Hospital Value-based Purchasing program 1% incentive is like homeopathic medicine — too diluted to actually work

In the June 15, 2017 issue of the New England Journal of Medicine, Andrew Ryan and colleagues from the University of Michigan published an evaluation of the Medicare Hospital Value-Based Purchasing Program (HVBP).

To summarize, if you offer a 1% incentive, and then dilute it by offering it only for the 40% of hospital patients covered by Medicare, and then dilute it further by spreading it across three domains (clinical process quality, patient experience and mortality), and then dilute each of these by basing them on multiple component metrics, and then dilute it more by choosing metrics that have already been reported for a number of years (and therefore the “low hanging fruit” improvement opportunities may already have been picked), and then further dilute it by offering the incentive mixed in with many other incentives for such things as meaningful use of EMRs…..

Wait for it….
You don’t see impact, even after 4 years.
The thinking behind HVBP is like homeopathy, where the practitioners assert that the more they dilute the homeopathic remedy ingredient, the more powerful the remedy becomes.
Imagine if a company hired a CEO and wanted to incentivize her to achieve growth and profitability. Would they consider a 1% incentive to be meaningful (even without further dilution).  No, the board would choose a number 50 to 75 times higher.
How about an equipment manufacturer choosing an incentive percentage for its sales team?  One percent sound like enough?
I’ve been exasperated for years that our value-based reimbursement designs – for both government and commercial payers – include an incentive that is far too small to motivate the types of changes they are intended to cause.  I fear we are just setting ourselves up for eventually someone saying “well, we tried incentives, and they don’t work.”
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First take on new CMS Comprehensive Primary Care Plus model

CMS CPC IconThis morning, I read about the recently announced next generation version of the CMS Comprehensive Primary Care model, which will require multi-payer participation and will involve up to 5K practices in 20 regions.

Sounds interesting.  I need to study it in more detail.  But based on my initial assessment:
  • I agree with the idea of pursuing payment and delivery system changes on a multi-payer basis to make it more compelling to providers.
  • I also agree with the idea of prepaying some E&M and then paying reduced FFS for E&M to cover only marginal cost of E&M office visits to make providers incentive-neutral on encounter modes.
  • But I disagree with move away from shared savings and implicit abandonment of the idea of non-governmental primary care-based organized systems of care pursuing care process innovation in favor of CMS taking over responsibility for defining a nationally-standardized multi-payer “care delivery model” and injecting it into individual primary care practices using a CMS-developed  “learning system.”
  • I also disagree with the Track 2 idea of partnering with “CMS-convened” IT vendors and contractual commitment to specific IT capabilities.  That approach basically takes MU, which was a huge distraction from real improvement, to even more obnoxious levels of micro-management.
Overall, I share the Fed’s frustration with the limited impact of previous efforts to transform primary care payment and delivery models, but I think the solution should be to define incentives which are more timely, coherent and consequential, enabled by more meaningful transparency requirements, clearer care relationships and some empowerment of primary care delivery organizations to define their own referral networks.
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New HIT ROI lit review is a methodologic tour de force, but misses the point

JAMIA logoRecently, Jesdeep Bassi and Francis Lau of the University of Victoria (British Columbia) published in the Journal of the American Medical Informatics Association (JAMIA) another in a series of review articles that have been written in recent years to summarize the literature regarding the economic outcomes of investments in health information technology (HIT).  Such articles answer the questions

  • “How much do various HIT technologies cost?”
  • “How much do they save?”
  • “Are they worth the investment?”

They reviewed 5,348 citations found through a mix of automated and manual search methods, and selected a set of 42 “high quality” studies to be summarized.  The studies were quite diverse, including a mix of types of systems evaluated, methods of evaluation, and measures included.  The studies included retrospective data analyses and some analyses based on simulation models.  The studies included 7 papers on primary care electronic health record (EHR) systems, 6 on computer-based physician order entry (CPOE) systems, 5 on medication management systems, 5 on immunization information systems, 4 on institutional information systems, 3 on disease management systems, 2 on clinical documentation systems, and 1 on health information exchange (HIE) networks.

