Value Over Volume:
Paying for Quality
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March 28, 2012
Ellen Andrews, PhD
CT Health Policy Project
CSG/ERC
Health care spending
health costs vs. state budgets, US
National health exp.
20
state budgets nominal
increase
annual % change
15
10
5
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
0
-5
Sources: National Health Accounts, CMS, accessed 3/20/11, Fiscal Survey of States, NASBO, Fall 2010
Annual Growth Rates, Gross Domestic Product (GDP) And National Health Expenditures
(NHE) Calendar Years 2009–20.
Keehan S P et al. Health Aff doi:10.1377/hlthaff.2011.0662
©2011 by Project HOPE - The People-to-People Health
Foundation, Inc.
Australia
Austria
Belgium
Canada
Chile
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Iceland
Ireland
Italy
Japan
Korea
Mexico
Netherlands
New Zealand
Norway
Poland
Slovak Republic
Spain
Sweden
Switzerland
Turkey
United Kingdom
United States
Life expectancy vs. health care spending,
OECD countries 2007
250%
200%
150%
100%
Life expectancy at birth vs. avg
spending per person vs. avg
50%
0%
Analysis of OECD Health Data 2010
We are all getting less recommended
care than we should
Source: RAND Compare
Quality question
• Only 39% of American adults are confident that
they can get safe, effective care when needed
• Americans get only 55% of recommended care on
average
• One in three Americans reports getting unnecessary
care or duplicate tests.
• Almost one in five Medicare patients discharged
from the hospital are readmitted within 30 days
Current incentives
• Pay the same for high and low quality services
• Consumers have no information and no incentive to
choose higher quality/higher efficiency services or
providers
• Encourages overuse, misuse of services
• Higher spending not correlated with higher quality
• Higher spending not correlated with better patient
satisfaction
Fee-for-service misaligned incentives
Fee for service encourages:
More services
Less coordination
Incentives for duplication
Few incentives for prevention
Stifles innovation
Only pays for selected services - not email, group
visits, phone calls
• No link to quality
• Incentives to increase high profit services/patients
and avoid low profit
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Quality-based purchasing
• Rewards better outcomes
• Payments based on value -- quality balanced with
cost
• Data driven
• Remove incentives for more services
• Reward providing the right services to the right patient at
the right time in the most effective setting
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Flexibility for providers to customize care
Reward patient satisfaction
Remove fragmentation and conflicting incentives
Align provider, payer and consumer incentives to
reward quality, effectiveness and efficiency
Consumers support quality-based
purchasing
• 96% of Americans feel it is important to have
information about the quality of care provided by
different doctors and hospitals
• 89% feel it is important that they have information
about the costs of care to them before they
actually get care
• 85% want public and private payers to reward high
quality doctors and hospitals
Why should states implement VBP?
• State employee groups usually one of largest
groups in state – 42 states self-insure
• Medicaid programs – covers one in five Americans
• States regulate insurers, license providers, CON
• Trusted source for consumer education, data
collection, research
• Public health collaborations
• Innovators – medical home, HIT, coverage
programs
• Provider training – promote primary care, emphasis
on accountability, transparency
• Convener – can get people to the table, anti-trust
protections
Options: Payment system overhaul
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Never events
Transparency
Pay for performance (P4P)
Market share – tier and steer
Shared savings
Episodes of care, bundled payments
Global capitation
Options: Transparency
• Data reporting, definitions are a challenge
• Report cards evolving, mixed results
o Improving science of how to effectively convey information
• Coalitions with other payers, providers for joint
reporting
o All payer data aggregation
• State employee, Medicaid use in contracting
• Moves providers to improve quality and/or reconsider pricing
Options: P4P
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Widespread, but mixed results
Process vs. outcome measures
Benchmarks vs. improvement
Medicaid P4P in 28 states
Federal Medicaid limits on incentive payments in
risk-based systems
Target health plans and/or providers
Outcomes vs. process and teaching to the
test/cookbooks
Provider resistance, low Medicaid participation
rates
Coordinate and join with other payers to make
payments salient to providers
Options: bundled payments
• Also called episodes or buckets of care
• One payment for full range of services associated
with a specific event, e.g. knee replacement
• Common now for physicians in general surgery and
obstetrics, DRGs in Medicare
• Similar to DRGs in Medicare
• Places providers at some financial risk
• Incentives to coordinate care, nontraditional
supports, reduce duplicate services
• No incentive to prevent illness in the first place
• ACA pilots for Medicare and Medicaid
Options: shared savings
• Allow providers to “share” some part of reductions
in cost per patient
• To avoid incentives to deny care, tied to quality
standards
• Medicare demonstration had mixed results
o Took five years to implement, with ten sophisticated groups
o Quality improvements good
o Did not reach expected savings targets
• ACA includes more opportunities for Medicare and
Medicaid
• Medicare ASOs
