Delivery System/Payment System Reforms
Contained in Federal Reform
Robert A. Berenson, M.D.
Institute Fellow, The Urban Institute
SCI National Meeting
Minneapolis 6 August 2010
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The Presentation Will Review:
Some challenges that the delivery system and
payment policy face
Pros and cons of different payment models
Overview of payment and organizational
reform models in ACA
What is an accountable care organization
anyway?
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Percent of People with Inpatient
Hospital Stays
Hospitalizations by Number of
Chronic Conditions
50%
40%
32%
30%
22%
17%
20%
12%
10%
8%
4%
0%
0
1
2
3
4
Number of Chronic Conditions
Source: G. Anderson, “Hospitals and Chronic Care”, PowerPoint Presentation to the American Hospital Association. Partnership for Solutions. 16 June 2004.; MEPS 2000.
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5+
Annual Prescriptions by Number
of Chronic Conditions
49.2
Average Annual
Prescriptions*
50
33.3
40
24.1
30
17.9
20
10
10.4
3.7
0
0
1
2
3
4
Number of Chronic Conditions
*Includes Refills
Sources: Partnership for Solutions, “Multiple Chronic Conditions: Complications in Care and Treatment,” May 2002; MEPS, 1996.
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5
Utilization of Physician Services by
Number of Chronic Conditions
37.1
Unique Physicians
Physician Visits
19.5
14.9
13.8
11.3
7.8
2.0
1.3
0
5.2
4.0
1
8.1
6.5
2
3
4
5+
Number of Chronic Conditions
Sources: R. Berenson and J. Horvath, “The Clinical Characteristics of Medicare Beneficiaries and Implications for Medicare Reform,” prepared for the Partnership for Solutions, March, 2002; Medicare SAF
1999.
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Medicare Spending Related to
Chronic Conditions
20.3%
65.8%
11.3%
14.8%
16.3%
15.1%
22.1%
Percent of Medicare
Population
12.7%
10.3%
6.8%
3.5%
0.9%
Percent of Medicare Spending
Source: Partnership for Solutions, “Medicare: Cost and Prevalence of Chronic Conditions,” July 2002; Medicare Standard Analytic File, 1999.
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5+ Conditions
4 Conditions
3 Conditions
2 Conditions
1 Condition
0 Conditions
Projected Total Medicaid
Spending Per Enrollee
$16,300
FY 2001
FY 2006
$11,200
$1,400
$2,000
$2,300
Children
$17,200
$12,300
$3,200
Adults
Disabled
Elderly
Note: Includes federal and state spending on benefits.
Sources: J. Crowley and R. Elias. “Medicaid’s Role for People with Disabilities,” The Kaiser Commission on Medicaid and the Uninsured, August 2003; KCMU analysis based on CBO baseline for Jan. 02.
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“The Tyranny of the Urgent”
“Amidst the press of acutely ill patients, it is
difficult for even the most motivated and
elegantly trained providers to assure that
patients receive the systematic assessments,
preventive interventions, education,
psychosocial support, and follow-up that
they need.” (Wagner et al. Milbank Quarterly
1996:74:511.)
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The Pressure of the 15 Minute
Office Visit
“Across the globe doctors are miserable
because they feel like hamsters on a
treadmill. They must run faster just to stand
still…The result of the wheel going faster is
not only a reduction in the quality of care
but also a reduction in professional
satisfaction and an increase in burnout
among physicians.” (Morrison and Smith, BMJ 2000;
321:1541)
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How Patients are Affected
Asking patients to repeat back what the physician
told them, half get it wrong. (Schillinger et al. Arch Intern
Med 2003;163:83)
Patients making an initial statement of their problem
were interrupted by the PCP after an average of 23
seconds. In 23% of visits the physician did not ask
the patient for her/his concerns at all. (Marvel et al.
JAMA 1999; 281:283)
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Incidents in the Past 12 Months
Among persons with serious chronic conditions, how
often has the following happened in the past 12
months? (Harris, Survey 2000)
Sometimes or often
1. Been told about a possibly
harmful drug interaction
54%
2. Sent for duplicate tests or
54%
procedures
3. Received different
diagnoses from different
clinicians
52%
4. Received contradictory
medical information
45%
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The Issue of Readmissions
In Medicare, about 11% of patients are readmitted
within 15 days and almost 20% within 30 days
50% of patients hospitalized with CHF are
readmitted within 90 days
The majority of readmissions are potentially
preventable – declining with time from index
admission
Half of those discharged to community and
readmitted within 30 days after medical DRG had
no interval bill for physician services
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“There are many mechanisms for
paying physicians, some are good
and some are bad. The three worst
are fee for service, capitation and
salary.”