Lau HIT ROI results

Key results:

  • Overall, 70% of the studies showed positive economic results, 24% were inconclusive, and 6% were negative.
  • Of 15 papers on primary care EHR, medication management, and disease management systems, 87% showed net savings.
  • CPOE, immunization, and documentation systems showed mixed results.
  • The single paper on HIE suggested net savings, but the authors expressed doubts about the optimistic assumptions made in that analysis about a national roll-out in only ten years.

My take:

Bassi and Lau have made an important contribution to the field by establishing and documenting a very good literature review methodology – including a useful list of economic measures, a nice taxonomy of types of HIT, and many other tools which they graciously shared online for free in a series of appendices that accompany the article.  They also made a contribution by doing some tedious work to sort through lots of papers and sorting and classifying the HIT economics literature.

But, I think they missed the point.

Like many others, Bassi and Lau have implicitly accepted the mental model that health information technology is, itself, a thing that produces outcomes.  They evaluate it the way one would evaluate a drug or a cancer treatment protocol or a disease management protocol.  Such a conceptualization of HIT as an “intervention” is, unfortunately, aligned with the way many healthcare leaders conceptualize their investment decision as “should I buy this software?”  I admit to contributing to this conceptualization over the years, having published the results of retrospective studies and prospective analytic models of the outcomes resulting from investments in various types of health information technologies.

Process PuckBut, I think it would be far better for health care leaders to first focus on improvement to care processes — little things like how they can consistently track orders to completion to assure none fall through the cracks, bigger things like care transitions protocols to coordinate inpatient and ambulatory care team members to reduce the likelihood that the patient will end up being re-hospitalized shortly after a hospital discharge, and really big things like an overall “care model” that covers processes, organizational structures, incentives and other design features of a clinically integrated network.  Once health care leaders have a particular care process innovation clearly in sight, then they can turn their attention to the health information technology capabilities required to enable and support the target state care process.  If the technology is conceptualized as an enabler of a care process, then the evaluation studies are more naturally conceptualized as evaluations of the outcomes of that process.  The technology investment is just a one of a number of types of investments needed to support the new care process.  The evaluation “camera” zooms out to include the bigger picture, not just the computers.

I know this is stating the obvious.  But, if it is so obvious, why does it seem so rare?

This inappropriate conceptualization of HIT as an intervention is not limited to our field’s approach to economic evaluation studies.  It is also baked into our approach to HIT funding and incentives, such as the “Meaningful Use” incentives for investments in EHR technology, and the incentives created by HIT-related “points” in accreditation evaluations and designations for patient-centered medical home (PCMH), accountable care organizations (ACOs), organized systems of care (OSC), etc.  The designers of such point systems seem conscious of this issue.  The term “meaningful use” was intended to emphasize the process being supported, rather than the technology itself.  But, that intention runs only about one millimeter deep.  As soon as the point system designers put any level of detail on the specifications, as demanded by folks being evaluated, the emphasis on technology becomes instantly clear to all involved.  As a result, the intended focus on enabling care process improvement with technology slides back down to a  requirement to buy and install software.  The people being evaluated and incentivized lament that they are being micromanaged and subject to big burdens.  But they nevertheless expend their energies to score the points by installing the software.

So, my plea to Bassi and Lau, and to future publishers of HIT evaluation studies, is to stop evaluating HIT.  Rather, evaluate care processes, and require that care process evaluations include details on the HIT capabilities (and associated one time and ongoing costs) that were required to support the care processes.

