Paying the Right Way for the Best Care for Patients with Diabetes: Why and How

In 2012, 23% of all healthcare dollars in America were spent on diabetic patients.1. In Wisconsin, where we live, the direct cost of diabetes is estimated to be over $4.07 billion per year, with the state bearing an additional $2.04 billion in indirect costs from lost productivity 2. And our numbers are headed in the wrong direction: Wisconsin has a prevalence of diabetes increased 13% from 2008 to 2011, while the incidence of pre-diabetes increased 37%.2 These trends are unfortunately not unique to Wisconsin. When they are considered in combination with our ongoing national epidemic of overweight and obesity in children and adults, it is clearly more important than ever to find cost-effective ways to improve the quality of medical care for diabetes and associated co-morbidities, such as hypertension, ischemic heart disease (IHD) and hyperlipidemia.

Coordinated, multi-level, team-based interventions are known to work for managing diabetes and other chronic illnesses. However, the current fee-for-service (FFS) payment system too often does not reimburse many of the vital components of this type of care delivery. Preventing complications of diabetes through proper management of the disease and its associated comorbidities not only represents the best outcome for individual patients, these strategies have been shown to reduce overall healthcare costs by avoiding costly inpatient and ER visits.

While we have a long way to go, there are some important payment experiments in the field that are yielding real results. Here are a few highlights of innovative approaches to paying for the right care for patients with diabetes and other common chronic diseases.

Care Coordination Fee: Payers make a small (around $2-8) per member per month (PMPM) payment to providers that covers extra costs associated with chronic disease management, such as the salary of a nurse care manager, telemedicine, and improved use of healthcare information technology. In some cases, the PMPM amount is linked to the level of National Committee for Quality Assurance Patient Centered Medical Home (NCQA PCMH) recognition that the clinic receives.

Program Highlight - Colorado Multipayer Patient-Centered Medical Home Pilot3: A coalition of six health plans, the state's high-risk pool carrier, and sixteen family or internal medicine practices participated in a pilot that used fee-for-service payments, with a care management fee, and a pay-for-performance bonus to foster the development of PCMHs. Participating clinics had to reach at least Level 1 NCQA PCMH recognition to qualify. Each plan negotiated its own care management fee depending on which level of NCQA PCMH recognition the clinics achieved. Preliminary results showed that quality and outcomes improved, and one participant reported a return on investment of 250-400%.

Nurse Care Manager Support: Upfront training and salary for a nurse care manager, who can provide many of the care coordination services required for chronic care management.

Program Highlight - BCBS of North Dakota Nurse Care Management Pilot4: Blue Cross Blue Shield of North Dakota provided a $20,000 grant to support the salary of a nurse care manager. Diabetic patients received a history review, development of a care plan, monitoring, self-management education, and other care coordination services from the nurse care manager. The health care plan and clinics shared a savings of approximately $300,000 from the program and moved forward to implement similar programs throughout the system.

Pay for Performance (P4P): Most commonly implemented as a bonus on top of FFS payments when physicians meet quality scores on certain standards of care. Other programs have rewarded physicians with lump sums if they qualify for national recognition, such as through the Bridges to Excellence program.

Program Highlight - Rocky Mountain Health Plan Diabetes Care Plan5: Physicians received lump-sum payments each quarter based on hba1c blood levels, ldl-cholesterol levels, blood pressure readings, and aspirin use among diabetic patients. All of the primary care physicians eligible to participate chose to do so, and improvements were made in each of these measures among the pilot group. The average physician payment was around $5,000 per year. The pilot group had costs savings of approximately $73 PMPM for patients with diabetes, mostly as a result of decreased hospital admissions and length of stay.

Shared Savings: If physicians are able to keep spending below a certain target they receive a portion of the savings, with the health plan or payer receiving the other portion. Physicians are also expected to meet certain quality measures, which lead to savings by reducing, for example, hospital admissions and length of stay.

