RAND Corporation and AMA study: Physicians need support and guidance to further advance delivery reforms

Physician practices are engaging in new health care payment models intended to improve quality and reduce costs, but are finding that they need help with successfully managing increasing amounts of data and figuring out how to respond to the diversity of programs and quality metrics from different payers, according to a joint study released in March by the RAND Corporation and the American Medical Association.

Both the federal government and private payers are changing the way they pay physicians and other health professionals, moving to innovative models intended to improve quality and reduce costs.

Many physician practices are responding by partnering or merging with other medical practices or hospitals in order to better support the investments necessary to succeed in new payment models, such as care managers and information technology. Practices say that realigning their operations to the goals of the new payment strategies can be challenging when necessary data are not available or different payment models conflict with each other.

Researchers performed case studies of 34 physician practices in six diverse geographic markets to determine the effects that alternative health care payment models are having on physicians and medical practices in the United States.

The payment models include episode-based and bundled payments, shared savings, pay-for-performance, capitation and retainer-based practices. Accountable care organizations and medical homes, two new organizational models, also were examined.

The findings are intended to help guide system-wide efforts by the AMA, the study's sponsor and co-author, and other health care stakeholders to improve alternative payment models and help physician practices successfully adapt to the changes.

The study found that alternative payment models generally have not changed the core content of physicians' clinical work. Efforts to improve efficiency by delegating some tasks to non-physicians has had the unintended consequence of increasing the intensity of physicians work, raising concerns about burnout.

The project conducted interviews between April and November 2014, speaking with 81 people from 34 physician practices in six markets throughout the country: Little Rock, Arkansas; Orange County, California; Miami, Florida; Boston, Massachusetts; Lansing, Michigan; and Greenville, South Carolina. Researchers also spoke to leaders of 10 payers, nine hospitals or hospital systems, seven local medical societies and five Medical Group Management Association chapters.

The report, “Effects of Health Care Payment Models on Physician Practice in the United States,” is available at www.rand.org.

From Health Affairs Blog: The Arkansas Payment Reform Laboratory

The Health Affairs Blog has launched a series, which will run over the next year, looking at payment and delivery reforms in Arkansas and Oregon. The posts will be based on evaluations of these reforms performed with the support of the Robert Wood Johnson Foundation. Check out the first post in the series - written by part of the team evaluating the Arkansas model, the Arkansas Payment Improvement Initiative.

New Report from NRHI on Making the Business Case for Payment and Delivery Reform

A new report from the Network for Regional Healthcare Improvement, Making the Business Case for Payment and Delivery Reform, provides a step-by-step guide to help businesses, physicians, hospitals, and other purchasers and providers design changes in the way health care is delivered that are both financially feasible for providers while saving money for purchasers.

The report describes a 10-step process for developing a business case to support successful reforms to both healthcare payment and delivery systems. Each of the steps is illustrated with a hypothetical example of how a business case calculation might be done for an initiative by a physician practice to improve care for patients with chronic disease in order to reduce avoidable emergency room visits and hospitalizations.

You can access the full report online.

New RWJF Brief on Payment Reform

RWJF has released a new brief authored by Michael Bailit entitled "A Burning Platform and Trust: Key Ingredients for Payment Reform". Drawing on insights from RWJF grantees and a study of safety net accountable care organizations, the brief explores factors found to generate movement toward fundamentally different payment and delivery models than those that have dominated American health care until now.

Check out the full brief here.

CPR Webinar on Payment Reform Tools

On September 30th at 11:00 am PT, NBCH member coalitions and employers are invited to join Catalyst for Payment Reform (CPR) for a one hour webinar to learn more about CPR's tools to help purchasers drive payment reform, including our health plan request for information (RFI) and health plan model contract language. RSVP to nperelman@catalyzepaymentreform.org.

Study: Doctors Look To Others To Play Biggest Role In Curbing Health Costs

When it comes to controlling the country’s health care costs, doctors point their fingers at lawyers, insurance companies, drug makers and hospitals. But well over half acknowledge they have at least some responsibility as stewards of health care resources.