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Trinity Health and BCBSM sign contract to invest in infrastructure for clinical integration and population management

Trinity Health – Michigan and Blue Cross Blue Shield of Michigan (BCBSM) recently announced that they signed a three and a half year agreement under which BCBSM will provide some funding to support a collaborative effort of Trinity Health and its affiliated physician organizations to make improvements in infrastructure designed to improve clinical integration and support population management, with the goal of improving the quality of care, enhancing patient experience and outcomes, and reducing health care costs.  BCBSM and Trinity Health will also collaborate to implement performance measures on patient satisfaction and quality.  These infrastructure improvements and measures will prepare Trinity Health and its affiliated physician organizations for a transition from a fee-for-service reimbursement from BCBSM to a “performance-based reimbursement” or “gain sharing” arrangement, to be implemented sometime before 2016.

Trinity Health is the third health system to sign similar agreements with BCBSM, after St. John Providence Health System and Beaumont Health System.    By the end of 2012, BCBSM intends to reach agreements with additional hospitals so that 50% of its hospital spending will be subject to value-based reimbursement agreements.

More details are available in Crain’s Detroit Business.

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Is current low trend in health care cost growth due only to recession? Ken Kaufman suggests that 5 other factors may be contributing.

In a very interesting recent post to the Health Affairs blog, Ken Kaufman challenges the widely repeated assertion that the current low level of health care cost growth can be attributed to the recession.  After decades of double digit trend, the rate slowed in recent years down to a mere 3.9% in 2010.  The conventional wisdom is that recessions cause decreases in employment by employers offering good insurance and general recessionary belt-tightening includes reductions in utilization of discretionary health care services.

Kaufman noted that inpatient hospital utilization by Medicare patients dropped 8% from 2006 to 2010 — patients that are presumably retired and therefore not affected by recessionary unemployment.  He also noted that states with a larger drop in Medicare utilization were the ones with the smallest drop in employment rates, the opposite of what one would expect if the recession was the driver of the drop.  From these observations, Kaufman proposes that we should look for other factors at play.  He suggests an initial list of five other factors:

  1. As doctors move from entrepreneurial self-employment to employment by hospitals and large groups, they come under the influence of care protocols, disease management and other clinical programs that attempt to drive down avoidable utilization
  2. As hospitals’ revenue growth slowed, they changed from an “all things to all people” philosophy to a policy of eliminating unprofitable programs
  3. New “care models,” including new approaches to physician incentives and reimbursement, are starting to have an effect
  4. Dramatic shift from brand name to generic drugs
  5. Health care utilization may have reached the point of “diminishing marginal utility,” where people’s appetite for more is diminished and other alternatives for resource allocation are relatively more appealing than more health care

As we (hopefully) continue to recover from the recession, everyone expects health care trends to creep back upward.  But, perhaps they won’t creep all the way back up to the teens due to these forces keeping cost growth in check.

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Of 27 new ACOs named by CMS: 93% avoid downside risk, 82% avoid CMS loans, 33% use payer-based infrastructure, and average beneficiaries per physician is 106

Yesterday, CMS announced the first batch of 27 “normal” ACOs under its Medicare Shared Savings Program (MSSP).

I found five things interesting about the list:

