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How Serious Is Medicare About “Preventable” Sickness Care?

by Scott MacStravic

When I wrote the blog piece posted on Aug 15 about “non-payment for non-performance”, little did I realize how prophetic it was.  In yesterday’s Times appeared an article - “Medicare Says It Won’t Cover Hospital Errors” - announcing that it will no longer treat the costs of preventable errors, injuries and infections that occur in hospitals.  This is expected to save the federal government millions of dollars, while also saving many lives as hospitals have that much more motivation to prevent such errors.

Imagine what could happen if Medicare, Medicaid, commercial insurers and consumers got together and decided not to pay for preventable sickness!  It has been estimated that roughly 75% of all sickness care could have been prevented by effective health management, immunizations, and other forms of proactive health care.  There has long been a category of “avoidable” hospital admissions and treatments, regularly estimated as a large portion of all such treatments, based on best practices in ambulatory care.

This could easily become a “blame game” of course.  Insurers, employers, and governments could blame either consumers for not adhering to healthy behaviors, or complying with medical recommendations and prescriptions, for example.  Or they could penalize providers for not following best practices in managing their patients’ health, or not getting their patients to behave better.

Patients could blame insurers and their employers for not offering proactive health management programs they could enroll in (unless, of course, they did so), or not covering preventive and proactive services (unless they do).  Providers could blame payors for not paying them enough or otherwise supporting them in proactive health care, e.g. not covering the amount of time and effort it takes in terms of “cognitive services” to get patients to behave themselves.  And providers could easily blame their patients for not following their advice, once it has been given.

Payors would clearly have the upper hand in the blame game if they denied all payment for preventable sickness, not merely preventable errors, nosocomial infections, etc.  They have a lot of practice in denying, or certainly dictating lower payment levels when they feel such is appropriate, as Medicare recently did in decreeing that ambulatory surgery centers should only get paid 65% as much as do hospitals for comparable procedures. [”Doc Group Says New ASC Rate Would be ‘Death Blow’” ModernHealthcare.com Aug 20, 2007]

Consumers, when they are payors for some or all the sickness care involved could also exert extreme pressure on providers, by denying them full payment of their charges for sickness care if they deem the sickness something their provider should have prevented.  Providers could be caught somewhere between the impossibility of surviving on payment only for non-preventable sickness, and what they could legally command, or negotiate as their share of the blame for preventable sickness.

Given the widespread number of examples of in-fighting among healthcare stakeholders, there may be some movement toward such a policy and practice combination.  After all, few insurers, employers, consumers, or governments have espoused a sense of responsibility for keeping the current sickness care system alive.  And denying payment, in whole or even in part, for sickness that a given payor deems to be preventable, would threaten the existence of almost all providers.

Wouldn’t it be far better for providers, payors, consumers, etc. to get together and set annual goals for reductions in preventable sickness, involving all of their efforts, with all sharing in accountability for preventable sickness that doesn’t get prevented.  Negotiating the relative share of accountability, in the form of lower payments by payors to providers, would be an interesting process to watch.  On the other hand, if a cooperative approach to common problem solving were tried, where providers and consumers, as well as payors defined and treated preventable sickness as a common problem, that might end up moving the current sickness-focused “healthcare system” in the right direction

Optimizing the Value of Healthcare Workforces

by Scott MacStravic

Given the constant warring challenges of having enough of the right people in their workforces despite severe labor shortages, and keeping costs within the limits set by miserly payment for patient care, healthcare organizations (HCOs) have no choice but to ensure they get the most value possible from their existing workforce.  While concepts such as “return on employee” (ROE) and “employee performance optimization” may not be commonplace, they are increasingly essential, as is equally true for “customers”.

While there have been many examples of re-labeling employees as “associates” or even “cast members”, what is really needed is the combination of thinking about and treating them, as well as motivating and enabling them to act as “partners”.  This may well require revolutionary changes in how employees are managed, and how managers function in healthcare.  And it will certainly require a revolution in the feedback systems that HCOs use in their employee relationship management (ERM) strategies.