In a study, published in the Journal of the American Medical Association, Mayo Clinic researchers surveyed more than 2,500 doctors to assess their views of different approaches to rein in the nation’s health care costs. The doctors were randomly selected from an American Medical Association database.

Based on the findings, 59 percent of doctors believe they have some responsibility in holding down health care costs. Only 36 percent think they have a major role. More than half of doctors, however, said each of five other groups carry “major responsibility:” trial lawyers, health insurance companies, pharmaceutical companies, hospitals and patients.

When asked about options to reduce health care costs, most doctors viewed efforts to improve the quality and efficiency of care most favorably. For example, 98 percent are enthusiastic about efforts to promote care coordination for people with chronic diseases. Doctors were also mostly in favor of improving conditions for evidence-based decisions, including efforts to prevent corporate influence of physicians’ decisions and promoting head-to-head trials of competing treatments. They were less enthusiastic about changing current payment models. Only 7 percent, for example, were very enthusiastic about eliminating the traditional fee-for-service payment system, while another 23 percent were somewhat enthusiastic. About a third of the physicians expressed enthusiasm for bundled payment systems.

UnitedHealth to Double Payments Tied to Quality and Cost Measurements

UnitedHealthcare plans to more than double the amount of its reimbursements that are tied to quality and cost-effectiveness, bringing the value of its contracts that are linked to quality measurements to $50 billion by 2017, the company recently announced.

Already more than $20 billion of UnitedHealthcare's payments to providers, such as hospitals and physicians, are paid through contracts that tie part of the payment to measurements of quality and cost-efficiency.

UnitedHealthcare—which provides coverage for more than 40 million people through private insurance, Medicaid, and Medicare—said that it has seen strong success from using quality and cost-control metrics. The company said that using patient-centered medical homes, in which a physician coordinates the care of patients, reduced the growth of medical costs by up to 4.5 percent.

The company is including in its projections three main types of programs:

• Performance-based payments, such as bonuses for primary care practices, or performance-based contracts with hospitals, physicians and other providers that reward them for improving patient medical outcomes and lowering costs.
• Centers of Excellence programs, in which payments are bundled for specific treatments or procedures, such as organ transplants, rather than charging for each visit or drug.
• Accountable care organizations and medical homes, in which the medical provider would get to share in any savings that result from better overseeing patients' care.

Read UnitedHealthcare's press release here.

PBGH Op-Ed on Cost Containment

NBCH member coalition, Pacific Business Group on Health, has published an op-ed in Politico on the subject of the role of employers in cost containment. The piece includes some specific proposals. Recognizing that action on broad Medicare reform is unlikely this year, PBGH is focusing on the specific issues that Congress seems to be interested in: 1) physician payment reform (including SGR replacement), 2) price transparency, and 3) quality measures. Co-authors David Lansky and Sally Welborn call on Congress to tackle the cost issue head-on by making both public and private-sector payment for care dependent on delivering the high-quality care every hardworking American deserves. They call on employers to work with federal payers to align incentives in all sectors of health care, including for both consumers and providers.

CMS Announces $1 Billion Health Care Innovation Awards Initiative

The Centers for Medicare & Medicaid Services (CMS) has released a Funding Opportunity Announcement for round two of the Health Care Innovation Awards. Under this announcement, CMS will spend up to $1 billion for awards and evaluation of projects from across the country that test new payment and service delivery models that will deliver better care and lower costs for Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) enrollees.

The second round of the Health Care Innovation Awards will support public and private organizations in four defined areas that have a high likelihood of driving health care system transformation and delivering better outcomes. Specifically, in this second round, CMS is seeking proposals in the following categories:

• Models that are designed to rapidly reduce Medicare, Medicaid, and/or CHIP costs in outpatient and/or post-acute settings.
• Models that improve care for populations with specialized needs.
• Models that test approaches for specific types of providers to transform their financial and clinical models.
• Models that improve the health of populations – defined geographically (health of a community), clinically (health of those with specific diseases), or by socioeconomic class – through activities focused on engaging beneficiaries, prevention (for example, a diabetes prevention program or a hypertension prevention program), wellness, and comprehensive care that extend beyond the clinical service delivery setting.