  1. 93% were unwilling to accept downside risk.  In the original proposed rule for the MSSP, ACOs would have been forced to accept downside risk.  Presumably, CMS thought that “skin in the game” would be an important motivator for real transformative change, and they wanted to increase the chances that the federal government would be able to achieve a net cost reduction.  But, in response to fierce backlash from providers saying they did not want to accept downside risk, CMS relented and introduced an option allowing providers to avoid taking downside risk in exchange for a smaller upside reward.   When it came time to lay chips on the table, 93% took the safe bet.
  2. Only 18% requested up-front payment.  One of the complaints from the provider community during the design phase of the MSSP was that providers lacked access to the capital needed to create the infrastructure to successfully improve care processes and manage risk — things like healthcare information technology, analytics and care management.  In response, CMS offered an option where ACO applicants could receive some up-front payments that would be repaid out of subsequent rewards.  CMS was offering to finance the investment, but it would be a loan, not a grant.  Only 18% of the first batch of ACOs selected this option.  I suspect this was due to the same risk aversion that led them to accept smaller rewards to avoid downside risk.
  3. 33% used payer-based infrastructure.  If physician organizations are to remain locally-focused, it makes more sense to share infrastructure with others to achieve economies of scale, rather than taking on the cost of creating their own infrastructure.   As I described in a prior post, this can be accomplished through a franchise arrangement.  It can also be accomplished through a management services organization (MSO), as is commonly done by PPOs and medical groups in mature managed care markets.  Or, it can be done by partnering with payers who already have such infrastructure.  Any of these approaches could potentially work, but I’m least enthusiastic about using payers’ infrastructure.  Nevertheless, nine of the 27 new MSSP ACOs are organized as partnerships between local health care providers and Collaborative Health Systems (CHS), a division of Universal American, a publicly-traded for-profit health insurance company that offers a variety of plans including Medicare Advantage plans.  For these 9 ACOs, Collaborative Health Systems will provide a range of care coordination, analytics and reporting, technology and other administrative services.  This is a popular option not only because of the economies of scale, but also because it allows the providers to avoid having to take out a loan, either from CMS or from traditional sources of capital such as banks or the equity markets.
  4. 44% did not note the number of physicians in their press-release blurb.  I hate to read too much into such a factoid.  But, for ACOs to work, the physicians must really be involved.  What does it tell you if the organizers of an ACO, when drafting their little blurb for the CMS press release announcing their selection as one of the first batch of MSSP ACOs, did not think to state the number of physicians involved?
  5. Average beneficiaries per physician is 107.  Of the 13 ACOs that did think to include the number of physicians in their press release blurb, 4 of them had between 100 and 400 beneficiaries per physician, 7 of them had between 31 and 60 beneficiaries per physician, and 2 of them had less then 10 beneficiaries per physician.  If ACOs are to really work, they don’t just need infrastructure, they need “mind share.”  If 5% of your patients are involved in some new program, and if you have not agreed to any downside risk in terms of taking on debts or being on the hook for possible negative rewards, and if the rewards are relatively small even for that 5% of your patients, are you really going to be motivated to radically transform your care processes and change your habitual clinical decision-making practices?

Here’s this list, including the beneficiaries per physician calculations.

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CBO: Bundled payments for bypass surgery saved 10%, but pay-for-performance and gain-sharing was not effective in 3 Medicare demonstrations

Lyle Nelson from the Congressional Budget Office (CBO) has been busy.

Two weeks ago, I commented on the results of Nelson’s review of 6 Medicare Care Management demonstration projects over the last decade. At the same time that report was released, Nelson also released a companion report on the 4 “Value-based Payment” CMS demonstrations over the same period. The following is my adaptation of the main results table in this new CBO report.

The most influential of these demonstrations was the Physician Group Practice Demonstration (PGP).  The ten PGP participants included 2 faculty group practices within academic medical centers, 5 non-academic integrated delivery systems, one freestanding group practice, and one network consisting of 60 small practices.  All had experience with care management programs before the demonstration, and all implemented care management programs in the Medicare population for the demonstration.    These care management programs mostly consisted of nurses serving as care managers, focusing primarily on patient education and monitoring for patients with CHF or diabetes or meeting other “high risk” criteria.  Most implemented chronic disease registries for use by the care managers, in addition to using electronic medical records systems that were already in place or in the process of being implemented before the start of the demonstration.

Two of the ten PGP participants received bonuses in the first year, since the Medicare expenditures were more than 2% below the expected expense.  Four participants received bonuses in the second year, five in the third and fourth years, and four in the fifth year.  A formal evaluation of the program conducted after the first two years concluded that the overall effectiveness of the PGP across the ten participants was about 1% gross savings in year two, and even lower in year one.  Net savings, after counting the cost of the bonuses paid to some of the participants, was only 0.1% in year two.

