Question

What are some banking procedures appropriate for the medical clinic?

Answer 1

To obtain better value for investments made in health care, significant discussion has emerged on how best to align economic and health incentives to achieve these goals (Dudley et al., 2007; IOM, 2007; Orszag and Ellis, 2007). Focusing on providers, attention has turned to the current fee-for-service reimbursement model. By placing the incentives on volume over value, fee-for-service fails to create incentives for preventive care and care coordination among providers (MedPAC, 2008; Miller, 2007). As physician practices spend an average of 3 hours a week interacting with health plans at a national cost of $23 billion to $31 billion a year, the administrative complexity created by multiple documentation requirements to varying billing, precertification, and credentialing forms takes time away from clinical care (Casalino et al., 2009). Failure to clearly differentiate the value and benefits of alternative providers, treatments, and health plans obfuscates the signals to consumers (Chernew et al., 2007). The papers in this chapter cover a range of strategies targeting the payment and payer systems as sources of opportunities for lowering costs and improving outcomes, underscoring the importance of streamlined and harmonized health insurance regulation, administrative simplification and consistency, and payment redesign to focus incentives on results and value.

Harold D. Miller of the Center for Healthcare Quality and Payment Reform reviews the broader evidence base of payment reform’s impact on costs and quality and provides a conceptual framework for possible payment policies. Building on Miller’s comments and recommendations on strategies for transitioning to more value-based payment structures, Amita Rastogi of Bridges to Excellence discusses the promising effects of the PRO-METHEUS (Provider payment Reform for Outcomes, Margins, Evidence, Transparency, Hassle-reduction, Excellence, Understandability, and Sustainability) payment system, based on a fee-for-episode system. She focuses in particular on the allowance in the PROMETHEUS system for potentially avoidable complications, which is designed to encourage reduction in such complications by at least 50 percent. Translating their estimates to the national level, she reports a potential cost savings of $165 billion nationally from reducing potentially avoidable complications in 13 medical conditions in the commercially insured population.

David R. Riemer of the Community Advocates Public Policy Institute highlights health insurance exchanges as a promising practice for introducing managed competition into the insurance market. Drawing on the lessons learned from one of the nation’s most long-lasting and successful exchanges, operated by the Wisconsin State Employee Health Plan in Dane County, he suggests that three conditions must be in place to maximize the ability of health insurance exchanges in lowering costs: the pool of potential enrollees should have an average or near-average risk profile; the pool of enrollees must be at least 20 percent of the population; and the enrollees must have clear financial incentives for selecting health insurance plans that have the lowest risk-adjusted bids.

Turning to consumer incentives, Niteesh K. Choudhry from Harvard University discusses value-based insurance design, focusing on the potential impact of tiering copayments for medications based on evidence-based value. He explains that, with insurance copayments set in a one-size-fits-all style, copayments for essential, high-value services are often set too high, and their resultant underuse leads to missed opportunities to prevent and treat morbid and expensive diseases while copayments for nonessential, low-value services are sometimes not set high enough to minimize their unnecessary use. Although the evidence base is limited, existing studies suggest that value-based insurance design for five chronic conditions may reduce costs by 1 to 6 percent, the equivalent of more than $2 billion annually. However, he cautions that these preliminary estimates, by necessity, aggregate groups of conditions into single disease categories, such as “heart disease,” do not account for patients with more than one related condition, and do not distinguish between the impact on patients of different disease severities. In a complementary discussion, Lisa Carrara of Aetna describes a variant of value-based insurance design with a discussion of tiered provider networks and consumer-directed health plans. Based on the experience of the Aetna Aexcel network of designating providers based on clinical quality and cost efficiency, she estimates that up to a 3 to 4 percent reduction in first year claims could be realized by customers if all Aetna patients demonstrated a 90 percent utilization of Aexcel-designated physicians.

Both Robin J. Thomashauer from the Council for Affordable Quality Healthcare (CAQH) and David S. Wichmann from UnitedHealth Group conclude this session by discussing different approaches to administrative simplification. Thomashauer describes CAQH’s work in driving payer collaboration and process consolidation through multistakeholder initiatives—the Committee on Operating Rules for Information Exchange (CORE) and the Universal Provider Datasource (UPD). Through development of standardized operating rules to facilitate administrative data exchange and promote interoperability, she relays that industry-wide adoption of CORE rules could save $3 billion over the next 3 years. Citing the success of this cross-industry, public–private collaboration, Thomashauer outlines the need for continued collaboration focused on both short-and long-term goals, coupled with appropriate policy support through the federal government. Meanwhile, Wichmann outlines how the use of current technology could improve payment speed and accuracy and streamline provider credentialing, privileging, and quality designation processes, yielding savings of $332 billion over the next decade. To achieve these savings and improve healthcare delivery, he urges shared, consistent action across all payers—commercial and governmental—in partnership with physicians and hospitals.

VALUE-BASED PAYMENTS, OUTCOMES, AND COSTS

The goals of value-based payment are to give healthcare providers adequate resources to deliver efficient, quality care and to remove the penalties that exist today for improving quality and efficiency. Episode-of-care payment and comprehensive care payment systems can help providers prevent health problems; prevent the occurrence of acute episodes among individuals who have health conditions; prevent poor outcomes during major acute episodes, such as infections, complications, and hospital readmissions; and reduce the costs of successful treatment. By using payment changes to help address these major sources of waste and inefficiency, healthcare costs can be reduced significantly without “rationing” or denying care that patients need .