In this round, CMS specifically seeks new payment models to support the service delivery models funded by this initiative. All applicants must submit, as part of their application, the design of a payment model that is consistent with the new service delivery model that they propose.

Interested parties of all types who have developed innovations that will drive significant improvement in population health, quality of care and total cost of care are welcome to apply. Eligible applicants include, but not limited to: provider groups, health systems, payers and other private sector organizations, faith-based organizations, states, local governments, public-private partnerships and for-profit organizations.

Key Dates and Deadlines
Letters of Intent to Apply: CMS will accept letters of intent beginning June 1 until June 28, 2013 3pm EDT.
Application: CMS will accept applications beginning June 14 until August 15, 2013 3pm EDT.

Visit the Innovation Center website for more details on how to apply for these awards! 

CPR Urges Plans, Providers to Add Their Payment Reform Programs to Their National Compendium

A close collaborator of NBCH, Catalyst for Payment Reform (CPR) has launched a National Compendium on Payment Reform This is a brand new searchable and sortable website designed to catalogue payment reform efforts underway across the country. Those implementing payment reforms are encouraged to share a description of their efforts in the compendium, a resource for health care purchasers, payers, providers, policymakers, researchers, and journalists. Visit the website and register to upload information about your payment reform pilot or program.

CPR is offering one hour of free consulting to the first ten organizations that add their program! Add your entry today!

Partnership for Sustainable Health Care Report

Five veteran health care leaders representing insurers, hospitals, employers, and consumers have published a report outlining an ambitious set of recommendations aimed at slowing rising costs, focused mainly on changing the way America pays for health care. The new group includes NBCH member coalition Pacific Business Group on Health, America’s Health Insurance Plans, a trade lobby for the insurance industry, hospital firm Ascension Health, the National Coalition on Health Care, a nonprofit research group, and Families USA, a consumer advocacy group.

Many of the ideas draw on existing efforts, such as accelerating Medicare’s efforts to pay for quality rather than just quantity of care. Working together as the Partnership for Sustainable Health Care, they also recommend greater incentives to promote quality, such as reimbursing providers more for treatments shown to be most effective — and reimbursing them less for those with more uncertain benefits. The distinguishing feature of this group and its recommendations are that they are aimed at true system-wide changes, not just federal or private sector solutions.

Providers Are Preparing for Bundled Payments

This article from Hospital & Health Networks provides a summary of the issues surrounding the implementation of a bundled payment program including insights from a variety of specific health markets. Among the considerations hospitals and other providers must analyze when designing and testing bundled payments are: alignment of financial incentives, the need for and importance of data, and the importance of recognizing bundled payments require culture change. Also included are references to resources to be used in preparing for bundled payments, including materials created by the Health Care Incentives Improvement Institute (HCI3), and organization closely aligned with NBCH.  In addition, Booz & Co. has published a white paper describing the consumer perspective on bundled payments.

Advisory Board Develops Private Sector Bundled Payment Tracker

The Advisory Board has developed a database of hospitals, health systems, and private sector payers that have adopted commercial bundled payment strategies. Currently, there are more than 30 different agreements in place. The database is interactive and provides details on the payment arrangements, including whether they are employer-driven or plan-driven.

Catalyst for Payment Reform Releases National Scorecard on Payment Reform

Catalyst for Payment Reform (CPR), an independent, non-profit employer coalition pushing for better value in health care, today released its first National Scorecard on Payment Reform. The Scorecard shows that only about 11 percent of the health care dollars we pay to doctors and hospitals today are value-oriented -- tied to how well they deliver care or create incentives for both improving quality and reducing waste. Almost 90 percent of payments reported remain in traditional fee-for-service, paying providers for every test and procedure they perform regardless of necessity or outcome, or in bundled, capitated, or partially-capitated payments without quality incentives.

Within the 11 percent of payment that is value-oriented, the Scorecard finds that 43 percent of those payments give providers financial incentives by offering a potential bonus or added payment to support higher quality care, such as fee-for-service with shared savings. The other 57 percent of payments put providers at financial risk for their performance if they do not meet certain quality and cost goals, such as bundled payment.

