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Profiles in Payment Innovation Featured in Health Affairs' September 2012 Issue


Complex patients responsible for $319.5 billion in annual spending under federal program


Bethesda, MD -- The September 2012 issue of Health Affairs, supported in part by grants from WellPoint Inc., the WellPoint Foundation, and the California HealthCare Foundation, focuses on changing the way US health care is paid for to shift incentives away from fee-for-service medicine and produce better health and health care at lower cost.


Together with other articles in the issue, a series of "Innovation Profiles" highlight promising pilot programs in which payments to doctors, medical groups, and hospitals were at least partially based on quality and other metrics--and in some instances moved broadly away from fee-for-service toward other, very different payment models. Innovations featured include patient-centered medical homes, accountable care organizations, bundled payment projects, and others.


Other articles in the issue carefully analyze the development of different payment models and show that, despite early signs of success, there are many challenges to their widespread implementation.


Ruth Raskas, vice president of clinical health policy at WellPoint, and co-authors provide encouraging signs that medical practices participating in patient-centered medical home pilots are meeting goals for higher quality of care, lower use of hospitalization, and cost savings. WellPoint provided incentives to participating physicians for greater care coordination and preventive activities to improve patient health.


In New Hampshire, for example, WellPoint paid primary care physicians fees based on services provided, plus a monthly care management payment to support comprehensive services. Additionally, physicians who met certain quality and utilization targets were eligible for a bonus.


Early findings show patient-centered medical home participants in New Hampshire saw costs increase just 5 percent, compared to 12 percent in traditional practices. Patient-centered medical home participants had a greater decline in emergency department visits than the control group, and the pilot had a positive influence on utilization of health care services.


"We know that we need to drive fundamental changes in primary care in order to improve the lives of the people we serve," said Raskas. "Payment models that improve both access and quality are scalable, and they encourage the type of patient-centered care that's needed to transform the US health care system."

Thomas Claffey, medical director of NovaHealth, president of Intermed, and director of the Infectious Diseases Division at the Maine Medical Center, and co-authors report on a collaboration between Aetna and NovaHealth, an independent physician association based in Portland. The model focused on shared data, financial incentives, and care management to improve health outcomes for approximately 750 of Aetna's Medicare Advantage members. Patients in the pilot had 50 percent fewer hospital days, 45 percent fewer admissions, and 56 percent fewer readmissions than unmanaged Medicare populations statewide. NovaHealth's total per member, per month costs for its Aetna Medicare Advantage members were 16.5-33 percent lower than costs for other members. Clinical quality metrics were also consistently high.


Marjie Harbrecht, CEO of HealthTeamWorks in Lakewood, Colorado, and Lisa Latts, principal of LML Health Solutions LLC, in Denver, share their experiences from one of the nation's first voluntary, multipayer medical home pilots. Six health plans, the state's high-risk pool carrier, and sixteen medical practices with approximately 100,000 patients participated in the pilot over a period of three years. Preliminary results show that the pilot significantly reduced emergency department visits and also reduced hospital admissions, particularly for patients with multiple chronic conditions. One payer in the pilot reported a return on investment of 250-400 percent.


Despite such success, participants in Colorado also ran into numerous obstacles. Many practices had to provide extra services to patients whose employer-sponsored insurance plans declined to pay the extra fees needed to cover the cost of the patient-centered medical home expansion. The authors say this outcome shows how important it will be to have strong commitments and collaborative efforts among multiple stakeholders in order to make the model viable over the long term.


Rachel Werner, a core investigator at the Center for Health Equity Research and Promotion at the Philadelphia Veterans Affairs Medical Center and an associate professor of medicine at the Perelman School of Medicine at the University of Pennsylvania and R. Adams Dudley, a professor of medicine and health policy and an associate director for research at the Philip R. Lee Institute for Health Policy Studies, University of California, San Francisco, calculated hospital performance scores and projected payments for all eligible hospitals. With a projected bonus pool of $850 million, it's the largest Medicare quality improvement initiative to date, but dividing this pool among more than 3,000 participating hospitals will produce small bonuses for individual hospitals, even those with the best scores. Almost two-thirds of hospitals will experience payment changes of just a fraction of a percent. Even after a projected doubling in size of the bonus pool in 2017, only eight hospitals would see payment changes as large as 1.5 percent, and the authors say it's unclear whether such small amounts can influence care.


Related articles that profile early payment innovations include:


  • A Global Budget Pilot Project Among Provider Partners And Blue Shield of California Led to Savings in First Two Years, Paul Markovich--president and COO of Blue Shield of California

  • Horizon's Patient-Centered Medical Home Program Shows Practices Need Much More than Payment Changes to Transform, Urvashi Patel--head of research and development at Horizon Healthcare Services, Inc., and co-authors

  • Payers Test Reference Pricing and Centers of Excellence to Steer Patients to Low-Price and High-Quality Providers, James Robinson and Kimberly MacPherson of the Berkeley Center for Health Technology at the University of California, Berkeley

  • Michigan's Physician Group Incentive Program Offers a Regional Model for Incremental 'Fee for Value' Payment Reform, David Share and Margaret H. Mason of Blue Cross Blue Shield of Michigan

Related articles that analyze past changes in provider payment and the viability of early payment pilots include:


  • The Lessons of Medicare's Prospective Payment System Show that the Bundled Payment Program Faces Challenges, Stuart Altman--economist and the Sol C. Chaikin Professor of National Health Policy at the Heller School for Social Policy and Management, Brandeis University

  • Beyond Capitation: How New Payment Experiments Seek to Find the 'Sweet Spot' in Amount of Risk Providers and Payers Bear, Austin Frakt--health economist with Health Care Financing and Economics at the Veterans Affairs Boston Healthcare System and Rick Mayes, a faculty research fellow at the Petris Center on Healthcare Markets and Consumer Welfare, University of California, Berkeley.

  • Fee-for-Service Will Remain a Feature of Major Payment Reforms, Requiring More Changes in Medicare Physician Payment, Paul Ginsburg--president of the Center for Studying Health System Change

  • Medicare Postacute Care Payment Reforms Have Potential to Improve Efficiency of Care, But May Need Changes to Cut Cost, David Grabowski--a professor in the Department of Health Care Policy, Harvard Medical School, and co-authors

  • Many Large Medical Groups Will Need to Acquire New Skills and Tools to Be Ready for Payment Reform, Robert Mechanic and Darren E. Zinner of the Heller School for Social Policy and Management, Brandeis University

About Health Affairs

Health Affairs is the leading journal at the intersection of health, health care, and policy. Published by Project HOPE, the peer-reviewed journal appears each month in print, with additional Web First papers published periodically at The full text of each Health Affairs Web First paper is available free of charge to all website visitors for a two-week period following posting, after which it switches to pay-per-view for nonsubscribers. Web First papers are supported in part by a grant from The Commonwealth Fund. You can also find the journal on Facebook and Twitter. Read daily perspectives on Health Affairs Blog. Download our podcasts, including monthly Narrative Matters essays, on iTunes. Tap into Health Affairs content with the new iPad app.