Health Affairs outlines key payment and delivery reform issues

As I have stressed in my book Potent Medicine and in other articles I have authored payment reform is one of three critical factors required to transform health care. In this issue of Health Affairs, there are several opinion pieces describing what we need to do next. This includes getting capitation right. In the article by Frakt and Mayes Beyond Capitation: How New Payment Experiments Seek To Find The ‘Sweet Spot’ In Amount Of Risk Providers And Payers Bear lessons learned from the 90's capitation experiences are discussed. In their words "We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the “sweet spot,” or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb". This is the critical point in ACO development; where does the risk reside? In the 90's we learned that having primary care providers take financial risk for the entire patient experience was a disaster. Experiments to understand what level of risk is appropriate for ACOs are clearly what is required. At the moment most of these experiments involve only shared savings. But there are some early adopters of a more aggressive approach.

In an experiment in California global payments to ACOs appear to be promising. Here's the abstract from an article by Paul Markovich entitled A Global Budget Pilot Project Among Provider Partners And Blue Shield Of California Led To Savings In First Two Years. "Health care plans and providers in the private sector are developing alternative payment and delivery models to reduce spending and improve health care quality. To respond to intense competition from other organizations, Blue Shield of California created a partnership with health care providers to use an annual global budget for total expected spending and to share risk and savings among partners for providing health care. The patient population consisted of certain members of the California Public Employees’ Retirement System in Northern California. Launched in 2010, the pilot accountable care organization in Sacramento provided a framework for operations and established goals and financial risk arrangements. The model shows early promise for its ease of implementation and effectiveness in controlling costs. During the two-year period, the total compound annual growth rate for per member per month cost was approximately 3 percent, or less than half the rate at which premiums rose over the past decade. Some of the savings stemmed from declines in inpatient lengths-of-stay and thirty-day readmission rates. Results suggest that the approach can achieve considerable financial savings in as little as one year and can gain wide acceptance from reform-minded providers".

Of course the key is "reform-minded providers". In our experience I would say it is also true that reform-minded insurers are also required. Insurers are reluctantly getting into the payment redesign game in some cases coming kicking and screaming. In Wisconsin Anthem Blue Cross, WEA Trust, WPS, Unity, Physician's Plus and Dean Health Plan are leading the way.

Another interesting experiment is focused on getting patients involved in the decision of choosing their providers using quality and cost data. Here's the abstract from the article entitled Payers Test Reference Pricing And Centers Of Excellence To Steer Patients To Low-Price And High-Quality Providers. "Hospitals frequently exhibit wide variation in their prices, and employers and insurers are now experimenting with the use of incentives to encourage employees to make price-conscious choices. This article examines two major new benefit design instruments being tested. In reference pricing, an employer or insurer makes a defined contribution toward covering the cost of a particular service and the patient pays the remainder. Through centers of excellence, employers or insurers limit coverage or strongly encourage patients to use particular hospitals for such procedures as orthopedic joint replacement, interventional cardiology, and cardiac surgery. We compare these two types of benefit designs with respect to consumer choice and how they balance price and quality. The article then examines their potential role in the policy debate over appropriate coverage and cost-sharing requirements".

The biggest problem with this effort is clearly the data. Most insurers do not have enough data to make statistically significant comparisons on cost or quality of provider performance. In Wisconsin and a few other states an All Payer Claims Data Base has been created in which 75% of the states resident claims data is aggregated. From this robust data base accurate comparisons can be made on cost and utilization. But this isn't a quality data base. The Wisconsin Collaborative for Healthcare Quality(WCHQ) reports quality outcomes on the physician groups in the state. WCHQ has recently partnered with Consumer Reports to build a consumer friendly quality report which accurately depicts  physician group quality outcomes. Our goal at the Center is to build this robust reporting system throughout the country at which point we will have the data to differentiate care on the basis of better value defined as Quality/Cost.

Finally, the voice of employers is heard in this article.Large Employers That Have Lived Through Transformation Say Payment Reform Alone Won’t Cut Costs And Reengineer Care.Martín J. Sepúlveda and Helen Darling point out "In this commentary we discuss large employers’ perspectives on three particular challenges that payment reform alone, as important as it is, may not be sufficient to address: high health care prices, inefficient and complex systems, and an outdated work environment ill designed to meet the pressing goals of better health care at lower cost".

Of course, what health care organizations require is a proven operating system that improves efficiency and creates a modern environment for delivering care. You guessed it the authors are pointing to lean in healthcare. Most employers must deliver on operational excellence every day to stay in business. For some reason healthcare has avoided this with devastating effect.

I think these four articles in addition to others in the September addition of Health Affairs support my contention that we need payment redesign,transparency of quality and cost performance data, and delivery redesign using a proven operating system called lean healthcare. With these in place we will be in a position to mend a seriously ailing industry.

To access the abstract, click here - http://content.healthaffairs.org/content/31/9.toc