The National Scorecard on Payment Reform uses data submitted on a voluntary, self-reported basis to eValue8, the National Business Coalition on Health’s annual Request for Information to health plans. The plans responding to the Scorecard questions represent almost half of the commercially-insured lives in the U.S. While Scorecard findings are not wholly representative of health plans across the U.S., they offer a preliminary baseline against which to measure progress toward value-oriented payment in the commercial sector.

Report of the National Commission on Physician Payment Reform

The National Commission of Physician Payment Reform said in a recent report that systems that reward quality of care, such as bundled payment systems and accountable care organizations, should replace physician fee-for-service (FFS). While acknowledging that the move to bundled payments will be gradual, the Commission suggested starting with patients with multiple chronic conditions makes sense particularly beginning with bundling payments for conditions that involve in-hospital and post-acute care, such as heart attacks and joint replacements. The Commission made these twelve recommendations:

• Over time, payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives. 
• The transition to an approach based on quality and value should start with the testing of new models of care over a 5-year time period, incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade. 
• Because fee-for-service will remain an important mode of payment into the future, even as the nation shifts toward fixed-payment models, it will be necessary to continue recalibrating fee-for-service payments to encourage behavior that improves quality and cost-effectiveness and penalize behavior that misuses or overuses care. 
• For both Medicare and private insurers, annual updates should be increased for evaluation and management codes, which are currently undervalued. Updates for procedural diagnosis codes should be frozen for a period of three years, except for those that are demonstrated to be currently undervalued. 
• Higher payment for facility-based services that can be performed in a lower-cost setting should be eliminated. 
• Fee-for-service contracts should always incorporate quality metrics into the negotiated reimbursement rates. 
• Fee-for-service reimbursement should encourage small practices (those having fewer than five providers) to form virtual relationships and thereby share resources to achieve higher quality care. 
• Fixed payments should initially focus on areas where significant potential exists for cost savings and higher quality, such as care for people with multiple chronic conditions and in-hospital procedures and their follow-up. 
• Measures to safeguard access to high quality care, assess the adequacy of risk-adjustment indicators, and promote strong physician commitment to patients should be put into place for fixed payment models. 
• The Sustainable Growth Rate (SGR) should be eliminated. 
• Repeal of the SGR should be paid for with cost-savings from the Medicare program as a whole, including both cuts to physician payments and reductions in inappropriate utilization of Medicare services. 
• The Relative Value Scale Update Committee (RUC) should make decision-making more transparent and diversify its membership so that it is more representative of the medical profession as a whole. At the same time, CMS should develop alternative open, evidence-based, and expert processes to validate the data and methods it uses to establish and update relative values.

Recent Publications by Bailit Health

Over the past few months Bailit Health staff have authored several papers and briefs on payment reform strategies and value-based purchasing. We have created this special newsletter to share these publications with you, and to provide you with descriptions from a sample of our current projects. Should you have questions about any of these publications, please contact any member of the team or visit the website at www.bailit-health.com.

• The Design And Application Of Shared Savings Programs: Lessons From Early Adopters Joel S. Weissman, Michael Bailit, Guy D’Andrea & Meredith B. Rosenthal Health Affairs - September 2012 Read Abstract

• Bundled Payment Across the U.S. Today: Status of Implementations and Operational Findings Michael Bailit and Megan Burns Health Care Incentives Improvement Institute - May 2012 Download Report

• Delivering Value: How Value-Based Purchasing Improves Quality and Lowers Costs Michael Bailit and Megan Burns Buying Value - July 2012  Download Report

Issue Brief: Pay-for-Performance Efforts Show Mixed Results

A new Issue Brief from Health Affairs and the Robert Wood Johnson Foundation reviews the background and current state of public and private pay-for-performance initiatives. In theory, paying providers for achieving better outcomes for patients should improve those outcomes, but in actuality, studies of these programs have yielded mixed results. This brief also discusses proposals for making these programs more effective in the future.

"Pay-for-performance" is an umbrella term for initiatives aimed at improving the quality, efficiency, and overall value of health care. These arrangements provide financial incentives to hospitals, physicians, and other health care providers to carry out such improvements and achieve optimal outcomes for patients.