When I began my career as a healthcare marketing executive, after teaching the idea for ten years, one of the practices I introduced in the two multi-hospital systems where I worked was a system-wide customer feedback mechanism, including patients, physicians and employees as “customers”.  But this was generally limited to measures of the satisfaction and suggestions for improvement of each of these customers, with “marketing” implications in terms of recruitment and retention of all three categories, with only physicians monitored, managed and marketed to in terms of the value they delivered to the system.

In the current competitive and “reimbursement” climate, seeking ways to optimize both patient and employee contributions are just as essential, and employee contributions include their impacts on both physician and patient value.  And the first, most essential requirement for optimizing employee value is to measure their performance and contributions, in order to manage them.  In many cases, this can only be accomplished on a team, categorical, or unit basis, but without measures of current employee value, and ways to monitor changes therein, there is little hope for increasing it.

Fortunately, the growing practice of pay-for-performance (P4P) measurement and bonus payments for HCOs provides yet another motivation and mechanism for measuring employee performance and value.  At a minimum, the contributions that employees make to P4P bonuses should be measured using the same metrics that determine the amount of added revenue their performance on such criteria delivers.  This can then be used as the foundation for a wider system of measurement of total performance and value based on the HCO’s “balanced scorecard” of performance measures.

An added source of ROE should be actionable feedback and input into HCO operations and their improvement, in quality, customer satisfaction, and efficiency.  The value of employee feedback can then be evaluated in the same performance dimensions as their overall worth is calculated. [“Designing Enterprise-Wide Real-Time Feedback Systems” CustomerSat, Inc. Aug 10, 2007 (www.mycustomer.com)]  This will require system-wide collaboration across the HCO’s “silos” and systems, along with increased development and empowerment of employees.

When and if HCOs master the art and science of employee performance measurement and management, they may be able to offer their mastery as part of services and relationships offered to local businesses.  This should help with employer relationship management and the public relations as well as marketing advantages improved relationships in that market deliver. And it would certainly be a great advantage for HCOs that venture into the employee health and performance market as a revenue-generating service to such employers.

To the extent that HCOs can achieve an integrated approach to employee performance optimization, for external ell as internal use, they may find a significant new source of revenue from employers, in addition to the added cost savings and revenue enhancement value of their own workforce optimization.  In any case, it is an opportunity that few HCOs can afford to ignore.

No Pay for Non-Performance in Healthcare?

by Scott MacStravic

The majority of pay-for-performance systems offer bonuses for healthcare providers that adhere to treatment guidelines and best practices.  In many cases, there are specific outcomes included, such as patient satisfaction, cost reduction, and reduced infections.  This “carrot” approach is intended to reward providers that improve or maintain high quality and efficiency, as defined and measured by specified criteria.

But just as is the case with P4P systems that apply to individual behaviors and health status, there are a growing number of “sticks” being added to systems that apply to providers.  Medicare, for example, has frequently included “budget neutral” policies in its P4P programs, where the extra payments for high-performing providers comes out of the payments for low-performers, in order to keep the total payments the same as usual.

Payers are also beginning to refuse to pay for the care required to address “never events” in medical care, such as wrong-site surgeries.  They argue that when providers cause costs to increase, often dramatically, by making serious errors in patient care, they should not be rewarded for such errors by getting increased payment over what would have been paid had there not been such an error.  While this makes eminently good sense, and will generally not harm providers dramatically, given the rarity of “never events”, this policy could end up having dramatic impact, as the definition of such events changes.

If payors decide that providers should not be paid for what amounts to careless or unsafe practices, for example, rather than egregious mistakes such as wrong-site surgery, they could save significant amounts, while providers could be severely affected.  Already lists of non-payable problems have been created that include quality failures such as decubitus ulcers in inpatients, for example.  The case can certainly be made that such conditions should not occur, since good care should prevent them among bedridden patients, but the effects of non-payment would be far greater than for truly egregious errors.

