DEFINITION AND OVERARCHING THEMES
The goal of the cross-cutting session on finance was to identify strategies that can be used by communities to change the way care is paid for by both the public and private sectors, with the aim of encouraging and rewarding higher-value care delivery. Finance and payment reforms building on demonstrations with the potential to lead to ongoing systemwide changes were highlighted, as well as methods communities might use to develop a business case for a given intervention from a variety of perspectives.
The following definition of finance that supports quality improvement—whose origins trace to the Quality Chasm report—was accepted by participants in this session and served as the framework for the discussions that followed:
Payment incentives should be aligned with quality improvement. Fair payment should be provided for good clinical management of patients, so that providers neither gain nor lose financially for taking care of the sickest patients and most complex cases. Providers should have an opportunity to share in the benefits of quality improvement. Incentives should be aligned with the implementation of care processes based on best practices and the achievement of better patient outcomes, as well as other desired actions, such as investment in information and communications technology infrastructure. Finally, finance in this context may also include defining a business case for a given intervention from a variety of perspectives, including the physician group, hospital, or community at large.
The objectives for the health care finance system articulated by participants in this session were to create a system that helps prevent the onset of disease and comorbidities; impedes the progression of chronic illness; and pays for effective, evidence-based health care. The participants also underscored that any changes to the finance system should be budget neutral—meaning that the issue is not the absence of sufficient resources. To the contrary, many participants noted that, if anything, the current system is characterized by substantial waste, and the needed changes involve redirecting and redistributing revenue streams rather than just spending more money. As a result, it must be accepted that there will be winners and losers. The challenge identified by the group was to overcome the considerable incentives to maintain the status quo among those who might be negatively impacted. Participants suggested that the key will be to align payments with incentives for providing high-quality care.
This sentiment was also echoed in Don Berwick’s keynote speech when he called for payment reform—not more money, but different ways to pay—as a critical strategy for improving the quality of health care for all Americans. Throughout his address, he provided numerous examples of overuse of procedures that do not help, or even harm, patients; underuse of procedures that are proven to be beneficial to patients; and misuse or errors of execution of care (Chassin and Galvin, 1998). These examples included, respectively, excessive use of intensive care and invasive care at the end of life (Wennberg et al., 2004); failure to adhere to evidence-based care protocols for diagnosing, treating, and monitoring depression, as illustrated by Martha Whitecotton’s presentation (see Chapter 4) (Wang et al., 2000); and the ill effects of medication errors experienced by 7 of every 100 patients admitted to America’s hospitals (Bates et al., 1995).
Berwick also cited the work of John Wennberg at Dartmouth College—a pioneer in the study of variation in the delivery of care—and others to demonstrate that inconsistencies in care persist throughout the country despite first being called to our attention more than 30 years ago (Wennberg and Gittelsohn, 1973). For example, in a study using Medicare data, even after controlling for confounding variables, a 400 percent variation was found nationwide, by hospital service area, in the likelihood that a person with heart failure would be admitted to the hospital (Fisher et al., 2000). Another study identified the potential for generating savings to Medicare of almost 30 percent of total costs if all regions provided care as efficiently as do those in the top quartile, with some indications that more efficient areas provide higher-quality care (Fisher et al., 2003a,b). In response, Berwick proposed ridding the existing health care system of waste and addressing variations in care, rather than funneling more money into the system (which currently accounts for more than 15 percent of gross domestic product) (Levit et al., 2004). He urged finding better ways to pay for chronic care, move payment toward better alignment with high quality, encourage best practices, and increase cooperation among providers (Berwick, 2004).
“The United States spends 40 percent more than any other western democracy on health care per capita…for which our outcomes of care are generally no better than, and in many well-documented cases worse than, care in these other countries. We spend more and we get less.”
—Don Berwick, summit keynote speaker
An important caveat expressed during the session was that finance strategies, such as those discussed at the summit, developed to do more on a prepayment basis focus on individuals who are already part of the health care system and have some type of insurance coverage, excluding the uninsured. The IOM has issued several reports calling for universal health insurance coverage (IOM, 2002a, 2003a, 2004). While this issue was not a specific focus of the
summit, many participants expressed the view that action must be taken immediately to provide all Americans with insurance coverage.
