Embargoed Until:
January 27, 2009
12:01 a.m. Eastern Time



Christopher Fleming

Can Payment And Other Innovations Improve The Quality And Value Of Health Care?

Bethesda, MD -- A paramount topic at the moment is value in health care: What should we pay for and how much? Resources aren't unlimited, and desires or demands for health care should be balanced against various realities--including the effectiveness of care or the desire for other goods and services. Especially in a depressed economy, questions about value in health care may well be at the center of coming health reform debates.

Value discussions raise other issues, including efficiency, measurement, the influence of the payment system, and the locus of accountability for quality. Today, Health Affairs releases a package of papers that take up these and other aspects of the value equation. Summaries of the papers appear below. http://content.healthaffairs.org/cgi/content/full/hlthaff.28.2.w205/DC3

Many of the papers were initially presented at the Fifteenth Annual Princeton Conference in May 2008, titled: "Can Payment and Other Innovations Improve the Quality and Value of Health Care?" The conference, held in Princeton, New Jersey, was organized by the Council on Health Care Economics and Policy at Brandeis University and was supported by the following organizations: Federation of American Hospitals, AARP, American Medical Association, Ascension Health, Johnson & Johnson, Medtronic, Press Ganey, and UnitedHealth Group.

Building Organizational Capacity: A Cornerstone of Health Reform, by Janet Corrigan and Dwight McNeill. The U.S. health care delivery system is in need of overhaul, say Janet Corrigan, president and CEO of the National Quality Forum, and Dwight McNeill, vice president, Education and Outreach, at the NQF. Care is too often fragmented, unsafe, and inefficient. Corrigan and McNeill assert that achieving higher levels of performance will require building organizational capacity, including information technology (IT) and specialized expertise, that is not present in most settings, and they note that organizational capacity is fortified through the benefits of larger scale and clinical integration. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w205

Corrigan and McNeill propose a comprehensive policy agenda to encourage all practice settings to develop the organizational capacity necessary to achieve high-value health care. This agenda includes (1) national priorities and goals for achieving high-value health care; (2) major improvements in the nation's standardized performance measurement and reporting infrastructure to enable assessment of value; (3) fundamental payment reform; (4) community-level initiatives aimed at building strong leadership, a culture of transparency and collaboration, a local infrastructure to implement public reporting and payment reform, and a readiness to change; (5) strong federal leadership for the development of health IT standards, as well as financial incentives for investment in electronic and personal health records; and (6) a public education campaign concerning opportunities to reform the health care delivery system.

In a Perspective on Corrigan and McNeill's article, Chip Kahn, president of the Federation of American Hospitals, emphasizes that payment reforms alone cannot succeed in changing health care delivery for the better. He cites two examples -- Medicare's relative-based resource-value scale (RBRVS) for physician payment, and capitated payments under managed care in the 1990s -- to demonstrate how payment reforms can have unintended consequences absent organizational and cultural change among providers. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w216

Fostering Accountable Health Care: Moving Forward In Medicare, by Elliot Fisher, Mark McClellan, John Bertko, Steven Lieberman, Julie Lee, Julie Lewis, and Jonathan Skinner. "To overcome the current system's perverse incentives and fragmentation, providers need to become accountable for the overall quality and cost of care for the populations they serve," Fisher, director of the Center for Health Policy Research at the Dartmouth Institute for Health Policy and Clinical Practice, and coauthors write. To help achieve this, the authors propose allowing providers to voluntarily form "accountable care organizations" (ACOs). The primary care physicians associated with an ACO would have to be the predominant ambulatory care providers for a sufficient number of Medicare beneficiaries; Fisher and his colleagues suggest setting that number at 5,000. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w219

ACOs would provide Medicare Part A and Part B benefits to beneficiaries. Payment benchmarks for ACOs would be based on prior spending by the beneficiaries assigned to each ACO. ACOs that provide care at costs below these benchmarks would share in the resulting savings with the government. The authors present models suggesting that ACOs could deliver care more cost-effectively and reduce Medicare spending.

ACOs would also publicly report their performance on a set of measures related to patient care. "We believe that these measures should rapidly move from the current generation of technical quality measures to focus on patient-level health outcome and experience measures," Fisher and coauthors say.

