June 16, 2009
12:01 a.m. Eastern Time
Should Health Care Come With A Warranty?
Researchers Say Yes; Offer A Model Of How The Warranty Could Be Structured
Bethesda, MD -- Should health care come with a warranty? Warranties, under which sellers promise to compensate buyers if products prove faulty, are common in other industries, but they have been fairly rare in health care. However, a paper published today on the Health Affairs Web site argues that warranties could improve the care that patients receive while offering medical care providers a chance to improve their profit margins. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.4.w678
The paper describes the “PROMETHEUS Payment” model, developed by a nonprofit corporation of the same name with the support of grants from the Commonwealth Fund and the Robert Wood Johnson Foundation. If the model were applied to payments for the treatment of patients suffering from acute myocardial infarction (AMI), or heart attacks, providers would have to reduce their rates of potentially avoidable complications to roughly two-thirds of current rates in order to be consistently profitable, according to lead author Francois de Brantes and coauthors.
“Fee-for-service payments reward quantity, not quality. In some cases, providers are even rewarded for poor care by payments for the treatment of complications that could have been avoided with better care in the first place. Coverage expansions will not be sustainable if we do not encourage better and more cost-effective care through innovative payment methods like the PROMETHEUS model,” said de Brantes, the leader of the PROMETHEUS Payment design team and the CEO of Bridges to Excellence, a not-for-profit organization developed by employers, physicians, health care services researchers, and other industry experts to recognize and reward providers who demonstrate quality improvement.
Under the PROMETHEUS model of “evidence-based case rates,” or ECRs, to care for a patient diagnosed with a specific condition, providers are paid a global fee covering all services recommended by well-accepted clinical guidelines or expert opinions. To encourage providers to work together to coordinate care, the global fee covers all inpatient and outpatient treatment delivered by physicians, hospitals, laboratories, imaging centers, pharmacies, and other providers. So that providers are not motivated to avoid treating older and sicker patients, the fee is “risk-adjusted” to account for factors such as age, sex, the presence of chronic illness, and prior acute events.
Crucially, while PROMETHEUS’s ECRs fully compensate providers for the expected costs of providing evidenced-based care, they only compensate providers for half of the predicted cost of dealing with potentially avoidable complications (PACs). Examples of PACs for heart attack patients admitted to hospitals might include medical error and phlebitis, as well as readmissions within 30 days of discharge. “This mechanism creates a de facto warranty,” de Brantes and coauthors Guy D’Andrea of Discern Consulting and Meredith Rosenthal of the Harvard School of Public Health write, since “providers win or lose financially based on their actual performance in reducing the incidence of avoidable complications.”
Using data from a large commercial insurance database, the authors modeled the effect on provider profit margins of using the ECR method to compensate providers for the treatment of patients with heart attacks. They found that profit margins did not suffer when providers treated more severely ill patients; indeed, profit margins increased slightly with the severity of illness. However, profit margins decreased as the number of potentially avoidable complications (PACs) increased, and they decreased even more significantly as the average cost per complication increased. “To be profitable under the new payment model, providers with average complication rates today would have to improve performance by one-third,” the authors observe.
After the embargo lifts, you can read the article by de Brantes and coauthors at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.4.w678
ABOUT HEALTH AFFAIRS:
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.
©2009 Project HOPEThe People-to-People Health Foundation, Inc.