Pay-for-performance has become popular among policy makers and private and public payers, including Medicare and Medicaid. The Affordable Care Act expands the use of pay-for-performance approaches in Medicare in particular and encourages experimentation to identify designs and programs that are most effective.

The typical pay-for-performance program provides a bonus to health care providers if they meet or exceed agreed-upon quality or performance measures, for example, reductions in hemoglobin A1c in diabetic patients. The programs may also reward improvement in performance over time, such as year-to-year decreases in the rate of avoidable hospital readmissions.

Pay-for-performance programs can also impose financial penalties on providers that fail to achieve specified goals or cost savings. For example, the Medicare program no longer pays hospitals to treat patients who acquire certain preventable conditions during their hospital stay, such as pressure sores or urinary tract infections associated with use of catheters.

The authors state that among the reasons for the mixed results to date are experiment design challenges, tension between providers and payers about the real goals of pay-for-performance programs, and concerns about how to adjust for differences in providers' patient populations (e.g. how to treat safety net providers).

KPMG Survey: Is Health Care In Denial About Pay-For-Performance?

Health care stakeholders offer contradictory notions of the direction of their business. Most believe current business models are sustainable even though economic and legislative trends point in a different direction, according to a recent KPMG survey.

Asked about the sustainability of their industry’s current business model over the next five years, the largest group of respondents from each group answered “somewhat sustainable” from five possible answers ranging from “extremely sustainable” to “not sustainable.” Fifty-three percent of payers’ representatives, 43 percent of pharmaceutical companies’ and 40 percent of providers’ answered similarly.

The findings suggest that many healthcare organizations are working to sustain the volume-driven status quo despite a shift in healthcare toward pay for performance, according to Ed Giniat, KPGM’s health care and pharmaceuticals national sector leader. The most successful will recognize that times are changing.

Based on these results, researchers concluded that health care organizations from all sectors should develop short-term models in anticipation of revenue transformation and execute partnerships across sectors.

The KPMG survey was conducted between January-June 2012 and reflects responses from 104 health care system executives, 51 health plans executives and 54 pharmaceutical executives at leading organizations in the U.S. A webcast on the findings from the survey is available via the KPMG Healthcare & Pharmaceutical Institute (HPI). The KPMG Healthcare and Pharmaceutical Institute is a forum for healthcare business leaders to gain insight into emerging issues, consider approaches to help balance risk and controls and improve performance, and further explore the accelerating transformation within the health care industry, both domestically and globally.

Health Affairs Article on Shared Savings Programs

An article in the September issue of Health Affairs, co-authored by Joel Weissman, Michael Bailit, Guy D'Andrea, and Meredith Rosenthal, discusses "lessons learned" from early adopters of shared savings programs. Shared savings programs reward providers for holding spending below specific targets, thus introducing a level of financial accountability for physicians not present in strictly volume-based payment models, such as fee-for-service. The article examines the design and application of shared savings formulas across a range of actual programs. It also presents a more detailed description of one particular shared savings program—the Massachusetts Patient-Centered Medical Home Initiative—focusing on key trade-offs between payers and providers that eventually led to agreement on specific aspects of the program. The article concludes with recommended principles for the design of future shared savings arrangements and consideration of issues that will confront decision makers as these efforts mature and expand.

Health Affairs Article Says True Reform Comes Through System Transformation, Not Just Payment Reform

In this month's Health Affairs, Martin Sepulveda and Helen Darling analyze historical attempts at delivery system transformation through the lens of large employers as payers and argue that payment reform alone will not cut costs and re-engineer care. They discuss large employers’ perspectives on three particular challenges that payment reform alone, as important as it is, may not be sufficient to address: high health care prices, inefficient and complex systems, and an outdated work environment ill designed to meet the pressing goals of better health care at lower cost. They argue that policies that support health care organizations in redesigning work processes will be essential to reducing prices and simplifying interactions in care delivery. They also state that health care organizations will need to redesign their compensation systems to align their employees’ pay with improvements in performance. As an example, they describe the major transformation that IBM underwent in the 1990s to position itself to compete in a radically changed computer marketplace. The article also offers several policy recommendations to support health care organizations in making the necessary changes.