A recent study, for example, found that hospital-based or “nosocomial” infections have cost between $200 million and $473 million in the state of Massachusetts alone.  This includes extended inpatient stays, and additional costs of treatment for such infections.  While the recommendation accompanying the report calls only for hospitals to publicize their infection rates, it would take little for payors to decide to include them among the events for which they will no longer pay.  In such a case, payors could save hundreds of millions of dollars in dozens of states, and hospitals could be seriously hurt as a result. [“Infections Acquired at Massachusetts Hospitals Cost up to $473M Annually, Report Finds” Kaiser Daily Health Policy Report Aug 10, 2007 (www.kaisernetwork.org)]

Even publishing the different performance levels achieved by providers could severely damage low-performers, by causing patients, providers, and payors alike to avoid doing business with them.  This has been one of the expectations of the “Buy Right” concept originated in the 1970s, though the effects of publishing performance data has, thus far, been minimal.  With more costs and responsibility for sickness care use management being shifted to consumers, and easy Internet access to performance data, the effects of publishing comparative performance may become significant in the current and future system.

Any “punishment” of providers for poor performance will have at least two effects: 1) making it that much more essential for them to correct mistakes and improve poor performance; and 2) depriving them of resources that may be needed to do so.  With many hospitals and physician practices operating at or below minimal survival levels in terms of revenue vs. expense, significant cuts in payment could easily drive them out of business before they are able to improve.

For those who favor a “free market” approach to healthcare reform, this would be a consummation devoutly to be wished, rather than a negative effect.  But when poor performers are the only available or accessible source of care for particular communities or sub-populations, their going out of business would not always be an overall improvement in their healthcare system.  With individuals, “capital punishment” is reserved for relatively rare and truly egregious behavior, not merely lower than average performance, but with healthcare organizations, there could be a far higher percentage of providers so “punished”.

There is also the risk that payors could find the refusal to pay for “never” events could become overly attractive, since it reduces their costs and improves their profits.  In such a situation, the free market may favor payors too much, and cause overly aggressive definitions of such events, and even greater reductions in payment levels, since payors are competing with each other to keep their costs down.  It will always be a temptation for payors to choose not to pay enough for providers to survive, witness the severe underpayment compared to providers’ operating costs that is already the case for Medicare and Medicaid, where these payors can simply dictate how much they will pay.

While carrots and sticks are often effective combinations in achieving improvements in individuals’ behavior and organizations’ performance, the stick carries with it some side effects that should warrant extreme care in its use.  While there may well be a number of hospitals, as well as physicians and other practitioners that should not continue to deliver care, the potential that “No Pay for No Performance” could do significant harm, as well as good, should not be ignored in either public policy or private payment.

Are Consumer/Provider Disconnects Diminishing?

by Scott MacStravic

There have long been serious disconnects between what healthcare providers are willing to promise and deliver, and what patients want to get from their healthcare encounters, episodes and relationships.  Providers have tended to focus on “doing the right thing”, i.e. using their best judgment, adhering to evidence-based-medicine guidelines, etc. while avoiding accountability for the clinical outcomes and health/life quality value of their services.  Patient satisfaction and loyalty to providers is certainly affected by the process of care, the “patient experience” that physicians and hospitals deliver, but are often much more concerned about the results they get.

On occasions when providers look at results, they often fail to recognize the full range of and variations among patients in results desired.  Surgeons at the New York Hospital for Special Surgery, for example, focused on the single outcome of pain reduction when assessing the success of their procedures.  Patients, on the other hand, looked for regaining ability to do normal activities of daily life, to resume favorite leisure and sports activities, improve their overall quality of life, not merely pain relief, and the specific outcomes desired varied by individual patient. [“Patients and Doctors Often Differ on What Constitutes Successful Surgery” Strategic Health Care Marketing 20:3 March 2003 p.12]

When patients have been the sole or main source of payment for care, however, providers have often been more sensitive to results.  Fertility clinics, for example, have frequently guaranteed results or offered patients some or all of their money back if they failed to become parents.  The 20/20 Institute in Denver offers a guarantee for its Lasik surgery: if patients do not achieve at least 20/20 vision in the treated eyes, they get a full refund of their payments. (www.2020institute.com/guarantee.htm)

