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Health Care Reform:
The Quality/Cost Conundrum
June 29-30, 2009
Brent L. Henry
Nidhi Kumar
Initial Considerations: The Quality/Cost Conundrum
policymakers are attempting health care reform under financially stressful
circumstances (fixed resources and tight budgets); cost considerations will
necessarily accompany concerns about the quality of care in motivating
health care initiatives
is the goal of current health care reform efforts to:
improve the quality of care without increasing costs or
to realize savings without compromising quality?
reforming health care to achieve favorable fiscal results conflicts with the
ideal that a physician’s medical judgment should not be clouded or driven
by financial considerations, which ideal is reflected in anti-kickback and self-
referral laws
2
Recent Legislation, Bills and Proposals
American Recovery and Reinvestment Act (2009)
Healthy Americans Act (2009)*
Help Efficient, Accessible, Low Cost, Timely Healthcare (HEALTH) Act (2009)*
Medical Justice Act (2009)*
Medical Care Access Protection (MCAP) Act (2009)*
Comparative Effectiveness Research Act (2009)*
Patient-Centered Outcomes Research Act (2009)*
Affordable Health Choices Act (2009)*
Senate Finance Committee’s Option Papers (2009)
The President’s Fiscal 2010 Budget
“Health Costs Are the Real Deficit Threat” by Peter Orszag, Director of the Office of
Management and Budget (2009)
Congressional Budget Office’s Options for Health Care (2008)
“The Economic Case for Health Care Reform” by the Executive Office of the President,
Council of Economic Advisors (2009)
Recommendations by Centers for Medicare and Medicaid Services and Medicare Payment
Advisory Commission
“A Path to a High Performance U.S. Health System” by The Commonwealth Fund (2009)
“The Cost Conundrum” by Atul Gawande (2009)
________________
*proposed legislation
3
Voluntary Initiatives: Quality and Cost of Care*
medical technology industry
reducing medical errors and avoidable injuries
health insurance industry
aggregating physician performance data
empowering consumers with personal health records
hospitals
improving care coordination
promoting efficient resource utilization
preventing patient falls
improving perinatal care
medical associations and professional organizations
improving care transitions to prevent hospital readmissions
reducing unnecessary utilization
________________
*as set forth in a letter, dated June 1, 2009, to the President by the coalition of industry leaders who pledged to lower
health care expenditures by $2 trillion over the next decade
4
Voluntary Initiatives: Quality and Cost of Care
pharmaceutical industry
developing and using performance measures to drive quality and
promote better, more efficient care
expanding use of medication therapy management (MTM) to address
polypharmacy, reduce medication errors and inappropriate use, and
achieve better clinical outcomes
developing an abbreviated regulatory approval process for biosimilars
that assures patient safety, increases competition, and provides
responsible incentives for R&D investment
supporting comparative effectiveness research
accelerating the development and adoption of personalized medicine
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Reform Themes Relating to Quality and Cost of Care
improving health care infrastructure
comparative effectiveness research
refocusing payment incentives toward quality, transparency, and
efficiency
serious reportable events
preventable readmissions and gainsharing
addressing medical malpractice
tort reform and medical malpractice premiums
restructuring payment schemes to achieve quality, accountability,
collaboration, and savings
bundled payments
Massachusetts
proposals for health care payment reform
private sector initiatives
6
COMPARATIVE
EFFECTIVENESS RESEARCH
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Comparative Effectiveness Research
American Recovery and Reinvestment Act of 2009 marked $1.1
billion for Comparative Effectiveness Research (CER)
systematic research comparing different interventions and strategies to
prevent, diagnose, treat and monitor health conditions*
recently proposed legislation
Comparative Effectiveness Research Act of 2009
Patient-Centered Outcomes Research Act of 2009
focuses on clinical comparativeness and not cost issues
provides for a private, non-profit organization to set research
agenda, coordinate research efforts, and disseminate
findings
________________
*taken from the Federal Coordinating Council for CER’s draft definition
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Comparative Effectiveness Research
concerns
limited access to and government rationed health care (“national
formulary”)
inadequate treatment for outlier patients
threat to innovation and personalized medicine (“cookbook” medicine)
lack of meaningful, adequate, objective and well-controlled studies
potentially narrow understanding of CER as applicable to only medical
technologies (drugs, devices, and procedures), neglect of medical
protocols, care practices and organizational systems
complexity of “real world” delivery of care
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Comparative Effectiveness Research
additional concerns about CER
economical: how to fix the point at which a well-known health benefit
justifies increased expense
practical: how to individualize treatment for outlier patients for whom
CER standard approaches may not be optimal
ethical: moral responsibility to care for a patient for whom the best
therapy may not meet CER standards
legal:
CER findings as standards of care in malpractice suits
conflicts of interest issues for researchers participating in CER
legal impediments in using CER tools
need for policies and procedures ensuring consistency with CER
findings
10
SERIOUS REPORTABLE
EVENTS
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“Serious Reportable Events”
effective as of October 1, 2008, CMS no longer reimburses for
certain conditions acquired after a patient’s hospital admission
examples of such conditions
foreign objects retained after surgery
blood incompatibility
pressure ulcers