The session participants identified four strategies for addressing the primary barriers facing the finance system: (1) implement performance-based payment models; (2) employ evidence-based benefit design; (3) provide payment for proven quality support services; and (4) engage consumers with information and incentives.
Implement Performance-Based Payment Models
This key strategy was described by session participants as paying clinicians or provider groups (physician organizations, hospitals, and health plans) differentially based on the quality and efficiency of the care they deliver. Inherent in this model is the ability to measure performance and outcomes, which requires agreement on the evidence supporting the measures used, including those for quality support services such as group visits, patient education, and care management. To achieve this goal would require changing the current base payment system and providing incentives for both providers and patients to change behavior.
Although the participants shared a sense of urgency regarding the implementation of this strategy, they acknowledged that the broad system changes needed might best be accomplished through a series of transitional (but not small) steps, as opposed to a one-step overhaul of the entire current system. They also identified the following impediments to redesigning existing payment models to reimburse only effective care:
The CPT® (current procedure terminology) code encounter model rewards clinicians on the basis of volume (AMA, 2004). A shift to some other payment model, such as providing aggregate payment in the form of performance-based capitation by chronic condition—could result in some providers seeing a decline in revenues (predictably to be met with resistance) if components of evidence-based chronic care such as those described in the Chronic Care Model are not in place (Wagner et al., 2001; see Chapter 1 for a description of the Chronic Care Model).
The accurate and reliable metrics and data infrastructure needed to link quality and efficiency to payment models are lacking.
There was strong agreement that the foundation of valid pay-for-performance efforts is having standardized performance measures. Session participants noted that federal agencies, such as the Centers for Medicare and Medicaid Services (CMS), must take a leadership role in requiring national-level performance reporting on a core set of measures. Participants agreed with the recommendation of the IOM report Leadership by Example: Coordinating Government Roles in Improving Health Care Quality that while the role of the federal government is crucial, such an effort would best be advanced through public–private partnerships (IOM, 2002b). The condition-specific working groups also stressed the need for a succinct set of measures on which to focus assessment of quality improvements efforts (see Chapter 8).
Requesting help from CMS, national champion Pacific Business Group on Health (PBGH) committed to supporting local and national initiatives to pay for performance for whole communities. Arnold Milstein, M.D., Medical Director at PBGH, summed up the dilemma of the current payment system with the following statement during the commitment portion of the summit: “I was struck by Don Berwick’s remarks yesterday, that Appleton Wisconsin’s has the lowest decile per beneficiary costs for Medicare and that the major health plan serving that area had the highest HEDIS® scores in the country in 2002 [American Hospital Publishing, Inc, 1999; personal communication, G. Pawlson, NCQA, March 22, 2004]. This is a
community that I’m sure is in no way rewarded for that kind of spectacular performance on two very important dimensions of quality” (NCQA, 1997).
As recommended in the IOM’s Quality Chasm and Priority Areas for National Action reports (IOM, 2001, 2003b) and illuminated during this session, a starting point to accelerate the adoption of performance-based payment models might be to focus on a set of priority conditions, such as the five targeted for this summit (asthma, depression, diabetes, heart failure, and pain control in advanced cancer). Ideally, payment would be made on a condition-specific basis for what is known to be effective processes of care; an example is a compound metric encompassing the core aspects of diabetes care—HbA1c monitoring, blood pressure monitoring, biennial lipid testing, and annual eye and foot screening. Such an approach, currently under way at HealthPartners, Inc. in Minneapolis (Personal communication, G. Isham, HealthPartners, Inc., February 9, 2004), requires treating the patient holistically and fully recognizing multiple comorbidities, including a decline in functional ability or an increase in sensory deprivation, that may not be directly linked with any one disease. Thus there would be a natural evolution toward paying less for visits and procedures and covering more system-level interventions, such as care coordination, with the eventual goal of an evidence-based benefit package. This approach is discussed in the next section as another possible solution to restructuring the health care finance system.