Even hospitals have, on occasion, guaranteed results to some extent.  Shouldice Hospital in Toronto has long guaranteed that if hernia repair patients must return for a repetition of the procedure, the surgeon’s fees will be waived.  Hospital charges cannot be waived under Canadian law.  Geisinger Clinic recently introduces a “ProvenCareSM” program for its coronary bypass surgery, with a warranty covering all needed care during the 90 days post procedure. [A. Casale, et al. “ProvenCareSM: A Provider Driven Pay for Performance Program for Acute Episodic Cardiac Surgical Care” American Surgical Association 2007 Abstracts (www.americansurgical.info/abstracts/2007/20.cgi)]

What such guarantees and warranties tend to do, in addition to promoting patient confidence in getting the desired results, is to motivate providers to strive for the absolute best processes and outcomes of care they can achieve.  It alters the current “perverse” incentives in healthcare payment where providers who deliver worse care get paid more, as patients need more care for complications and repetitions or extensions of care, and payers add to their payment for individual episodes. [W. Lynch & H. Gardner “Getting Paid More for Doing Worse…Only in Healthcare” Health as Human Capital July 23, 2007 (hhcf.blogspot.com)

As Lynch and Gardner pointed out, this practice creates what amounts to pay-for-performance incentives for providers, self-imposed rather than offered by payors.  It figures to fit very well with the increasing burden that consumers are bearing as employers shift more costs to employees and insurers sell more health spending account plans.  It also figures to serve the providers well as they reduce the long-established disconnect between what consumers want to get out of healthcare, and what providers are willing to promise and deliver.

Paying for a Different “Performance”

by Scott MacStravic

The World Healthcare Congress included a number of discussions of the growing practice of “Pay-for-Performance (P4P).  Feelings about its propriety and effects on the healthcare system varied, judging by comments made by speakers and members of the audience.  One of the major issues raised was whether it makes sense for payers, or patients for that matter, to pay providers more for doing what they should already be doing anyway.

When it is reported that physicians adhere to best practice guidelines and evidence-based medicine only about half the time, should they be paid extra to correct their significant failures, or punished for not doing so?  Given the already burdensome and always growing costs of healthcare, does it make sense to pay providers more, since that would simply add to the costs?

Of course, there is one domain in which P4P should not be an issue – in proactive health management (PHM).  There is little basis for argument that providers are already being paid for PHM, or that it is something that they ought to be doing anyway.  Physicians, for example, have nowhere near the time required to assess their patients’ overall health and risks, much less coach them regularly on how to maintain or improve their health.  To spend even an average of one hour per year on a normal patient panel of 2000 patients would take up a primary physician’s entire work year, and yield almost no revenue under present insurance plans.

But physicians have already found a way to make PHM profitable – through patient-paid “retainer practices”.  Perhaps the best known, and certainly the largest retainer practice organization is MDVIP, of Boca Raton, Florida – where “VIP” stands for “Value in Prevention” as well as the usual interpretation.  A major focus of the roughly 150 physicians practicing in 16 states under the MDVIP banner is on prevention and patient health improvement, rather than just the special amenities, availability and access common in “concierge” practices.

It is necessary for any physicians who charge patients an annual amount in addition to getting paid based on Medicare or commercial insurance payment schedules to identify the specific extra services they offer, beyond those that are covered by health plans.  MDVIP, along with most other retainer practices, offer special health assessments and improvement partnerships, and easily justify their extra fees.

But PHM-focused practices yield significant value to both insurers and employers, even when they receive no payment from these payers.  For example, MDVIP has reported dramatically lower rates of hospital admissions for its patients compared to state averages in four states for which such averages are available.  Its admission rate varies from 62.7% lower in Arizona to 93.5% lower in Virginia.  Its rates for commercially insured patients are uniformly and significantly lower as well, across twice as many states, varying from 36.0% lower in Connecticut to 92.9% lower in Georgia, compared to what are rated the top performing health plans in each state. (www.mdvip.com)