Program Highlight - Medicare Physician Group Practice Demonstration6: Physician groups were eligible for 80% of savings that came from improved patient care management if they were able to lower spending growth by 2%. They were also rewarded based on performance for 32 quality measures. By the end of the first year, all of the physician groups improved their clinical management of diabetes on 7 of the 10 clinical measures, and two groups received shared savings. By the fifth year, the last year of the program, all 10 of the groups continued to improve on clinical quality measures, and 4 received shared savings. The success of this program was a key foundational element of the Pioneer ACO and Medicare Shared Savings ACO, underway in more than 200 sites across the country under the Affordable Care Act.

Risk-adjusted Global Budget: A target annual budget, adjusted for the estimated cost of treatment for the patient population. FFS payments are used to track spending over the year, and providers keep any savings under the target budget, but are at risk if spending is higher. Providers can use resources to manage population and have a financial incentive to keep costs low and quality high.

Program Highlight - Massachusetts Alternative Quality Contract (AQC)7: The AQC combines a risk-adjusted annual global budget for Blue Cross health maintenance organization (HMO) members, with pay-for-performance bonuses for providers who meet clinical targets. Providers are paid with FFS throughout the year, and then settle-up with BCBSMA at the end of the year depending on whether they were above or below target spending. Providers keep any savings, but are at risk if spending surpasses the target budget. The AQC has performance-based payments of up to 10% of total payments. These payments are made to the provider group, which can use the funds in any way necessary, such as investing in infrastructure or paying staff salaries. These payments are based on both ambulatory measures (5%) and hospital quality measures (5%). The ambulatory measures were designed to specifically reinforce investment in primary care, by measuring primary care practice measures such as screening rates and chronic disease management.   After two years, medical spending was 3.3% lower than the control group, and quality was consistently high among participating physicians.

We are learning more every day about how to make the right kind of payment for the right kind of care.  Now it’s your turn:  Are providers, payers, and employers in your market focusing on implementing these emerging best practices?  If not, why not?  What will it take for any of these successful strategies to go to scale?  And if we’re serious about the three part aim…how can we reward health systems for delivering the best care while creating incentives for them to invest in preventing new cases of diabetes?  Who is doing the best work on this, in your view?

Karen Timberlake is the Director of the Partnership for Healthcare Payment Reform in Wisconsin.

Ryan Kartheiser is a second-year MD/MPH student with the University of Wisconsin School of Medicine and Public Health, working on a summer research fellowship with the Partnership for Healthcare Payment Reform in Wisconsin

1Dall, T., Nikolov, P., & Hogan, P. (2003). Economic costs of diabetes in the US in 2002. Diabetes care, 26, 917-932.

2Wisconsin Diabetes Prevention and Control Program, Division of Public Health, Department of Health Services. (2011) The 2011 Burden of Diabetes in Wisconsin. http://www.dhs.wisconsin.gov/publications/P0/P00284.pdf

3Harbrecht, M. G., & Latts, L. M. (2012). Colorado’s Patient-Centered Medical Home Pilot met numerous obstacles, yet saw results such as reduced hospital admissions. Health Affairs, 31(9), 2010-2017.

4Tynan, A., & Draper, D. A. (2008). Getting what we pay for: innovations lacking in provider payment reform for chronic disease care. Center for Studying Health System Change. http://www.hschange.com/CONTENT/995/#ib3

5AHIP. (2007) Innovations in Chronic Care. http://www.ahip.org/uploadedFiles/Content/Departments/Policy_and_Research/Innovations_Report_Series/Innovations-in-Chronic-Care-Report.pdf#page=69

6Centers for Medicare & Medicaid Services. 2011. Physicians Groups Continue to Improve Quality and Generate Savings Under Medicare Physician Pay-for-Performance Demonstration. https://www.cms.gov/Medicare/Demonstration-Projects/DemoProjectsEvalRpts/downloads/PGP_Fact_Sheet.pdf

7Song, Z., Safran, D. G., Landon, B. E., Landrum, M. B., He, Y., Mechanic, R. E., ... & Chernew, M. E. (2012). The ‘Alternative Quality Contract,’ based on a global budget, lowered medical spending and improved quality. Health Affairs, 31(8), 1885-1894.