catheter-associated urinary tract infections
certain surgical site infections
concerns
CMS reimbursement rules applied as standards of care
actions of non-employed physicians resulting in readmissions that get
attributed to the hospital
requires clear policies on “serious reportable events” (e.g., not billing for
such events and having in place disclosure/apology protocols)
12
PREVENTABLE READMISSIONS;
GAINSHARING
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Preventable Readmissions; Gainsharing
measures proposed as part of payment reform in the transition
towards bundled payments and accountable care organizations
preventable readmissions: reducing payment rates for hospitals with
readmission rates above a certain benchmark
concerns
hospitals need protection from penalty for patients’ non-
compliance
certain patients experience complications and relapses beyond
the hospital’s control
benchmarks should be based on accurate reporting on
readmission rates
identifying preventable readmissions seems like a subjective
process
hospitals may avoid risk of readmission by increasing patient
discharges to post-acute facilities, and thus offset any savings
14
Preventable Readmissions; Gainsharing
gainsharing: allowing providers to share in savings from improved
efficiency and quality
concerns
conflicts with fraud and abuse laws*
“stinting”
“cherry picking”
“steering”
“quicker and sicker discharge”
hospitals need strong and clear policies for allocating payments
through voluntary agreements with physicians
________________
*July 7, 2008 Proposed Rule (s. 411.357(x)) by CMS: proposed exception for “incentive payment” programs (quality-
based gainsharing) and “shared savings” programs (savings-based gainsharing)
15
MEDICAL MALPRACTICE
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Medical Malpractice
statutory reform on medical malpractice torts
resolution process (early disclosure, administrative decision, and
health court models)
damages (capping non-economic damages; restricting certain
attorneys’ fees)
plaintiffs’ burdens (increasing requirements for filing claims;
heightening standard of evidence)
information about collateral sources of recovery (health insurance)
to juries
periodic payments of damages instead of lump sum payments
shortened statute of limitations
sanctions for frivolous claims
joint and several liability (restricting awards against secondary
defendants)
17
Medical Malpractice
availability and affordability of medical malpractice insurance
requiring insurers to obtain approval before increasing premiums
creating state-run malpractice carriers
allowing business tax credits for premiums or premium subsidies
little or no evidence of the association between tort interventions and
quality-of-care measures
18
PAYMENT REFORM
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Reimbursement Reform Models
Episode-
Fee for Medical Global
P4P Based
Service Home Payments
Payments
fee for service: payment per service
pay for performance: payment based on performance level
medical home: payment to primary care providers for coordinating care
episode-based payments: single payment for full-range treatment for an
acute episode of care
capitation or global payments: single payment for delivering a group of
services designed to meet the health needs of covered individuals
20
Bundled Payments
concerns
if hospitals become care coordinators, they will need to reengineer
clinical operations to align with episode-based payments and CER
requirements
unintended consequences, such as inappropriate reductions in care to
increase profit, may result
reforms may conflict with fraud-and-abuse laws and some state laws on
corporate practice of medicine
health care providers may be penalized for or discouraged from treating
sicker patients
non-integrated and smaller health care providers may be left out
21
MASSACHUSETTS
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Massachusetts: Proposals for Health Care Reform
the Special Commission on the Health Care Payment System has
made certain recommendations, but implementation would require
legislation
movement from predominantly fee-for-service payment must occur to
promote safe, timely, efficient, effective, equitable, patient-centered care
and thereby reduce growth in per capita health care costs
Massachusetts should transition to a payment system where global
payments to provider networks are the predominant form of
reimbursement
global payments should be adjusted for risk and other factors and
incorporate common performance measures
provider networks should become “Accountable Care
Organizations” (ACOs), which may include doctors, other
community-based providers, and hospitals collectively capable of
providing a full range of services to encourage the formation of
medical homes
23
Massachusetts: Proposals for Health Care Reform
the Commission recognizes that some providers may face challenges in
moving away from fee-for-service, and accordingly advises that a
careful transition must occur and offer adequate infrastructure support
for providers
the Commission envisions the transition to occur over a period not to
exceed 5 years
the Commission envisions a transition payment model, shared
savings, that should provide either no risk or limited downside risk
for providers that are unable to assume full risk
the Commission envisions the transition to include financial
incentives for more rapid movement (upside potential increases with
movement towards global payment):
Fee-for-service → Shared savings → Global payment
24
Massachusetts: Proposals for Health Care Reform
the Commission envisions an oversight board that would guide the
implementation of recommendations
oversee and regulate aggregation of providers into ACOs
composition and participation, scale, risk considerations
determine global payment methodology
determine sticks and carrots to drive system changes
establish transition milestones and monitor progress
progress to target
payment equity
cost growth
intervene as necessary
25
Massachusetts: Proposals for Health Care Reform
concerns
varying states of readiness
how much of the provider community is ready to do this?
