnecessary re-admissions, than smoothly moving people out of inpatient care and decreasing readmission rate will improve the hospital’s bottom line.

The article recommendations in essence seek more integrated care between the acute and non-acute treatment settings.  In the three examples above, the hospital is expanding its reach to include more ambulatory care.  Some of the business case made above depends on reforming Medicare’s payment methods however, (e.g., reduced or no reimbursement for hospital readmissions).  Even if these changes are made, however, Siu and co-authors recognize that implementing these changes will not be easy.  For instance, even if these hospital programs reduce readmission rates, decrease the number of iatrogenic injuries, and decrease overall medical costs, “these savings, however, may accrue to other cost centers (for example, if length-of-stay or intensive care unit use is reduced) or to a separate entity (such as an insurer) rather than to the entity paying for the model…Even for programs that operate entirely within the hospital, crossing departmental and cost-center lines makes funding difficult, given the silo-based budgets and norms for recognizing revenue.  Further, Medicare Part B does a poor job of proving funding for care based on interdisciplinary teams.”

This article does provide some areas for further integration and improved care for patients in the chronic care setting.  However, an integrated hospital system would seem to be able to overcome many of these issues.  For instance, an organization like Kaiser Permanente could more easily allocate chronic medical care across the inpatient and outpatient settings in the most efficient manner, worrying less about which setting the cost accrues.  A more integrated health insurance model would still have to worry about these issues, but further vertical integration seems like a more sustainable business model in the long-run than the business policies laid out by Siu and co-authors.

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Should low quality hopsitals be given more or less money?

August 25, 2008 in Hospitals, Medicaid/Medicare, Quality | Permalink

Recently, the San Diego Union Tribune reported that the Sharp Grossmont Hospital in eastern San Diego county was cited for a number of preventable deaths. Reporter Cherl Clark found numerous problems, which included:

“staff members restraining a highly medicated, 25-year-old man with schizophrenia in such a way that he was allowed to suffocate. In addition, hospital workers caused the death of an 83-year-old woman who had undergone a hysterectomy by injecting a dangerous anti-narcotic into her bloodstream. Other problems included nurses who did not know or use proper CPR, an unsanitary operating-room mattress held together by tape and glue, unsafe storage and handling of food and kitchen equipment, and use of critical medications such as heparin that had expired up to a year earlier.”

CMS is threatening Sharp Grossmont that it could lose all federal money (i.e., Medicare and Medicaid). Since 50% of Sharp Grossmont’s business comes from Medicare and Medicaid patient, this would be a disaster for the hospital. What should we do with underpreforming hospitals?

In regular markets, when a product has lower quality, people stop buying that product and switch to another one. For instance, if GM stops making high quality cars, people switch to Toyota. The market compels companies to offer a desirable bundle of quality and price or else they will lose business. Because markets are so effective at maintaining high quality, withholding Medicare and Medicaid payments from Sharp Grossmont makes sense, right?

Maybe not in this case. First of all, some hospitals may not be in a competitive market. While urban hospitals must compete with other, nearby hospitals, Sharp Grossmont is supposed to provide medical care for the entire Grossmont Healthcare District, which covers 750 square miles in San Diego’s more suburban and rural East County. This area has more than 652,000 residents and Sharp Grossmont has the busiest emergency department in San Diego County. By reducing funding, individuals who have emergencies will receive even worse care than before.

This is similar to the no child life behind program. Low preforming schools lose money. But these are exactly the schools that need more money to survive. If students had the freedom to switch schools, then penalizing a failing school would make perfect sense since the students could opt for higher quality schools. The failure of low quality schools would not be a problem if students had other schools available for them to choose to attend. If individuals do not have any choice of which school they attend, however, withholding funding from schools or hospitals can make low quality schools worse.

Will Sharp Grossmont be decertified? The CMS threat to withhold funding is likely just a bluff.

“Among the 450 hospitals in [CMS certification officer Steven] Chickering’s jurisdiction of Hawaii, California, Nevada and Arizona, 10 to 12 a year have as many major lapses, he said. Ninety-nine percent of those facilities resolve their crises and keep their federal payments, Chickering said.”

The federal government knows that removing funding from the only emergency room in a 750 square mile area is not politically feasible. Although individuals may not have much choice of a hospital in an emergency situation, in non-emergency situations patients can decide to drive longer distances to visit physicians at more competent hospitals. If CMS payments are proportional to patient volume, then Sharp Grossmont may take a financial hit due to this lower patient volume without having the hospital decertified.

Decertification is likely not the answer, but having such serious quality lapses reflects poorly on the state of health care in San Diego, and in the U.S. in general.

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Do hosiptal CEOs make too much money?

April 9, 2008 in Hospitals, Labor Economics, Supply of Medical Services | Permalink

Paul Levy, the president and CEO of Beth Israel Deaconess Medical Center in Boston made about $1 million dollars in 2005. Of this, $650,000 was base salary, $195,000 was made up of incentive bonus, and the balance was composed of compensation for health insurance, life insurance, and retirement.
How do I know these figures? Paul Levy told me. Well, he didn’t tell me directly, but he did post these figures on his Running a Hospital blog. Levy writes:
So, if you were on my board, how would you set an appropriate salary? You might look at the competition, and as the Globe notes, the salaries for most of the Boston-area hospital CEOs center around the same level. Would you look at salaries of people in for-profit companies, and, if so, how do you measure comparable size and complexity? Would you look at salaries of other types of non-profits, like universities and museums?

Does it matter that the average tenure of a hospital CEO is under six years? If that is roughly the tenure of a major league baseball player, should CEO salaries be in the same ballpark? Sorry, I couldn’t resist!

The New York Times recently posted an interactive page on executive pay. So the question remains, readers, how would you set Paul Levy’s salary?

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