How value-based payment systems address sources of waste and inefficiency.

Using Episode-of-Care Payment to Reduce Waste and Inefficiency

Poor outcomes and high costs of major acute episodes can be reduced through the use of episode-of-care payment systems; this system defines a single amount to cover all of the services that are provided to a patient during a single episode of care (e.g., the treatment of a heart attack), rather than making separate payments for each individual service (Robinson, 2001). Episode-of-care payment gives the involved providers an incentive to coordinate their activities, eliminate unnecessary services, and avoid complications that require additional services (Miller, 2009).

Defining an Episode-of-Care

There are different versions of episode-of-care payment that address different types of waste and inefficiency (Table 11-1). Although only the fourth and fifth categories—full-episode payments with a limited warranty based on either the type of treatment or diagnosis—can address the full range of problems that occur within a major acute episode, the narrower forms of episode-of-care payment could be used for types of patients where only one issue is of concern, or the narrower forms could be used as transitional steps toward full-episode payment (Center for Healthcare Quality and Payment Reform, 2009b).

Variants of Episode-of-Care Payment That Address Different Aspects of Waste and Inefficiency in Major Acute Episodes.

Encouraging the Use of Higher-Value Providers and Services

As indicated in the fourth and fifth categories in Table 11-1, episode-of-care payment can be based on a particular type of treatment, or it can be based solely on the patient’s diagnosis, particularly where there is clear evidence as to the appropriate treatment(s) for the diagnosis. Basing payment on diagnosis creates an incentive for a provider to use higher-value treatments—those with equivalent outcomes and lower costs.

Episode-of-care payment also enables providers to define a single, comprehensive price for an episode of care, which in turn would enable payers (and consumers, if the price is made public) to more easily see the full cost of treatment and to more accurately compare the costs of different providers that could provide the same treatment. Although there is evidence that costs for the same treatment can vary significantly among providers in the same community (Pennsylvania Healthcare Cost Containment Council, 2007), most payers (e.g., Medicare and major health insurance plans) do not give patients strong incentives to use providers who achieve similar outcomes at lower costs.

Why Episode-of-Care Payment Is Better Than Other Payment Reforms

Other payment changes that have been proposed or implemented in an effort to reduce infections, complications, and readmissions are not as effective in changing incentives as a true episode-of-care payment that includes a limited warranty. For example, pay-for-performance systems that give bonuses to hospitals for reducing infections do not change the underlying payment system and its rewards for providing more services. Medicare’s rules that exclude hospital-acquired infections from the diagnosis-related group (DRG) formula do not prevent hospitals from being paid for the complications resulting from those infections or from receiving outlier payments for those cases.

In contrast, if a hospital and physician commit to a “limited warranty,” similar to what has been done by Geisinger Health System through its ProvenCare program (Casale et al., 2007), they have both a financial and quality incentive to improve, and they can also advertise the warranty to patients and payers as a sign of high-quality care.

Experience with Episode-of-Care Payment

Although Medicare has been successfully using a narrow form of episode-of-care payment for over 25 years through the Inpatient Prospective Payment System, there has been relatively limited experience using episode-of-care payments that incorporate warranties or bundle together payments for multiple providers. The projects that have been evaluated have all focused on surgery episodes; the evaluations indicate that payers received savings ranging from 10 to 40 percent, without negative impacts on quality.

Using Comprehensive Care Payment to Help Prevent Episodes and to Encourage Use of High-Value Services

Despite the many improvements of episode-of-care payment over current fee-for-service payment systems, it still does not encourage preventing episodes of care from occurring in the first place. For example, the primary goal for patients with chronic diseases should not be to reduce the cost of each episode of hospitalization, but to reduce the number of hospitalizations. Many studies have demonstrated that large reductions in hospitalizations—20 to 40 percent or more—can be achieved through relatively simple, low-cost services such as patient education, self-management support, telemonitoring, and so on sever, many of these services are not paid for under Medicare or private insurance plans, whereas hospitals and physicians are paid for all hospitalizations, no matter how frequently they occur.

Comprehensive care payment is designed to solve this problem by defining a single amount to cover all of the services needed to manage a patient’s conditions during a fixed period of time, regardless of how many separate episodes of care occur (Miller, 2009). This gives the providers involved in the patient’s care the flexibility to try innovative approaches and tailor services based on the patient’s needs, and it gives them an incentive to avoid hospitalizations and unnecessary or overly expensive services.

In addition to supporting better care management of chronic diseases, comprehensive care payment can encourage the use of higher-value services for treatment of conditions by providing physicians with both the resources and incentive to engage in shared decision making with their patients. Research has shown that the frequency of many types of surgery can be reduced by 20 to 40 percent (O’Connor et al., 2004) and that the inappropriate use of diagnostic imaging can be reduced significantly (Bottles, 2009) when a neutral advisor helps patients make an informed choice, but providers are not compensated or rewarded for doing this under fee-for-service payment.

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