In a Perspective on the article by Fisher and coauthors, Francis "Jay" Crosson states that for ACOs to flourish, there must be greater integration among physicians and between physicians and hospitals. Crosson argues that Medicare is the place to begin the twin transformations needed, one from fee-for-service payments to bundled payments and the other from solo practice toward larger delivery system entities. Medicare has more experience than most payers with prospective payment mechanisms, and innovative Medicare payment ideas have tended to drive commercial payment patterns for some time, says Crosson, a senior fellow at the Kaiser Permanente Institute for Health Policy and associate executive director of the Permanente Medical Group. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w232

In a second Perspective, John Rother cites broad agreement among policy analysts on the need to reengineer care delivery. However, Rother also warns of potential pushback from consumers and caregivers if they are not involved in developing health reforms. "To achieve the public's buy-in, policymakers must present convincing and credible evidence to demonstrate that less care is not necessarily rationing and that more care is not necessarily better care," writes Rother, the executive vice president for policy and strategy at AARP. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w235

Using Medicare Payment Policy To Transform The Health System: A Framework For Improving Performance, by Stuart Guterman, Karen Davis, Stephen Schoenbaum, and Anthony Shih. As the largest payer for health services in the United States, Medicare has the potential to use its payment policies to stimulate change in the organization of care to improve quality and mitigate cost growth, say Stuart Guterman, assistant vice president for the Program on Medicare's Future at the Commonwealth Fund, and colleagues. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w238

The authors propose a framework in which Medicare would offer an array of new bundled payment options for physician group practices, hospitals, and delivery systems, with incentives to encourage greater integration in the organization of health care delivery and the provision of more coordinated care to beneficiaries. Organizations achieving savings under the new payment options would share the savings with Medicare.

These changes could serve as a model for other payers to improve quality and efficiency throughout the health system, say Guterman and coauthors. The next phase in payment reform should go beyond aligning the financial incentives at the margin and should build the incentives "into the underlying payment mechanism to encourage and reward accountability and performance -- in particular, higher quality and more-coordinated and -efficient care," the researchers write.

Measuring Outcomes And Efficiency In Medicare Value-Based Purchasing, by Christopher Tompkins, Aparna Higgins, and Grant Ritter. The Medicare program may soon adopt value-based purchasing (VBP), in which hospitals could receive incentives that are conditional on meeting specified performance objectives, note Christopher Tompkins, a professor at the Heller School for Social Policy and Management at Brandeis University, and colleagues. The authors explain, "The Medicare hospital VBP design has two major components: the performance assessment model, which determines a hospital's performance, and the financial incentive model, which converts relative performance into incentive payment levels." Tompkins and colleagues advocate a VBP approach in which the performance assessment model would include clinical outcomes and the financial incentive model would include cost. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w251

The force of VBP as an agent of change will depend in large part on the amount of hospital reimbursement made conditional on quality and efficiency, the authors point out. Putting more money at risk would strengthen incentives. It would also increase financial risk to hospitals unable or unwilling to improve, but "having low-quality and inefficient providers cede market share to other providers may be a desirable outcome," Tompkins and coauthors observe.

Payment Reform Options: Episode Payment Is A Good Place To Start, by Robert Mechanic and Stuart Altman. Unless the forty-year historical spending trend for health care "miraculously abates," expanded public and private cost control initiatives are inevitable, write Robert Mechanic, a senior fellow at the Heller School for Social Policy and Management, Brandeis University, and Stuart Altman, the Sol C. Chaikin Professor of National Health Policy at Brandeis, in a Commentary. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w262

Policymakers will face pressure to cut provider payment rates in order to achieve short-term savings, the authors say. They warn, however, that, "in the fragmented U.S. delivery system, cutting fee-for-service (FFS) payments over any sustained time period will hurt both quality and access. A more sensible approach would be to develop a long-term agenda to restructure the delivery system into organized networks of providers capable of delivering reliable, evidence-based care within realistic budgets." However, such delivery system reforms cannot occur without significant changes in health care payment policy.