Kim Horn, president and chief executive officer of Priority Health and a team member of the Grand Rapids Medical Education and Research Center community, provided an example of a pay-for-performance initiative during the finance session. See Box 6-1.
Priority Health is a not-for-profit, community-based health plan with approximately 450,000 members serving the western portion of the state of Michigan. Seven years ago, Priority Health initiated a Physician Incentive Program, which gives monetary rewards to primary care providers for delivering superior-quality care and for achieving high levels of patient satisfaction—as measured against national standards and benchmarks. Three of the priority areas highlighted at the summit—diabetes, asthma, and depression—are part of this program, which also includes screening for tobacco use and a host of preventive health care measures. The program is driven by the clinical evidence base and grounded in the principle of transparency, facilitated by the use of information and communications technology. For example, on-line resources assist patients in finding a physician with “three apples”—a known provider of high-quality care. There is also a website where physicians and patients can retrieve information on good care for diabetes, for example, as well as for other conditions.
Priority Health will spend almost $5 million in 2004 on this program, and the number of physicians who qualify for payment has tripled since the program’s inception in 1997. Overall, average scores on performance measures have increased by approximately 5 points, comparable to national trends. Most notable, however, is that Priority Health has been successful in significantly decreasing the variation in practice patterns among its clinicians.
As we’ve gone about our payment practices, we’ve learned three principles: (1) Keep it simple. (2) Bundle payment for services whenever possible. (3) Align incentives so people are focused on the same things, whether you’re a hospital, a physician, or a patient.”
—Kim Horn, summit participant
Additionally, Karen Ignani, president of America’s Health Insurance Plans (AHIP), committed to sharing her organization’s experiences with pay-for-performance initiatives in which AHIP members are engaged—some in collaboration with employers, purchasers, and consumers. Said Ignani, “We’re tracking it, we have a great deal of information, we will report it every step of the way, so if you have questions we’d be happy to be a gateway for that.”
The importance of promoting pay-for-performance systems was reinforced by the condition-specific working groups, which identified payment reform as a key strategy for achieving high-quality care. For example, the depression working group proposed a “transformational aim” of redesigning the finance system to pay for equitable, effective, and efficient performance based on evidence-based guidelines. That group also echoed the notion of budget neutrality, identifying it as an overriding criterion. Box 6-2 lists the pay-for-performance strategies discussed by this group.
The depression working group also outlined strategies at both the local and national levels for aligning financial incentives to support an approach that integrates primary and specialty care, employers, and payers for the assessment and treatment of depression. One such strategy was to conduct local experiments on pay-for-performance models of evidence-based care, for example, paying for a bundled set of visits, team collaboration, and screening for depression in comorbid conditions. Another was to encourage local health insurers/payers to have explicit policies, coupled with outreach to providers, delineating how depression care will be reimbursed. Data from these local pilots would then be used to develop a national payment model.
The working group also stressed that Congress should remediate the current inequities in mental health care copayments under Medicare. Along with the above changes in finance, issues of financing access to care were highlighted. The group adopted the philosophy of “no wrong door,” which means that those who suffer from depression should have high-quality access,
referral, and treatment regardless of where they present for care within the health care system.
The diabetes working group focused on strategies that could be used to make a business case for payers to support patient self-management and care coordination for those with diabetes. There was general consensus on the need for additional studies or demonstrations to further substantiate the return on investment of these interventions in the long run. Strategies put forth by this group included paying for process improvement and outcome performance; paying for currently uncovered services, such as group visits, nutritional supports, and care coordination; and creating incentives for support for patient self-management. Additionally, this group highlighted the importance of consumer demand, suggesting that a menu of self-management options might be covered rather than a “one-size-fits-all” approach, with the option selected being based on the nature and severity of the disease and individual patient choice. Finally, the diabetes group proposed that innovative finance mechanisms could generate a resource pool from savings that would accrue over time, which would be reinvested in diabetes care—used, for example, to build on information and communications technology infrastructure. The heart failure and pain control working groups also supported channeling savings from pay-for-performance initiatives back to improvements in information and communications technology to ensure that outcomes are tracked and monitored.
