Payment Policy

HC4HR: Sharing the Savings From Health Reform

We've been running a series of posts on the Health CEOs for Health Reform, highlighting innovative models of integrated care, health IT, comparative effectiveness, and clinical excellence.

Today, we examine a collaboration being developed between payers, providers, and health plans in California to share in the savings of higher quality, lower cost care. Tomorrow, we'll wrap-up the series by looking at how these real-world experiences can be translated into practical policies for health reform.

In the video below, Wade Rose of Catholic Healthcare West and Mike Johnson of Blue Shield of California describe a pilot project being developed with the Hill Physicians Group and the California Public Employees Retirement System (CalPERs).


HC4HR: Health CEOs Visit the White House

After sharing their stories with Congress at our recent event, the Health CEOs for Health Reform traveled down Pennsylvania Avenue to the White House to spread the word about the achievability of health system reform.

Dr. Gary Kaplan, Chairman and CEO of Virginia Mason Medical Center, and Lloyd Dean, President and CEO of Catholic Healthcare West, were part of a select group of provider and clinician leaders invited to meet with top health care aides to the president, Nancy-Ann DeParle and Valerie Jarrett.

HC4HR: Making Quality Health Care Affordable for All

With the debate over how to credibly finance health reform taking center stage, Health CEOs for Health Reform released Realigning U.S. Health Care Incentives to Better Serve Patients and Taxpayers at an event on Capitol Hill last Friday.

The detailed recommendations emphasize a need to refocus health care delivery on the patient and move away from fee-for-service medicine. Most notably, Health CEOs for Health Reform recommend that providers be held accountable to reasonable cost and quality standards at a specified date, guaranteeing that health reform will slow the rate of Medicare cost growth. Health CEOs for Health Reform make clear that significant savings and a more sustainable health system are eminently feasible. We have to look no further than our own backyards to prove it is possible.

The event also featured remarks from the Director of the White House Office of Health Reform, Nancy-Ann DeParle, who commended the group for it's courage and innovation tackling these issues. Below are some highlights from the event. Complete video coverage of the event is also available.

QUALITY: Better Health Guaranteed, Or Your Money Back!

Some pharmaceuticals companies have negotiated a new payment plan with insurers based on a pretty exciting claim: our products work, and we'll suffer the economic consequences if they don't. Several companies, including Merck and Proctor & Gamble, are linking their charges to whether the patient gets better, reports the New York Times. Basically payment becomes about quality, not quantity, which is what we'd like to see for the health care system as a whole.

The makers of the osteoporosis drug Actonel agreed to help insurer Health Alliance pay for the care if a patient suffers a nonspinal fracture despite taking the bone-protecting drug properly. It's win-win—the insurer can save money, and the drugmakers are less likely to lose market share to generic versions of Foxomax, another osteoporosis drug.

QUALITY: Isn't it Nice to Get What You Pay For

In health care, sometimes it actually pays money to save money—at least if you're one of the participating practices in Medicare's Physician Group Practice Demonstration.

The program is designed to reward physician groups by coordinating care to improve patient outcomes, while reducing overall costs—particularly for those with chronic conditions like heart disease and diabetes. Physician groups that are able to generate savings of more than 2 percent compared to what it would cost Medicare to pay for the treatment of similar patients on average, are eligible to receive performance bonuses. The payments are based on a group's improved cost efficiency (the savings generated) and its performance on 32 evidence-based quality measures. Since the groups share in the savings of improved care, CMS claims, they have an incentive to invest in things like care management and health IT.

IN THE STATES: P4P More than OK for Duncan, OK

We wouldn't expect Duncan, Oklahoma—the birthplace of Halliburton and Ron Howard—to be a bastion of pay-for-performance, which is why an article in Saturday's Tulsa World, caught our attention.

Four years ago, Duncan was in a bind, unable to control the rising costs of providing health care to city workers. Enter, Jeff Greene, CEO of MedEncentives with a program to improve health care and reduce costs by aligning the incentives between patients and doctors.

REFORM: How "Bundling" Can Save Us a Bundle

As promised, more on MedPAC. This post focuses on the Medicare Payment Advisory Commission's ideas on changing the way we pay doctors and hospitals.

As a physician, I'm impressed by the June 2008 MedPAC report because it's truly a comprehensive rethinking of how to reform health care finance and delivery in the United States. Prior MedPAC reports have recommended measures to improve quality such as paying doctors and hospitals for performance, usually with a few percent bonus for good results; correcting imbalances in the fee-for-service payment system; or reporting the rates at which doctors and hospitals use certain services. Those pay-for-performance programs have improved the quality of care in many hospitals. But they certainly have not reduced the cost of care, which as numerous researchers have shown varies wildly among individual hospitals, individual doctors, and U.S. regions.

This report recognizes the central fact of reforming the delivery of medical care: It can't be done as long as doctors and hospitals are paid through the traditional fee-for-service system. Because in that system, doctors and hospitals are basically paid by the piece. The higher the volume of services provided, the greater the revenues. If fees are cut, doctors increase their volume to make up for the lost revenues.

COST: We Made the Hospital Bed, So Lie In It

I want to expand on Joanne's excellent and thorough post yesterday on the new Dartmouth Atlas Project report. One sentence in the AP/WaPo story especially caught my eye: the supply of beds in a locality is a key driver of how many days patients spend in the hospital. In other words, the more beds you have, the more patients you will admit. According to the Dartmouth report, this doesn't affect the fairly clearcut necessary hospital stays, an elderly patient with a hip fracture for instance. But, when the decision to hospitalize a patient is "more discretionary—as is the case for patients with heart failure and most other medical conditions—admission rates are strongly correlated with the local supply of hospital beds." Hmm.


QUALITY: Oops, We're Not Paying Again

"Oops I did it again," may have made millions as a pop song, but for 11 preventable medical errors, it will no longer get you paid by the Indianapolis-based insurer, WellPoint, according to an article in today's Indianapolis Star.

WellPoint joins a growing number of public and private payers in efforts aimed at promoting quality, reducing errors, and controlling costs in our medical system. WellPoint's new policy adopts the steps taken by the Centers for Medicare and Medicaid Services last fall to no longer pay for preventable medical errors, injuries and infections that occur in hospitals.

Like CMS, WellPoint will make sure that neither it nor its patients pay for three so-called "never events"—surgical mistakes that should never happen under any circumstances. They are:

  • Surgery on the wrong body part
  • Surgery on the wrong patient
  • The wrong surgery performed on a patient.

Additionally the insurer will limit payments for the following events, all of which are highly preventable when evidenced-based guidelines are adhered to:

QUALITY: Can What Works for Toyota Heal Hospitals?

There's a great story out of the Seattle Post-Intelligencer this morning by Cherie Black on the innovation at Virginia Mason Medical Center in Seattle. Central to their work is the Toyota Production System, which seeks to eliminate wasted time and mistakes. It works with cars - what about health care?

Virginia Mason said benefits include an 85 percent reduction in how long patients wait to get lab results back, and $1 million savings on inventory costs.They've redesigned facilities to make patient and staff work flow more productive. The hospital reduced overtime and temporary labor expenses by $500,000 in one year and increased productivity by 93 percent. While direct cost savings aren't passed on to patients with the new system, less waiting, increased safety and more efficient care are.

(CEO Gary) Kaplan's vision is to have patients start their appointment in the parking garage with a smart card that triggers their entire appointment process. No more waiting rooms, just move directly from the garage to an examination room.

Total flow -- no waiting, no waste and it's all about the patient.

"We have more than enough resources in health care," Kaplan said. "We just need to stop wasting it and only do what's appropriate and value-added and we'd save billions."