MDVIP already serves employers directly through its Executive Health Plus program, which goes well beyond the traditional one-day-to-one-week-long annual physical to a year’s worth of health maintenance and improvement for executives.  Reductions in sickness absences and impaired performance at work, to say nothing of lower sickness care costs, can easily cover the full year’s retainer for most executives.  The University of Michigan’s Health Management Research Center, for example, found that executives who had even an annual physical had 20% lower sickness care costs and 45% fewer absence days than peers who did not. [N. Santelmann “How the Wealthy Get Healthy” Forbes.com July 21, 2004]

It would be a relatively simple matter for employers, in particular, to contract directly with providers, paying them for such performance as they are able to demonstrate in terms of reduced sickness costs, lower absences, improved performance, and similar value that goes beyond what traditional primary care focuses on.  Such payments would be for a different kind of performance, and one that traditional primary practices are neither paid for, nor usually capable of delivering.

The Empire, er, AMA Strikes Back

by Merrill Goozner

Every once in a while, someone at a conference makes a statement that stands out from the usual platitudinous palaver. Today, that honor belonged to William Plested, the president of the American Medical Association. During a session on the Center for Medicare and Medicaid Services’ efforts to set quality standards to inform (and, let’s face it, one day determine) payment policy, Dr. Plested declared:

“There is a growing refrain that there is a crisis of quality in American healthcare. I want to make it crystal clear that I categorically reject this assertion. . . If there is a crisis in American medicine, it is a crisis like no other in history. It is not a crisis of failure, but one of unprecedented success.”

Forget for a moment the front page New York Times article on Sunday cataloguing the dramatic increase in infant mortality in the American south. Forget for a moment the rising obesity epidemic and demographers’ legitimate fear that it will result in a reversal of the past century’s slow, steady rise in longevity. Forget for a moment the statistics that show that despite the U.S. spending anywhere from 150 percent to 200 percent of what other industrialized countries spend on healthcare, we have longevity and infant mortality statistics that rank us near Eastern European nations — somewhere in the mid-20s among the 30 nations that belong to the Organization of Economic Cooperation and Development.

If you are still wondering why CMS has made so little headway in implementing quality standards and pay-for-performance pricing, this afternoon’s session would have explained it all for you. Herbert B. Kuhn, the acting deputy administrator, gamefully outlined the agency’s goal of moving “from just paying bills to helping people get well and avoiding costs.” They’ve given hospitals a small financial incentive (0.4 percent!) to report performance data; they’ve set up a physician group practice demonstration project; they’ve worked with the AMA in establishing physician performance standards.

Plested’s view on where all this is heading? “You and your loved ones may find yourselves in the hands of someone who foresakes ethics and for a pitifully insignificant reward will follow a cookbook of care designed primarily to reduce costs.”

Physicians have embraced evidence-based medicine, he declared. Treatment must be based on careful scientific research and he insisted that payment reform be held to the same standard. “We are witnessing a pell mell rush to pay for performance programs based entirely upon grandiose predictions of great improvements in quality and massive savings in costs, predictions that are completely without any basis in historical fact. There is even a rapidly escalating body of literature that suggests that the exact opposite outcome — lower quality and higher costs — is much more probable.”

I’m not familiar with that literature, so perhaps readers of this blog can enlighten me. Plested’s insistence that the practice of medicine is strictly according to ethical standards and driven by evidence is way off the mark, though. Every study I have ever seen on the subject suggests that the massive variations in practice and outcomes around the country prove that quality and cost have almost nothing to do with each other.

Moreover, I wish he would have spent a few sentences in his talk addressing the myriad conflicts of interest that have enmeshed more than 90 percent of physicians. Is that what he meant by the ethical practice of evidence-based medicine? Later this week, his society’s journal will publish a study showing that free lunches, free samples and small gifts from drug reps are still the coin of the realm when it comes to determining physician prescribing patterns, and the physicians who sit on the committees that write clinical practice guidelines are still largely doubledipping on the payrolls of the providers with a stake in the outcomes of those guidelines.

It has been said many times that health care reform will not succeed unless reformers can gain the cooperation and collaboration of the nation’s 700,000 physicians. I tend to agree. But on days like today, I am reminded that organized medicine — the AMA — has fought every successful reform movement of the 20th century — from the coming of employer-based insurance and Blue Cross-Blue Shield to expansion of government services through Medicare and Medicaid. Yet after each successful reform, the profession adapted and thrived as never before.