Although not specifically addressed as a separate cross-cutting question by the pain control group, compensating or marketing higher-quality care was identified as an essential element in the development of seamless and reliable care plans for the prevention and relief of cancer pain. Strategies put forth included payers demanding continuity of care by mandating consistent interventions, and reimbursing at higher levels if patients’ self-reports of pain average 3 or less on a scale of 1–10 over the preceding month. The pain group also suggested a demonstration project, spearheaded by Medicaid, to document the effectiveness of care coordination, with the resulting data being used to help institute a change in current federal reimbursement policies.
Employ Evidence-Based Benefit Design
The integration of evidence-based medicine into benefit design was identified as holding promise for matching resources with more effective care. For example, evidence-based benefit design might include covering bundles of high-value services that are known to work clinically for many of the chronic conditions featured at the summit. Participants emphasized that the design of benefits as a means to change consumer behavior must be solidly grounded in evidence. Thus when such evidence exists, reimbursement would be tied to interventions that have proven to be effective, and there would be a corresponding move away from paying for services that have been shown not to work or may even might be harmful. For example noncoverage of high-dose chemotherapy plus autologous bone marrow transplants for breast cancer today is appropriately based on the evidence, as five major randomized clinical trials have documented no improvement in survival rates as compared with the less-costly standard-dose chemotherapy regimen (Mello and Brennan, 2001); in the early 1990s, however, there was enormous consumer pressure for coverage of this treatment when there was little evidence for its relative efficacy. There will certainly be more instances in which the evidence base lags behind demand for a specific intervention, and policy decisions regarding coverage will need to be made on a case-by-case basis. Nonetheless, the goal should be to have as many design decisions as possible be anchored in evidence.
Undoubtedly, implementation of this strategy would require considerable behavioral change at both the provider and patient levels. Participants suggested that additional research is
needed to determine how to construct these incentives so as to achieve ideal outcomes without causing unintended consequences, such as patients forgoing preventive care as the result of a copayment.
Francois de Brantes, program leader for Health Care Initiatives at General Electric—a national champion participant at the summit—offered the following perspective with regard to purchasers’ roles in benefit design:
We ought to as purchasers, both large and small, reiterate our core functions, which means to have benefit designs that are going to in some way increase the likelihood that consumers will be sensitive to both the cost and quality of health care services that they consume. But in addition, we also must have some incentives around better self-management, which doesn’t exist today and I think is something we need to address robustly. Many of us have, but it’s getting it to that next tier for the majority of purchasers.
The asthma working group also embraced the concept of an evidence-based benefits package, as reflected in their report to the plenary session at the summit. They coupled this approach with community collaboration as a mechanism for accelerating system-level change for asthma care. The group suggested defining the appropriate mix of finance solutions—emphasizing not only health insurance, but also schools, community health foundations, and state health department funding—to deliver a package of evidence-based chronic disease management and community services, including care coordination, self-management support, and education. This might best be accomplished through a process of community activation involving the creation and maintenance of coalitions. These coalitions should include key community stakeholders, especially individuals and families with asthma, and have agreed-upon short- and long-term goals. The Pediatric/Adult Asthma Coalition of New Jersey is a good example of such a coalition (see Chapter 7).
Provide Payment for Proven Quality Support Services
Services such as care coordination and patient self-management support enhance the delivery of quality care but are often not covered benefits outside of integrated delivery systems. Additionally, those services when performed by hospital nurses are embedded in housekeeping costs. Thus the work is invisible, and performance and outcomes are not monitored. This state of affairs has consequences for worker morale as well as for patient care.
Support services that foster higher-quality care are difficult to measure and are rarely rewarded. Payment for such interventions will require a shift from the current piecemeal approach of financing encounters associated with a single provider to paying for elements that are linked to systems of care involving a team of diverse practitioners. (This concept is addressed more fully in Chapters 4 and 5.)