The CBO report points out that even this meager 0.1% net savings might be an over-estimate, because PGP participants changed their diagnostic coding practices, making their populations appear to be sicker, and therefore making the risk-adjusted cost targets artificially high.  Such revenue maximization efforts have been job one in Medicare Advantage plans for years.  The PGP participants succeeded in lifting their risk scores by 8%, which was 3 percentage points higher than the increase in the comparison population.  And, the savings might have been further overestimated because all four of the PGP participants that achieved reward payments in year two already had slower than normal growth in Medicare expenditures before the PGP demonstration began.  All the other PGP participants that did not earn year 2 bonuses had pre-demonstration Medicare growth that was no different than the comparison population.

Despite these discouraging results, the PGP demonstration was nevertheless used as the main evidence base supporting the design of the Medicare Shared Savings Program, calling for the establishment of Accountable Care Organizations (ACOs).  It is also the main evidence base for the associated Pioneer ACO program, for which 32 participating provider organizations have recently been selected.

The Premier Hospital Quality Demonstration focused on 5 disease states and made bonus payments that amounted to only 0.25% of the total Medicare payments for those disease states.  That’s two orders of magnitude less than the size of incentive payments thought to substantially influence performance.  With such a tiny prize, it is not surprising that the quality improvements were assessed to have only a 1-5% incremental impact of process of care quality metrics during a period of time when such process of care metrics were improving nationally.  And, the CBO report concluded that the demonstration had no effect on Medicare expenditures for inpatient hospital care.  In fact, taking into consideration the reward payments, the demonstration led to an increase of costs by 0.3%.

The most successful of the demonstration projects was the Medicare Participating Heart Bypass Center Demonstration, which was used as a model for similar provisions in the health care reform law (PPACA).  In this program, the hospitals negotiated their bundled payments up front, ensuring that Medicare received savings compared to typical fee-for-service cases.  Overall, the program saved Medicare 10%.

So, where did the savings come from?

It’s possible that  they just came from good negotiating by CMS with hospitals that wanted to get out in front of what they saw was an inevitable trend toward bundled payment.  But, let’s assume that the hospitals really had a plan to reduce their costs in proportion to the negotiated decline in their revenue.

In interviews with leaders of the participating hospitals, the important changes in their approaches to patient management that were intended to reduce their costs included:

  1. Greater involvement by surgeons in postoperative care
  2. Earlier discharge of patients from the intensive care unit
  3. Greater standardization of surgical protocols and supplies
  4. Substitution of less expensive drugs for more costly ones, and
  5. Greater reliance on clinical nurse specialists for managing patients’ care in the hospital.

The participating hospitals substantially decreased their length of stay during the demonstration period, although length of stay for bypass surgery was dramatically decreasing nationally during that same time period.

However, probably more important than these process changes was the fact that all the participating hospitals created a physician reimbursement approach that established a fixed per case payment expected to cover all physician payments.  This amount was split in defined percentages among the four types of specialists involved in every bypass case — the thoracic surgeon, cardiologist, anesthesiologist, and radiologist.  Any payments to other specialists was essentially payed from this pool, reducing the payments to the four core specialties. Therefore, the hospitals created a strong incentive for the core specialties to limit referrals to other specialists.  This undoubtedly led to a reduction in utilization of those other specialists and the tests and procedures they generate.  Therefore, some of the savings probably came from reducing revenue to non-core specialists.

My conclusions

  1. Don’t bother with incentives unless they are large enough to change behavior.  A 0.1% reward can’t work.  Nor can a 1% reward.  Try 10-20%.
  2. Don’t create asymmetrical up-side only incentives.  They are far weaker in terms of motivating change.  And, they create a problem with paying out undeserved rewards for lucky good results.
  3. Negotiate the savings up front, rather than just creating a game from which savings might be achieved.
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HHS Releases Final ACO Rule

The Department of Health & Human Services (HHS) today released the final rule for accountable care organizations (ACO).

