+
Payment Reform: Targeting
Preventable Complications
Meredith B. Rosenthal, Ph.D.
June 28
28, 2010
1
+ Public and Private Payer
y Reforms Pushing
g Towards
Global Payment
Current
payment for
units of
service
Add pay for
performance
Subtract
payment for
preventable
complications
Medical
homes:
holistic
payment
p
y
for
primary care
Episodebased
(bundled)
payment
p
y
concepts
Global
payment,
shared
savings
g
(capitation)
2
+ Short of Global Payment: Aligning Incentives
to Prevent High-Cost Complications

Global payment (with or without corridors, risk sharing)
transfers risk for all sources of variation in costs to providers

Taking a step back from full or shared risk on the total cost of
care, payers can focus on any of three cost drivers:

Utilization and mix of services

Prices of identical services

Preventable complications of acute or chronic illness
3
+
4
Incentive Design Principles of Non
NonPayment for Preventable Complications

Risk sharing in general is about balancing the costs of risk
(variation that is random, or controlled by someone/thing
else) against the benefits from inducing effort

In practice, making providers bear risk for complications is
worthwhile if:


The uncontrollable variation in these complications is relatively
small

The net benefits from provider efforts to reduce complications is
relatively large (e.g., low-cost interventions prevent high-cost
events)
t )
It is not necessary that all complications “not paid for” (at the
margin)
i ) be
b preventable
t bl
5
CMS (Medica
(Medicare)
e) R
Rule
le on
o Complications
Co licatio That
Are No Longer Factored into Payment
Condition
Number of Medicare Cases for
FY 2006
Object left in surgery
764
Air embolism
45
Blood incompatibility
33
Cather-associated UTI
11,780
Pressure ulcer
322 946
322,946
Vascular catheter-associated
infection
Unknown – unique code for
FY 2008
Mediastinitis after CABG
108
Falls
2,591
+ Massachusetts Law Prohibiting Payment for
Serious Reportable Events

Last year, a law was introduced in Massachusetts that went
beyond what Medicare and other private payers have done

Prohibited hospitals from seeking reimbursement for costs
related to any of 28 “serious
serious reportable events
events” as defined in
related law

Serious reportable events are based on NQF definitions –
and all are required to be reported to the Dept of Public
Health, patient, and payer

How payers and hospitals determine non-payment is left to
individual negotiations (what share of DRG payments should
be withheld for a stage 3 pressure ulcer for a pneumonia
patient?)
6
+
7
Comprehensive Bundled Payment:
PROMETHEUS Payment
Base case rate
• Evidence-based services
• Other routine care for
condition
• Risk adjusted
Warranty for
complications
• All potentially avoidable
complications (PACs)
• Warranty set at 50% of
baseline
Pay for
performance
f
• Quality, patient
satisfaction
ti f ti
PAC Rates across Episode Types
CIP = Commercial Insurance Plan (blinded)
+
9
Coming Soon: Readmissions as
Preventable Complication
 Roughly
20% of Medicare admissions result in
readmission within 30 days; more than a third in 90
days (Jencks, et al. 2009)
 Cost
 Are
of readmissions estimated to be $17.4 billion
hospitals in a position to take accountability
for all readmissions? Or is there a narrower
narro er ssubset
bset
that should be targeted?
+
10
Conclusions
 Focusing
on preventable complications may be
payment reform tactic that is both economically
and politically justifiable – less subject to charges
of “death panels”
 Particularly
for chronic conditions, complications
are a substantial share of total costs
 Providers, however, may
bristle at the notion of
“preventable” and no perfect allocation of cause
will ever be accomplished
 As
with g
global
o
p
payment,
y e , details
e
o
of who
o should
o
be
e
accountable particularly across settings remain