Value-Based Purchasing

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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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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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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)

 

Read the rest of this entry »

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Health Reform’s Value-Based Purchasing Provisions

February 28, 2011 in Health Reform, P4P, Quality | No comments

The Affordable Care Act of 2010 includes a number of provisions to study and/or implement value-based purchasing (VBP) programs in the United States’ health care system.  These provisions target Medicare payment policies in particular.  Today I review a Robert Wood Johnson (RWJ) article which provides an overview of the ACA provisions related to VBP.

There are four Sections of the ACA which I will focus on: Section 3022, 3007, 3013, and 3021.  Let’s get to it.

  • Section 3022 calls for a Medicare Shared Savings Program, which would provide payments specifically for new accountable care organizations. The legislation specifically requires measurement and assessment of quality as reflected in clinical processes and outcomes, patient and caregiver experience with care, and utilization reflecting efficiency and effectiveness of care, such as hospital admissions for ambulatory care sensitive conditions.

The House also asked the Institute of Medicine (IOM) to study the value issue in two ways. First, the IOM would conduct a study that would explore whether Medicare‘s current geographic payment adjustments for the prices paid to physicians and hospitals, which are designed to reflect differences in input prices, are accurate and to propose specific improvements, if any.  At Acumen, I am currently working on designing an alternative approach to calculating geographic payment adjustments for hospitals.   Second, and broader in scope, the IOM would conduct a companion study on geographic variations in the volume and intensity of services and recommend how to incorporate “quality and value” metrics into Medicare payment systems.

Because much of the House health reform bill‘s language was lost when Congress decided to use the Senate bill as the basis for final legislation, permitting only a few House amendments to be brought as part of reconciliation bill amendments, the House compromise was not included in the Affordable Care Act. Subsequently, the secretary of the Department of Health and Human Services (HHS), Kathleen Sebelius, committed in writing to congressional members of the Quality Care Coalition (members representing lower-spending districts) that she would commission the IOM study as called for by the House. Recently, the IOM announced formation of the study panel, which has already begun  meeting.

The Affordable Care Act includes a Senate provision that would pay for individual physician services based on a “value index” assigned to physicians according to their quality and costs:

  • Section 3007 creates a new “value-based payment modifier,” which, starting in 2015, will be used to provide differential payments based on quality and cost of care. Since the payment adjustments are to be budget neutral, some physicians would receive bonuses and others penalties under this provision. Presumably, the IOM‘s study will be influential in determining how CMS might apply a value-based payment modifier.

I am also is also working on this project, evaluating whether episode grouping software can be used to evaluate physician cost efficiency levels.  Previous reports I have worked on are available here.  Further, the Act continues to advance the notion of bringing value into payments made to physicians, hospitals, and other providers through established payment mechanisms:

  • Section 3013 provides for the identification of gaps in quality measures and authorizes (but does not appropriate) funding intended to fill those gaps, relying on collaboration between CMS, the Agency for Healthcare Research and Quality (AHRQ) and the National Quality Forum, which will be primarily responsible for identifying the measure gaps. Priorities are to be given to the following areas: i)  health outcomes; ii)  functional status; iii) coordination of care; iv) meaningful use of health IT; v) safety; vi) patient experience; vii) efficiency; and viii) disparities.

The RWJ article continues, “While this work proceeds, the current pay-for-reporting and pay-forperformance programs—labeled as value-based purchasing—for physicians and hospitals will be extended and expanded. The most advanced is the program for hospitals; FY 2013 measures will include measures for five conditions and patient experience as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS). FY 2014 will include measures of efficiency.”

  • Section 3021 creates a Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services to test payment and service delivery models that reduce costs while preserving or enhancing the quality of care provided under Medicare, Medicaid, and CHIP, and funds it at $10 billion every 10 years. The legislation specifically suggests pursuing models that transition providers away from fee-for-service and toward comprehensive pay

Source:

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Oregon’s Test of Value-Based Purchasing

February 2, 2011 in Health Insurance, Quality, Value-Based Purchasing | No comments

More quality at lower cost has been the mantra of payers for many years.  But how do we make  this goal a reality?