Options: Global payment rates
• Massachusetts a leader, 20% of commercial
payments
• Pay one risk-adjusted rate for each patient to cover
all their care – in and outpatient, LTC, rehab, drugs
• Linked to Pay for Performance to ensure quality of
care maintained, up to 10% of budget
• Year One mixed results
o Quality up for some measures, not others
o All groups met savings targets and received rewards
o Savings from reducing prices, shift to outpatient care, not reduced
utilization
o But total savings did not equal total bonuses
Supportive options
Patient-Centered Medical Homes
Accountable care organizations
EMRs, health information exchange
Wellness programs with employee supports and
rewards
• Workforce development, esp primary care
• Comparative effectiveness research
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Patient-Centered Medical Homes
• About half of Americans report poor coordination of
care
• 93% believe it is important to have one place or doctor
responsible for primary care and coordinating care
• 86% support providers working in teams to improve
patient care
• Patients linked to a team of providers that are
responsible for their primary care, coordination,
prevention, and supports for self-management
• Evidence that the model improves care, reduces overall
costs
• Preferred by primary care providers
• More efficient use of scarce primary care resources
• Accreditation by national organizations
• Support for Medicaid PCMHs in ACA
Accountable Care Organizations
• Networks of providers collectively rewarded to slow cost
growth for their patients while improving quality of care
• Patients can get care outside the network if they choose
• Quality standards must be met to get share of savings
• Some in one corporate entity, some are contractual
networks
• Medicare and private payers, some Medicaid programs
considering them
• Patients cannot be in Medicare ACO and any other
state shared savings program
o Providers may have incentives to guide patients based
on their bottom line
• For dual eligibles, how will Medicare ensure that providers are
not shifting costs onto Medicaid
Comparative Effectiveness Research
• New treatments, drugs, devices, procedures largest
driver of rising health costs
• Little information on which are worth the expense
over current care
• Even the research that is available takes years to
enter practice patterns
• Large federal investments in research
• CEPAC – New England collaborative of clinicians,
researchers and patient advocates deep dive into
CER, votes on whether evidence is sufficient to
recommend treatments
o Medicare in our region changed authorization policy
on treatment resistant depression vote
Federal payment reform
• Strong feature in national reform
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Innovation Center, waivers
ACOs
Comparative effectiveness research
Medicare and Medicaid bundled payment pilots
• Medicare
o 23 programs – P4P, pay for reporting, never events,
medical home, gain sharing, removing regulatory barriers,
e-prescribing, data aggregation
o Premiere Demonstration – hospital P4P
o Physician Group Demonstration
o Implementing differential payments based on readmission
rates
Medicaid payment reform
• Most states risk adjust managed care plan capitation
rates
o 22 adjust for health status
• 19 states include pay for performance in health plan
payments
o Withholds, bonuses, enhanced rates, shared savings, auto assignment,
data reporting incentives, performance pools
• 8 of 31 states with PCCM programs include P4P
• Three-fourths of states with managed care plans publicly
report on their quality
o Some report on provider quality
• 16 states assess quality in their fee-for-service programs
Maine value-based purchasing
• State employee plan leadership in larger multi-payer
collaborative – Maine Health Management Coalition
• 2005 adopted strategy to encourage consumers to make
informed choices, incentives to access higher quality care,
reward high quality providers, wellness programs with
employee supports
• Hospital and physician tiering by quality, expanded program
in steps over the years
o www.getbettermaine.org
• Messaging to members, web-based, became a trusted source
of information
• Engaged providers in development of standards, QI plans
• First year diabetes disease management participants
averaged $1300 less in health care costs
• Transitioning from FFS to bundled payments
Vermont single payer reform
• Global budget for health care costs, new payment
models
• Guaranteed coverage not linked to employment
• Single system of provider payments and administrative
rules
• Health care system will remain privately owned
• Payment reform to link payment to quality
• Delivery reforms, workforce development
• Expect to save $500 million/year and operating in 2017
• Planning through Green Mountain Care Board
o Can set rates, CON controls, review insurance rates, hospital budgets
Lessons from others
Collaborate first
Go slowly
Start small and with strongest partners
Coordinate across payers -- standardize
Fair and open process
Everyone on same page, all have same understanding
Be clear on goals, single-minded dedication
Strong consumer education piece necessary
Plan for transitions
Don’t underestimate the power of disclosure and
transparency, often stronger motivator than $$$
• Be brave
• The time is right for transforming delivery and payment
systems – the status quo is not sustainable
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For more information:
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www.valueovervolume.org
www.csgeast.org
www.cthealthpolicy.org
eandrews@csg.org
andrews@cthealthpolicy.org