hospital impact

by Christopher Cornue

The third area of focus in the Commonwealth Fund’s recent report, Bending the Curve: Options for Achieving Savings and Improving Value in US Healthcare Spending is that of Aligning Incentives with Quality and Efficiency. In the report, it is stated that our current healthcare system, based upon a fee-for-service payment structure, often rewards overutilization and inefficiency. There is wide variation of cost & quality throughout our nation, as demonstrated by the comparison of Medicare outlays per beneficiary date reported in The Dartmouth Atlas of Health Care. As comparison, this range of outlays from Medicare is as wide as $4,530 in Hawaii and $8,080 in New Jersey, yet there is no obvious quality outcome that corresponds to any increased cost. The report suggests four strategies to help better align incentives with increased quality and efficiency:

Hospital Pay for Performance – many of us are aware of the many pilot programs working to align payments for better performance, probably most significant has been the CMS & Premier demonstration project. This project attempted to reinforce actions consistent with high quality … by penalizing poor performance and rewarding superior performance, based upon comparison with a peer group. The Bending the Curve report suggests expanding this demonstration project beyond the 250 participating hospitals to all acute care under the Medicare PPS system. Additional payments would be based upon the following: 1) Top Performance at or above 90th percentile composite quality score (2% bonus payment); 2) Absolute Performance at or above 75th percentile in any clinical area (1% bonus payment); and 3) Performance Improvement for hospitals that are at 80th percentile or above for the composite quality score improvement ratio (1% bonus payment). There are further details and conditions that space in this posting prevents elaborating on.

Episode of Care Payment – the current system of reimbursement doesn’t overtly incentivize efficient or coordinated care. An alternative to the fee-for-service system is a bundled payment system covering costs of care across different settings of a patient’s episode of illness (over a determined period of time).
These bundled payments would cover episodes of care (by DRG) for all inpatient, physician and other related services. Bundled rates would also be developed for the outpatient arena for chronically ill and healthy beneficiaries.

Strengthening Primary Care and Care Coordination – this strategy is based upon the need to have primary care physicians (PCPs) take on a greater role in the delivery of care, outcomes and overall costs. Recognizing that much of the infrastructure & services (i.e., HIM, care management, etc.) needed to support these activities are poorly reimbursed, the development of Primary Care Case Management (PCCM) programs will be needed. These PCCM models (currently in some states) allow for additional reimbursement to PCPs in a “per member, per month” manner for care management services. This is in addition to the usual fee-for-service payments. Among the requirements for this additional payment would be the establishment of a formal “medical home” for the patient. Included in these “medical homes” would be enhanced services such as care coordination/management, patient education, improved access, strong IT structure, specialty referral coordination, etc.

Of final note, we see increasing efforts nationally to tie metrics to pay-for-performance. Unrelated to the Bending the Curve report are recent actions by the government to now tie reimbursement dollars to Patient Satisfaction Indicators (in 2009), and the limited reimbursement to hospitals when a patient experiences a poor outcome while an inpatient, see the following link for the Hospital-Acquired Conditions (pdf).