Engage Consumers with Information and Incentives
This strategy addresses empowering consumers to modify their behavior using monetary incentives and/or providing them with information to make better health care decisions on the basis of quality. In stark contrast with the increasing trend to shift costs to consumers, this strategy is anchored in having costs borne by consumers, but with the specific intent of encouraging better access to the right care at the right time. Suggestions from participants to this end included tiered premiums to mirror modifiable health behaviors, such as smoking, and changes in benefit design to make consumers aware of the value of the providers they select. An issued raised with regard to implementing this type of mechanism is the need for additional evidence to ensure that incentive arrangements do not have the
unintended consequence of impeding patient access to needed care. As noted by Karen Ignani of AHIP, “I think what we found is that tiering in the pharmaceutical arena has given us an insight into how to align incentives. The key will be what gets rewarded, how it gets determined, how we get to consensus.”
The asthma, diabetes, and heart failure working groups affirmed the importance of providing consumer-based information and incentives to influence patients to engage in self-management activities, such as attending group classes and self-monitoring glucose levels from home. It was stressed that consumers should share in any cost savings that might result. Two groups (asthma and heart failure) identified premium rebates as a possible strategy for patients who make use of available supports.
John Miall, Director of Risk Management for the city of Ashville, North Carolina, presented a heartening case study illustrating how his community effectively used consumer incentives to provide high-quality, patient-centered diabetes care. Box 6-3 describes the Ashville Project of the Mission-St. Joseph’s Health System.
The city of Asheville is a small community in the mountains of western North Carolina. As a major employer in the area, the city government provides health care benefits to approximately 1,000 employees and 2,500 dependent family members. In an effort to improve diabetes care for its employees, in 1997 the City of Asheville launched the Asheville Project—a collaborative partnership with Mission-St. Joseph’s Hospitals, the North Carolina Association of Pharmacists, and the University of North Carolina.
First, a curriculum was developed, with input from a multidisciplinary team including local physicians, diabetes educators, and pharmacists. Based on a pharmaceutical care model, patients receive “hands-on” care that includes a monthly visit to a specially trained pharmacist. During these visits, patients receive counseling and continuing education on diabetes management and on monitoring of glucose levels by downloading of hand-held glucometers—given free of charge. In addition to assessing medication use, adherence, side effects, interactions, and achievement of therapeutic goals, pharmacists check blood pressure, perform foot exams, and help patients set goals during these visits. Additionally, as an incentive to patients to participate, copayments were waived for disease-related medications and all diabetic supplies, including syringes, and test strips were provided free of charge as long as participants remained compliant with the contract they agreed to at the start of the program.
It was found early on that this system, created as a community effort, resulted in earlier and more appropriate referrals to physician offices rather than to more costly emergency room visits and hospitalizations. At the end of the first year, medical care costs had decreased by $2,573 per diabetic (from a 1996 average of $6,127 to a 1997 average of $3,554), primarily as a result of reductions in emergency room visits and hospitalizations. Although costs per diabetic have climbed since then, they remain well below the projected expenditures each year, based on the Consumer Price Index rate of inflation for medical care. In 2001, the last year for which data are available, there was a 36 percent savings per diabetic—actual costs of $4,651, compared with a projection of $7,248. A 50 percent reduction in sick leave utilization has also been documented.
“The point I’m here to advocate is if you’re serious about reconnecting with health and committing the resources to make people well, we have to begin to think seriously about what we want to do differently with our dollars than just paying for the sick.”
—John Miall, summit participant
Providing incentives and rewarding high-quality care were themes woven throughout all the cross-cutting sessions. The message from the summit was clear: there is an urgent need to embark on some actionable items now, recognizing that fundamental restructuring of the health care finance system may require more time.
AMA (American Medical Association). 2004. AMA (CPT) CPT Process—How a Code Becomes a Code. [Online]. Available: http://www.amaassn.org/ama/pub/category/3882.html [accessed April 30, 2004].