-- Robinson, Milbank Q, 2001
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Distinguishing Between Payment to Groups
and Payment to Physicians Within Groups
Within physician organizations, 1/4 paid FFS, 1/4
paid by either capitation or pure salary, 1/2 on
blends of retrospective and prospective methods
– Robinson, Shortell, et al. HSR, Oct, 2004
Note that “salary with productivity incentives”
usually means measures of productivity as defined
by FFS payment parameters, either actual billings
or RVUs generated -- may be counterproductive
(pun intended)
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The Basic Problem with Current FFS
Payment to Clinicians
The Resource Based Relative Value Scale (RBRVS)-based
fee schedule has inherent limitations
By design, the relative values of 7000+ codes are, at best, an
approximation of underlying resource costs, not an attempt
to determine what services beneficiaries need
And, what purports to be an objective process is, despite
many good intentions, inherently subjective
Health reform legislation addresses the issue by calling for
actual data to inform the CMS-RUC process, e.g. to
determine actual time, not estimates, for work and
otherwise focusing on potentially overvalued services
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FFS for Primary Care Has Been Rooted
in Face-to-Face Encounters
There are plenty of reasons, e.g.,
– high transaction costs, associated with nonface-to-face, frequent, low dollar transactions;
– major program integrity concerns
– “moral hazard” driving expenditures
Yet, increasingly, face-to-face visits do not
encompass the work of primary/principal care for
patients with chronic conditions (most Medicare
beneficiaries and the duals)
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Gaps in FFS Payments and the
Patient-Centered Medical Home
Current payment policies do not support the activities that
comprise the Wagner Chronic Care Model: non-physician
care, team conferences, coordinating care, community
resources, patient registries, evidence-based practice
guidelines, EMR
The Patient-Centered Medical Home as a remedy?
The House would have formally tested the community
network medical home model, based on NC Medicaid,
Vermont approaches
Administration has committed to multi-payer demos called
Advanced Primary Care – currently in process
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Five Specific Payment Options (not
mutually exclusive)
Enhanced FFS payments for office visits
Reimburse for new CPT services
Regular FFS for office visits and small PPPM for
medical home activities
Reduced FFS for office visits and larger PPPM for
medical home activities
Comprehensive payment for medical services and
medical home activities
Can also provide startup/seed money for developing
MH capacity
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FFS Attributes
Advantages
–
–
–
–
Rewards activity, industriousness
Theoretically can target to encourage desired behavior
Implicitly does case-mix adjustment
Commonly used by payers and physicians
Disadvantages
–
–
–
–
–
Can produce too much activity, physician-induced demand
Maintains fragmented care provided in silos
High administrative and transaction costs
What is not defined as reimbursable is marginalized
Complexity makes it susceptible to gaming and to fraud
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PPPM (Comprehensive or Global
Payment)
Advantages
–
–
–
–
–
Internalizes allocation of activity and costs to meet needs
Direct incentive to restrain spending
Predictable and capped spending
Administratively simple (until address some of the problems)
Low transaction costs
Disadvantages
–
–
–
–
–
May lead to stinting on care
Susceptible to cream-skimming
Incentive to cost shift to services outside the PPPM
Can’t specifically promote desired activity
May resist innovation/ new services
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Episode/Condition/Bundle/Case
Advantages
− internalizes incentives for efficiency within the episode
− potentially aligns incentives across siloed providers
− arguably, is an intermediate step on the way to real integration
Disadvantages
− does not fundamentally alter incentive to generate units of service
− be careful about what you wish for, e.g. physician-hospital
alignment without determination of appropriateness in a FFS
environment
− currently, political challenges in bundling among providers
− technically challenging (esp. for ambulatory care) – vagaries of
diagnosis (more episodes in Miami than Minnesota), bias to
performance of a procedure in a case rate, sorting out where
particular claims are assigned to
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What is an Episode of a Chronic
Disease, Such as Diabetes, CHF?
An oxymoron. Would patients with 5 or more
chronic conditions have 5 or more 365-day
payment episodes? With payments to different
clinicians/providers?
To maintain any reasonably holistic approach to the
patients with multiple chronic conditions, would
need episodes of conditions that often cluster
together, e.g. diabetes, hypertension, and renal
failure
But then why not go right to population-based
payment, i.e., PPPM?
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Public Reporting and Pay-forPerformance (P4P)
Advantages
– provides a hybrid payment to mitigate disadvantages of pure
models; some natural blends – PPPM and under-service measures
– can start to actually reward desired performance, instead of
rewarding volume of services produced
– can include measures of patient experience, which have been
generally ignored in considerations of reformed payment
approaches
Disadvantages
– underdeveloped measure set – especially for physicians
– what gets measured gets done?