how can those who are not ready be brought along?
how will the shifting of risk from payers to providers be addressed?
if risk is transferred, how can we ensure that insurance products are
consistent with provider risk?
how can we ensure the transfer of risk is based on the provider’s scope of
control?
consumer role
are consumers ready to accept limitations?
how will they be engaged in this transformation?
will insurance products support this?
will the business community support this?
26
Massachusetts: Proposals for Health Care Reform
setting rates
who will set the rates and how?
current risk adjustment models only capture about two-thirds of cost
variation due to patient acuity - how will the payment methodology account
for this?
how do we ensure that adjustments will be reasonable and/or adequate?
how do these models today correlate with performance on total medical
expenditures?
27
Massachusetts: Private Sector Initiatives
Variation in High Cost Comparative Address Administrative
Diseases Effectiveness Complexity
Chronic diseases account for 75% Technology-related changes in The average U.S. hospital devotes
Opportunities
of the nation’s medical costs medical practice estimated to ~24% percent of spending to
~20-30% of healthcare spending is contribute 40-60% of growth in real administration
estimated to be overuse, underuse, health care spending per capita Administrative ‘burden’ in physician
and misuse New technologies don’t always add offices is ~11% of net patient
value revenue
Massachusetts health plans’ admin
expense ratio was 11% from 2002-
2007
Benefit design giving patients Support institute to research clinical Standardize and streamline
responsibility and incentives to live and cost effectiveness of technology administrative processes across
healthy lives and treatment choices payers
Payment reform to eliminate New benefit designs or coverage Appeals process
Initiatives
Potential
disincentives and create incentives decisions that incorporate comparative Medical policy taxonomy
to reduce unwarranted variation and effectiveness and terminology
improve quality Patient decision aids Increased use of electronic
Evidence-based guidelines Payment reform that incorporates eligibility verification
Performance information for comparative effectiveness Benefit design or product
providers simplification
E A C H
28 Employers Action Coalition on Healthcare
Massachusetts: Private Sector Initiatives
Variation in High Comparative Address Administrative
Cost Diseases Effectiveness Complexity
Pilot Focus
Chronic Disease: Diabetes Prostate Cancer for proof of Standardization of
Acute: Chest Pain concept medical policy
Then, chronic back pain Standardization
and streamlining of
eligibility process
Community standard Use ICER to develop Development of
guidelines for care community standards of standards
Evidence-informed case practice Technical
Approach
rates (potentially Experiment with different assistance to
Likely
Prometheus) ways of changing practices providers on
Standardized information to Provider incentives eligibility
providers Patient incentives
Patient incentives for Decision aids
compliance (chronic
disease)
E A C H
Employers Action Coalition on Healthcare
29
Massachusetts: Private Sector Initiatives
Be willing to address the Be willing to offer strong
variation in care for patients incentives to employees
with chronic diseases Incentives to use integrated
Be willing to practice evidence- provider groups for defined
based guidelines and adhere conditions
to common clinical standards Patient incentives for
evidence based practices
Em
Reinforce implementation
rs
e
Coverage for new
pl o
vid
EMR
ye
technology that takes cost
Pro
Training
rs
effectiveness into account
Incentives to individual
Be willing to limit
physicians
customization of patients
Health Plans
Be willing to agree to common standards
Administrative processes
New technology assessments
Offer new products with benefit designs that incorporate
comparative effectiveness and patient incentives
E A C H
Reduce unnecessary complexity for providers Employers Action Coalition on Healthcare
30