Value-based insurance alters cost sharing structure so that beneficiaries have low levels of cost sharing for cost-effective services and high compayments for low value items.  I report by Joan Kapowich (2010) looks at Oregon’s public employee benefit boards decision in 2010 to adopt an improved value-based insurance design system.  ”Oregon’s Public Employees’ Benefit Board and Educators Benefit Board design and purchase benefits for the two largest employee groups in the state: 128,000 state and university employees and dependents, and 155,000 public education employees and dependents.”

The revised value-based purchasing structure eliminates cost sharing for 17 preventive services.  For instance, patients have $0 out-of-pocket costs for periodic health appraisals; vaccinations;  screenings for breast, cervical, colon, and prostate cancer; and tobacco and weight management programs.  Copayments for generic drugs were minimal.  All these services fall into Tier 1 coverage.  ”Tier 2 is a standard commercial plan designed to include cost sharing. Tier 3 is designed to reduce the use of preference-sensitive or supply-sensitive services but not to impede access to essential care…Tier 3 includes a separate deductible, higher out-of-pocket maximums, and a coinsurance percentage double that of tier 2 for specific types of care, including emergency room visits; arthroscopy; hip and knee replacement; hysterectomy; magnetic resonance imaging, computed tomography, and positron emission tomography scans; upper endoscopy; coronary angioplasty and stents; and spinal surgery.”

Yet these plans did face some opposition.  For instance, using the term “preference-sensitive” or  ”supply-sensitive” did not fly with patients.  Instead, the board renamed Tier 3 as the “additional cost tier.”  In addition, treatments and hysterectomies were originally included in Tier 3 coverage, but this move was considered “too contentious” and they were moved to Tier 2.  The reasoning: “Certain cardiac treatments are performed for emergency care, and certain hysterectomies are performed for cancer care. Emergency treatments and cancer care were excluded because they require prompt treatment.”

Will the VBP work?  The spending and patient outcome measures from 2011 will reveal the results.

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Value-Based Cost Sharing

February 4, 2009 in Asymmetric Information, Health Insurance, Optimal Ins (Theory) | No comments

Many policy experts have been proponents of value-based cost sharing.  Under value-based cost sharing, medical care that is seen to provide a higher marginal benefit to the patient will have lower coinsurance rates than medical care with lower marginal benefits.  If value-based cost sharing would be implemented, preventive care should have low coinsurance rates because of the subsequent health benefit.

This seems like a very attractive way to design health insurance benefits, but a paper by Pauly and Blavin (JHE 2008) asks if value-based cost sharing is truly a novel concept.

First, under perfect information, there is no reason to have value-based cost sharing.  In this case, patients should internalize the marginal benefits–now and in the future.  ”When all agents have perfect knowledge of patient illness states and benefits of care, optimal coinsurance should be zero; insurance should take the form of a fixed dollar (indemnity) payment to cover the full cost of care when care is cost-effective, and should pay nothing in circumstances in which care has benefits that fall short of cost.”

Under asymmetric information, however, patients may make naive decisions.  For instance, patients may decide to forgo preventive care because the do not realize its long-term health benefits.  Coinsurance rates must still be designed to balance the twin goals of risk sharing and averting moral hazard.  Lower coninsurance rates will incentivize patients to get needed care.  However, designing coinsurance rates solely based on the marginal benefit of the procedure may not be optimal once we take into account that patient moral hazard may increase medical care above optimal levels.  

Pauly and Blavin also note that under asymmetric information, “it may now be the more price responsive service that should get the cost reduction, since lowering its cost sharing will have a larger effect in terms of moving it closer to the ideal level than would be the case for a less responsively demanded service.  That is, if patient ignorance resulting in underestimation of benefits from care in a given setting is severe enough, the direct relationship between price responsiveness and optimal cost sharing should be reversed.”

Yet just because value-based cost sharing can work does not mean that is the only solution.  Instead of spending money to reduce coinsurance rates, insurance companies or policymakers could spend money to inform consumers of the true benefits and costs of different types of medical care.  This is especially true of medical services that are not price responsive; where the only way to convince patients to undergo these potentially uncomfortable procedures is to increase information dissemination.  For instance, most people would prefer not to undergo a colonoscopy even at a price of 0.  The only way to convince patients that the procedure is needed is by information dissemination.

Value-based cost sharing is not a magic bullet, but may be a useful technique in the presence of asymmetric information.

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