– marginal incentives may be insufficient to counter basic incentives
in whatever base model it is superimposed over
– contributes more administrative complexity
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Examples of Blended or Hybrid
Payment Models
PPPM with FFS carve outs or “bill aboves” and public
reporting on underuse measures
For PCMH, FFS for visits (possibly “discounted”), PPPM for
medical home activities and P4P for patient experience
Shared savings for ACOs
Partial capitation – FFS/PPPM and/or risk corridors and/or
particular sector (professional services, but not
institutional)
Any of the above with public reporting and/or pay-forperformance
− quality measures where they exist, expenditure or
utilization targets, patient experience measures
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Key Payment Provisions HR3590
Patient Protection and Affordable
Care Act and HR 4872 The Health
Care and Education
Reconciliation Act of 2010
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Payment Rate Changes
Medicare Part A providers get reduced payment
updates assuming economy-wide productivity
increases.
Physician fee schedule updates remains in the grips
of the SGR nightmare, but there is greater
authority for CMS to address mispriced services in
the Fee Schedule
Some providers are exempt from reach of new
Independent Payment Advisory Board (IPAB) till
2019, e.g. hospitals, hospices, inpatient psych, etc.
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Targeted Physician Payment Rate
Changes
In Medicare, 10% bonuses for primary care
physicians (based on specialty designation
and 60% of services are E&M) and for
general surgeons in shortage areas
In Medicaid, increased payments in FFS and
managed care for primary care services
(E&M and immunizations) to 100% of
Medicare for 2013 and 2014, with 100%
match, based on rates applicable on July 1,
2009.
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Some “Value-based” Payment
Provisions
In Medicare, hospitals will receive incentive
payments using the structure of the current
Reporting Hospital Quality Data for Annual
Program Update (RHQDAPU).
To establish VBP standards to assess overall
performance of each hospital – those with highest
scores will receive highest extra payments –
funded by reductions in DRG rates of 1-2% from
FY13 to FY 17.
PQRI expansion for physicians
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Payment Adjustment for Conditions
Acquired in Hospitals
Based on current program for adjusting DRG
payments for HACs, in FY 2015, hospitals
in top quartile of risk-adjusted rates are to
receive 99% of their payment
Before then, performance reports are to be
made public after hospitals review and
correct
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Medicaid Quality Measurement
Program
To establish priority for the development and
advancement of quality measures for adults in
Medicaid.
Sets deadlines for development of measures,
standardization of reporting formats and requires a
report to Congress (2014 and every 3 years)
Prohibits federal payments to states for Medicaid
services for healthcare acquired conditions with
regs to be effective 7/11
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Geographic Variation In Medicare
and Other Payers
The fallout from Dartmouth research and the food
fight on the Hill pitting urban against rural and
north and west against east and south
The proposed Institute of Medicine Study of various
dimensions of “value” – input price adjustments
and geographic variations in resource use that was
in the House bill did not survive. But one or both
may take place under direction of the Secretary
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Center for Medicare and Medicaid
Innovation (CMI) within CMS
Broad authority to test lots of new things –
e.g. payment models, HIT, patient
education, care for cancer patients, postacute care, chronic care management, telehealth, etc.
Can adopt more broadly without going back
to Congress if achieve certain positive
outcomes on quality and/or cost
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Innovation Center (cont.)
Waives current budget neutrality requirement
initially, but Secretary is supposed to
terminate if either quality is not improved or
spending reduced
$10 billion available over 10 years (but
concern about being “raided” for other
purposes in a seriously underfunded
agency)
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Federal Coordinated Health Care
Office (CHCO)
Is designed to align Medicare and Medicaid
financing, benefits, administration,
oversight rules, and policies for dual
eligibles
Clarifies Medicaid demonstration authority
for coordinating care for duals for up to 5
years
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Medicare Shared Savings
Program
Narrow construct of the accountable care organization
concept with language based on the Brookings model
▪ Real organizations, not “extended medical staffs” or other
loose affiliations
▪ FFS with bonus for coming in under a spending target
▪ historical spending trended forward by projected national
growth in A and B, adjusted for risk
▪ beneficiaries assigned (without their knowledge?) to an
ACO
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Global Payments and ACO
Demonstrations in Medicaid and CHIP
Global payment demo in up to 5 states for
safety net hospitals – FY 2010-2012
ACO demonstrations in Medicaid and CHIP
to allow pediatric medical providers –
presumably pediatric hospital-based -organized as ACOs to participate in shared
savings approach – 2012-2016
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National Pilot Program on
Payment Bundling
By 1/1/13, start to establish, test and evaluate
alternative payment approaches for a 5-year,
voluntary pilot for bundled episodes in Medicare –
related to care provided around a hospitalization
(3 days before to 30 days after). This one must be
budget neutral
Can include bids from entities (as in current ACEs -“acute care events” -- demo)
Beneficiary can have one or more of 10 conditions to
be identified
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Medicaid Bundled Payment Demo
For up to 8 states for acute and post-acute care
– 2012 -- 2016
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“Independence at Home”
Demonstration Program
For 1/1/12, geriatric home visiting care model
demo using shared savings approach
Note that the target population is that served
by Home and Community-Based Waivers –
frail elderly, including duals at home, who
may or may not be “homebound” under
Medicare definition.