The new rule includes a number of changes designed to make the Medicare Shared Savings Program more palatable for health care providers who had a largely negative response to the draft rule released last March. The changes include the following:

  • Allow providers to choose to participate without any downside financial risk during the initial contract period, rather than requiring all participants to take downside risk during the third year of the contract period
  • Provide up front financial support to physician-owned ACOs to support investments in building ACO capabilities, to be repaid through gain sharing rewards in subsequent years
  • Reduce the up front investment needed by eliminating the requirement for meaningful use of electronic health records
  • Reduce the number of quality measures from 65 to 33
  • Allow providers to choose from a number of available start dates throughout 2012
  • Allow community health centers and rural health clinics to serve as ACOs
  • Prospective identification of the Medicare beneficiaries for whom the ACO will be held accountable, rather than deriving such care relationships after the accountability period
  • Eliminates the mandatory anti-trust review for newly-formed ACOs
  • Puts the burden on the federal government, rather than nascent ACOs, to gather data regarding local market share
The  text of the rule is available here, and the associated final waiver rules are available here.

In my opinion, the elimination of the requirement to accept downside risk is likely to substantially increase the willingness of providers to participate in the program, while simultaneously reducing the likelihood that participation will lead to meaningful transformation of the care process within those participants.  But, given the strong opposition to the draft rule, CMS had little choice but to dilute the requirements to at least get some players to take the field.

 

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2 min video of Harold Miller saying hospitals need to be offered a “glide path” to handle revenue reduction anticipated from new payment models

In this 2 minute video, Harold Miller, Executive Director, Center for Healthcare Quality & Payment Reform,talks about the changes that hospitals will face during the transition to new payment models. His remarks were part of the Massachusetts Medical Society’s program, “A Path to Accountable Care Organizations: How Do We Get There From Here?”, held on Sept. 13, 2011.

He argues that savings won’t necessarily come from reducing the revenues of specialist physicians, but that they are likely to come from reducing revenue to hospitals, device manufacturers and others.  He says hospitals need to anticipate getting smaller, and payers need to create a good “glidepath” to make that happen without being too disruptive.

I agree wholeheartedly with this principle. More generally, I am a big fan of Dr. Miller’s work. He thinks clearly about health care structures and processes, and is an effective communicator. His early framing of Accountable Care remains very useful.

http://www.youtube.com/embed/aeF9mLzCrN4

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CMS Innovations Center announces new Medicare Bundled Payments Initiative. I predict it will be popular.

On top of the Medicare Shared Savings Program (the original ACO initiative) and the Pioneer ACO Program, CMS is now adding four more optional approaches for providers to get reimbursed for Medicare services.  The new models all involve bundled payments, where a single negotiated payment covers all professional and facility services for a particular type of episode, such as a hip replacement.  This approach has been shown in a previous Medicare demonstration project and numerous bundled payment initiatives of commercial payers to create an incentive for physicians and hospitals to do a better job coordinating care and reducing the use of potentially unnecessary services during the episode of care, resulting in lower overall cost.

The four new models differ in terms of what the bundle includes and whether the payment is made prospectively or retrospectively.

Under the program, data about the historical cost for the services associated with the bundle will be provided by CMS. Then the provider will negotiate a discount percentage off of the historical cost, assuring that CMS receives some savings.  Then, if providers can reduce their actual cost more than the discount percentage, they get to keep the additional savings.  It’s a fair bet that, over time, CMS will ratchet down the bundled payment one way or another.

So, the idea is for providers to voluntarily sign-up for a program that will reduce their revenue.  Why would they do that?  For two reasons:

  1. They could make more bottom line profit if they decreased their fixed and variable cost faster than CMS decreases the bundled payments, and
  2. They know the market is heading back in the direction of providers bearing more risk, and this is a way to get their feet wet and establish their capabilities for care coordination, care process transformation, utilization management and the supporting information technology and analytics.

I predict that the bundled payment approach will be more popular among health care organizations than the more global ACO approach because is feels more gradual, more controllable, and more understandable.  As a result, it is less risky and scary.

More information about these bundled payment options are available on the CMS website.

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