American Hospital Publishing, Inc. 1999. The quality of medical care in the United States: A report on the Medicare program. In: Wennberg JE, Cooper MM, eds. The Dartmouth Atlas of Health Care. Chicago, IL: American Hospital Publishing, Inc.
Bates DW, Cullen DJ, Laird N, Petersen LA, Small SD, Servi D, Laffel G, Sweitzer BJ, Shea BF, Hallisey R. 1995. Incidence of adverse drug events and potential adverse drug events: Implications for prevention. The Journal of the American Medical Association 274(1):29–34.
Berwick DM. 2004. Crossing the Quality Chasm: Health Care for the 21st Century. Powerpoint Presentation.
Chassin MR, Galvin RW. 1998. The urgent need to improve health care quality: Institute of Medicine national roundtable on health care quality. The Journal of the American Medical Association 280(11):1000–1005.
Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ, Lucas FL, Pinder EL. 2003a. The implications of regional variations in Medicare spending. Part 2: Health outcomes and satisfaction with care. Annals of Internal Medicine 138(4):288–298.
Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ, Lucas FL, Pinder EL. 2003b. The implications of regional variations in Medicare spending. Part 1: The content, quality, and accessibility of care. Annals of Internal Medicine 138(4):273–287.
Fisher ES, Wennberg JE, Stukel TA, Skinner JS, Sharp SM, Freeman JL, Gittelsohn AM. 2000. Associations among hospital capacity, utilization, and mortality of US Medicare beneficiaries, controlling for sociodemographic factors. Health Services Research 34(6):1351–1362.
IOM (Institute of Medicine). 2001. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academy Press.
IOM. 2002a. Fostering Rapid Advances in Health Care: Learning from System Demonstrations. Corrigan JM, Greiner AC, Erickson SM, eds. Washington, DC: National Academy Press.
IOM. 2002b. Leadership by Example: Coordinating Government Roles in Imp roving Health Care Quality. Corrigan JM, Eden J, Smith BM, eds. Washington, DC: National Academy Press.
IOM. 2003a. The Future of the Public’s Health in the 21st Century. Committee on Assuring the Health of the Public in the 21st Century, eds. Washington, DC: National Academy Press.
IOM. 2003b. Priority Areas for National Action: Transforming Health Care Quality. Adams K, Corrigan JM, eds. Washington, DC: National Academy Press.
IOM. 2004. Insuring Health—Insuring America's Health: Principles and Recommendation. Committee on the Consequences of Uninsurance, eds. Washington, DC: National Academy Press.
Levit K, Smith C, Cowan C, Sensenig A, Catlin A, Health Accounts Team. 2004. Health spending rebound continues in 2002. Health Affairs (Millwood, VA) 23(1):147–159.
Mello MM, Brennan TA. 2001. The controversy over high-dose chemotherapy with autologous bone marrow transplant for breast cancer. Health Affairs (Millwood, VA) 20(5):101–117.
NCQA (National Committee for Quality Assurance). 1997. HEDIS 3.0: What's In It and Why It Matters. Washington, DC: NCQA.
Wagner EH, Austin BT, Davis C, Hindmarsh M, Schaefer J, Bonomi A. 2001. Improving chronic illness care: Translating evidence into action. Health Affairs (Millwood, VA) 20(6):64–78.
Wang PS, Berglund P, Kessler RC. 2000. Recent care of common mental disorders in the United States: Prevalence and conformance with evidence-based recommendations. Journal of General Internal Medicine: Official Journal of the Society for Research and Education in Primary Care Internal Medicine 15(5):284–292.
Wennberg JE, Gittelsohn AM. 1973. Small area variations in health care delivery. Science 182 (117):1102–1108.
Wennberg JE, Fisher ES, Stukel TA, Skinner JS, Sharp SM, Bronner KK. 2004. Use of hospitals, physician visits, and hospice care during last six months of life among cohorts loyal to highly respected hospitals in the United States. British Medical Journal 328(7440):607–612.