Why did I ever think that the movement to contain costs while improving quality — a must if we are going to weather the twin tsunamis of an aging society and advancing medical technology — was going to be any different. Based on Plested’s comments today, it seems to me that the AMA is gearing up to be the bulwark against reform. This is one more war where organized medicine will be in its foxholes lobbing shells at the reformers.

P4P and other provider perspectives

by Tony Chen

Looks like Scott beat me to the punch on P4P. Scott aptly says that we have to define “pay” and “performance.” A small performance (i.e. adhering to a good process) deserves a small payment. A big performance (i.e. achieving real outcomes) deserves big payment. The problem is this: even if we decided that we should measure outcomes, which ones really make sense? If you read Matthew Holt’s P4P Roundtable summary last year, there are smart people all over the map on this. Yes, the trials and demonstration projects will continue to grow, and one day CMS may even make physician P4P mandatory. We will continue to get news from reputable journals that we should utilize P4P compensation approach. But my guess is it will still be such a small % of all of healthcare; we will still be talking about P4P as an emerging trend in 2012.

While we’re on the topic of incentives, I have a question for everyone. All of the energy/enthusiasm I hear around potential new hospital-related business ventures and extensions are related to prevention, wellness, and retail-based medicine. These new wave of ideas are all about how hospitals can engage and touch patients before they’re patients.

No hospital would admit this. I’m not admitting it either (I just heard this from a *friend*). How in the world are hospitals supposed to do this without losing a lot of downstream revenue? If hospitals are successful at preventing illness and complications and surgeries, we’ve essentially worked ourselves out of a job, right? I know that’s overstated, but somehow hospitals need to think about our purpose/identity in a different way.

VCR companies eventually have to sell DVD players. Cassette player companies eventually have to sell iPODs. Hospitals need to sell health as well as healthcare.

Paying for Performance – Shifting Focus

by Scott MacStravic

Reflecting a widespread tendency to look for simple and plausible solution to complex and persistent problems, the idea of “Pay-for-Performance” (P4P) has gained great credibility in healthcare. It is certainly a favorite for providers, and even payers see its virtues, when “performance” means saving enough money to make paying for such gains worth the investment. But to achieve its full potential, this tool, since it is hardly enough to do solve the healthcare crisis by itself, needs to start with the right definition and measurements of both “Pay” and “Performance”.

While third-party payors expect to be the ones who both do the paying and decide who gets paid for what, providers of the performance that payors want expect to obtain enough to make that performance worth achieving. So far, most P4P schemes tend to reflect relatively modest bonuses rather than enough to make dramatic changes in how providers operate. Meanwhile, while payors want to define “performance” in terms primarily of cost savings, providers persist in their strong preference for being paid based on what they can fully control – on “doing the right thing”, which means adhering to processes of health care and management that represent proven best practices, rather than achieving cost savings.

The one arena where payors and providers may agree on how to measure and judge “performance” may be in managing the health of employees. Providers, as employers, themselves, should be interested in managing the health of their own employees in order to both minimize their labor costs and maximize their own performance, since healthy employees are known to perform better. And as the substantial economic value to employers of healthier employees is translated into substantially greater payment than would be justifiable when only sickness care cost reductions are considered, providers should be willing to include these broader measures of economic performance impact in P4P schemes.

After all, if only processes of health care and management are considered, payors are likely to continue their modest rather than enthusiastic contributions to P4P systems. When such contributions are based on demonstrated economic gains that they realize, payors can afford to be much more generous. The US federal government, for example, has offered to share as much as 80% of the cost savings achieved in one of its disease management demonstration projects with the providers that achieve those savings.

Since it the “performance” that payors most wish to achieve is measured in monetary terms, and the “payment” that providers most want to gain is measured in precisely the same terms, it should be far easier for payors and providers to agree on terms and reach an amicable arrangement when both focus on the same outcomes of care, where cost savings are at least a major component of what “performance” means, and positive ROI for both payors and providers is achieved.