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Hospital Readmissions Reduction
Program
Starting 10/1/12, adjustments in Medicare payments
for hospitals with “excess readmissions” for 3
NQF approved conditions: AMI, pneumonia, CHF,
with prospects for expansion to other conditions
Readmission information to be made publically
available after hospitals review and corrections
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Community-based Care Transitions
Program
Establishes a 5 year Transitions Program starting
1/1/11. Funds hospitals with high readmissions
rates and certain community-based organizations
that provide transition services to high-risk
beneficiaries.
Applicants required to propose a specific care
transition intervention other than discharge
planning.
Working with AoA and funded at $500 million
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Some Other Medicaid Delivery and
Payment Changes
States get a 1% increase in FMAP for preventive services
graded at A or B by US Preventive Services Task Force
Coverage for smoking cessation for pregnant women with no
cost-sharing
Requires coverage for free standing birth center services
Medicaid kids can get hospice concurrent with other care
$100 million in grant funding for states to set up programs for
Medicaid benes – tobacco cessation, weight control, lower
cholesterol and BP, diabetes
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Medical Homes and Accountable Care
Organizations
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The ACA Medical Home Provision
Creates a Medicaid state option to implement a test
of a “health home” – focus on beneficiaries with at
least 2 chronic conditions (one and at risk of
another or one serious with persistent mental
health condition) – set of activities is specified –
chronic care management, health promotion,
transition care, etc.
$25 million planning grants with 90 percent FMAP
for first 8 quarters for home health-related services
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What is an ACO?
In fact, there is little agreement
Some see it as a virtual organization with
providers assigned based on claims history
Others emphasize that they are real
organizations, typically identified as
integrated delivery systems, with or without
a hospital as part
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Potential Real ACO Organizations
Shortell and Casalino identified 5 types of
current organizations that could be or be
part of an ACO
•
•
•
•
•
Independent Practice Association
Multispecialty Group Practice
Hospital Medical Staff Organization
Physician-Hospital Organization
Organized or Integrated Delivery System
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Three Essential Characteristics
Ability to provide and manage with patients
the continuum of care across different
institutional settings, at the very least,
ambulatory and inpatient care
Capacity to prospectively set budgets and
allocate resources
Sufficient size to support comprehensive,
valid, and reliable performance
measurement
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Is ACO Just a New Term for PSO
(Provider Sponsored Organization)?
In BBA 1997, PSOs were created to permit
Medicare to engage in financial risk
contracting directly with providers
They built it and no one came – actually 3 in
10 years.
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What is New?
Greater flexibility in organizational models
New payment models, no longer full capitation –
e.g., FFS w. shared savings based on total
spending and partial capitation
Improved risk adjustment
Availability of performance measures
Prospect of ratcheting down on FFS rates
Alternatives to a beneficiary hard lock-in
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How Would an ACO Work for
Purchasers and Commercial Plans?
Well-founded concern about Medicare
“sanctioned” ACOs developing and using
market power in negotiations to drive prices
higher
Concern is they might reduce costs but not
provide the savings to purchasers in reduced
premiums
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Section 3022 is Very Prescriptive
Sets out requirements for real, not virtual organizations –
IPAs, multispecialty group practices, PHOs, joint ventures
between hospitals and physician entities
Shared savings model – FFS with bonus if come in under a
spending target – threshold for percentage saved before
sharing and savings split to be decided in regs
Accepts historical costs associated with patients assigned to
ACO on the basis of claims patterns
Beneficiaries may not know about assignment – and no limits
on current freedom of choice
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Section 3022 (cont.)
Language permits CMS to test other payment
methods including “partial capitation”
Partial capitation can mean – mixed FFS and
PPPM; capitation for part of total spending,
e.g. Part B, not Part A – that seems to be the
statutory intent; or capitation with corridors
to limit losses and gains
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Skeptics
In many markets, physicians have drawn away from
the hospital and function increasingly
independently. Weak financial incentives may not
be able to bring them together. (But in other
markets hospitals are employing physicians – for
better or worse)
Jeff Goldsmith on Health Affairs blog –
“The problem with this movie is that we’ve
actually seen it before and it was a colossal and
expensive failure.”
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