The authors examine four payment reform options that have been widely discussed: recalibrating FFS; instituting pay-for-performance (P4P); creating "episode" payments that combine hospital and physician reimbursement; and adopting global payment approaches such as capitation; they discuss these options' potential impact on future cost, quality, and provider integration. Mechanic and Altman say that payment reform can not succeed without Medicare as a major player, and they suggest that episode payments may be the most promising near-term opportunity for payment reform in Medicare.

Consumer-Driven Health Care: Promise And Performance, by James Robinson and Paul Ginsburg. "The performance of consumer-driven health care has fallen short of both the aspirations of its proponents and the fears of its critics," write James Robinson, the Kaiser Permanente Professor of Health Economics at the University of California, Berkeley, and Paul Ginsburg, president of the Center for Studying Health System Change. Growth of the organizational forms favored by advocates of consumer-driven health care, such as high-deductible health plans and individually purchased insurance, has been "anemic," the authors note. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w272

Robinson and Ginsburg argue that the insurance market "has merged the ideas of consumer-driven health care with those of managed care instead of replacing the latter by the former." They point out that today's dominant form of insurance, the preferred provider organization, "combines network principles from managed care with some of the cost-sharing principles from consumer-driven health care." As for the future, "it seems safe to say that insurance product design will continue to move toward consumer-driven elements and that managed care elements will be recrafted into forms in which consumers choose but are subject to incentives structured by insurers," Robinson and Ginsburg suggest.

Costs And Benefits Of Health Information Technology: New Trends From The Literature, by Caroline Lubick Goldzweig, Ali Towfigh, Margaret Maglione, and Paul G. Shekelle. There has been a proliferation of patient-focused health IT applications, many of which are designed for use by patients on their own, without significant oversight by traditional health care providers, observe Caroline Lubick Goldzweig, associate chief of staff, Clinical Informatics, at the Veterans Affairs Greater Los Angeles Healthcare System, and coauthors, who are part of the Southern California Evidence-Based Practice Center based at RAND. Goldzweig's team conducted a systematic review of the literature on health information technology in 2005, then supplemented that review with a series of literature searches covering the June 2004-June 2007 period. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w282

According to Goldzweig and colleagues, the increase in descriptions of patient-focused health IT applications -- including Internet-based cognitive behavioral therapy, Web-based diabetes management, and alcohol abuse and eating disorder sites, among many other examples -- was the most important new finding from the June 2004-June 2007 literature searches, as compared to the 2005 literature review. But "what has not changed since our prior review is the paucity of meaningful data on the cost-benefit calculation of actual IT implementation. This makes creating the business case for health IT adoption a challenge, and costs still remain the number-one barrier cited by all surveys assessing adoption," the authors say.

Measuring, Monitoring, And Managing Quality In Germany's Hospitals, by Reinhard Busse, Ulrike Nimptsch, and Thomas Mansky. The development of quality measurement, monitoring, and management has made great progress in the German hospital sector, writes Reinhard Busse, professor and director of the Department of Health Care Management at the Technische Universitaet in Berlin, and his coauthors. Germany's external quality assurance system was developed and made mandatory already in the 1990s; by 2007, the Federal Office for Quality Assurance collected quality information from all acute care hospitals for 26 procedures and diseases, involving 194 separate indicators on 3.6 million patients. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.2.w294

In 2003 Germany introduced a reimbursement system based on diagnosis-related groups (DRGs) for all acute care inpatient services except psychiatry. This was accompanied by strict coding guidelines, which greatly improved the quality of data available in administrative information systems and facilitated the development of two additional quality assessment approaches: a "second generation" system of quality measurement using hospital-level administrative data, which is voluntary, and a "third generation" of long-term performance measurements using administrative data at the payer level, which is still in the developmental stage.

According to Busse and his colleagues, this third-generation system "may help establish a new type of quality assessment, in both Germany and the United States," particularly if it is enriched by information previously confined to the first-generation quality assessment system run by the Federal Office for Quality Assurance.

After the embargo lifts, the articles described above will be available at http://content.healthaffairs.org/cgi/content/full/hlthaff.28.2.w205/DC3



Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


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