Tag Archives: value-based purchasing

What’s the downside to value-based purchasing and pay for performance?

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Pay for performance (P4P) is often touted as one of the best ways to improve health care quality. In most P4P programs, health plans pay physicians and hospitals more if they meet certain quality targets.

Image by Colin Dunn via flickr.

Image by Colin Dunn via flickr.

The federal Centers for Medicare & Medicaid Services has adopted a version of P4P for hospitals called Hospital Value-Based Purchasing, which we covered last year. CMS has a similar program for doctors, called the Physician Quality Reporting System.

In theory, P4P and VBP give commercial and government health insurers a way to incentivize physicians and hospitals to deliver services designed to improve patient outcomes. Physicians can earn more for following patient-care guidelines, for example.

P4P and VBP are thought to help counteract the perverse incentives built into fee-for-service payment in which the more care physicians and hospitals deliver, the more they get paid.

But a recent report raises questions about CMS’ value-based purchasing program and pay for performance in general. This report is more than a critique of VBP and P4P. It is an excellent primer on what’s wrong with how commercial and government insurers pay for health care and how their methods of payment are not designed to produce the most desirable outcome: better patient health.

The report (PDF), by Harold D. Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, “Measuring and Assigning Accountability for Healthcare Spending,” thoroughly explains the problems with P4P, VBP, and fee-for-service. Sabriya Rice in Modern Healthcare covered the report well as did Cheryl Clark in HealthLeaders. Clark called the nation’s current payment formulas “Kafkaesque.”

Health care journalists would do well to read this report because it’s an impressive undertaking that explains how the U.S. health care system works, what’s wrong with how we pay for care, and how some payment reform methods could fix these flaws. The report would serve as a useful guide for any articles on payment reform.

In discussing the fundamental problems with current spending methods, for example, Miller, an adjunct professor of public policy and management at Carnegie Mellon University, names and explains six of them as follows:

  1. Many patients and many aspects of spending are not attributed to any physician or other provider.
  2. The physician or organization that is attributed spending for a patient may not have control or influence over many of the services that a patient received.
  3. Many providers are not attributed the spending that they can control.
  4. No distinctions are made between necessary and avoidable services.
  5. Comparisons of spending across providers do not adequately adjust for differences in patient needs.
  6. Comparisons of spending do not adequately adjust for structural differences in costs among providers.

Later in the report, Miller gives five examples of payment methods that would address these flaws: bundled payment, warranteed payment, episode payment for a procedure, condition-based payment, and global payment.

Miller clearly explains some of the biggest flaws in how insurers pay for most care. “Some services that could lower overall spending aren’t paid for adequately or at all,” he writes. “For example, Medicare and most health plans don’t pay physicians to respond to a patient phone call about a symptom or problem, even though those phone calls can avoid far more expensive visits to the emergency room. Medicare and most health plans won’t pay primary care physicians and specialists to coordinate care by telephone or email, yet they will pay for duplicate tests and the problems caused by conflicting medications.”

Image by Colin Dunn via flickr.

He also explains why physician practices have no incentive to care for high-risk patients. Health plans typically don’t pay for physicians to hire staff to educate these patients on self-care management even if such education would help avoid an expensive inpatient stay, he writes.

And, more seriously, he writes that under fee for service, all providers are penalized financially for reducing unnecessary services. “Most fundamentally, under the fee for service system, providers don’t get paid at all when their patients stay well.”

In other words, our current payment methods do not do what any health policy expert would want them to do: provide incentives to keep patients healthy.

More hospitals penalized in value-based payment program

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

columbiahospitalHere’s a sign that paying more for better care and paying less for inadequate care is taking hold in a significant way. The federal Centers for Medicare & Medicaid Services (CMS) reported this week that 1,231 hospitals will get a performance bonus in fiscal 2014 under its Hospital Value-Based Purchasing program and 1,451 hospitals will receive an overall decrease in Medicare payment. Fiscal 2014 is the second year of the VBP program.

“We think this second anniversary deserves recognition – it’s a sign that value-based purchasing in Medicare is becoming routine,” wrote Patrick Conway, MD, in a blog post on the CMS site. Conway is CMS’ chief medical officer and director of the Centers for Clinical Standards and Quality.

“The Affordable Care Act gave CMS many new tools to convert Medicare from a program that paid for decades on automatic pilot into one that deliberately pays to promote better health,” Conway added. “Now, thanks to one of these tools, the Hospital Value-Based Purchasing program, Medicare is no longer a program that just pays the bills. Acute-care hospitals across the country not only are paid more for higher quality care, they also have skin in the game.” Continue reading

Article looks at reform concepts put into practice

About Joanne Kenen

Joanne Kenen, (@JoanneKenen) the health editor at Politico, has been AHCJ’s topic leader on health reform and curated related material at healthjournalism.org. Follow her on Facebook.

Here’s a recent story that touches on a whole lot of themes in health reform – without getting bogged down in a lot of jargon. Value-based purchasing. Evidence-based medicine. Shared decision-making.

Jackie Crosby of the Minneapolis Star-Tribune writes about how a Minnesota insurer, HealthPartners, has introduced a new approach for patients with low back pain. Before they get surgery, they have to get a consult on nonsurgical alternatives.

Joanne KenenJoanne Kenen (@JoanneKenen) is AHCJ’s health reform topic leader. If you have questions or suggestions for future resources, please send them to joanne@healthjournalism.org.

If they still opt for surgery, they can have it. But the thinking is (based on what other health systems have learned) that many will opt for physical therapy and rehabilitation once they learn more about the pros and cons, risks and benefits, of all their options.

“Patients can still see a surgeon if they wish. But after this visit, they’ll be better informed about all of their options, and can make decisions more aligned with their own values,” the story quoted  Dr. Thomas Marr, HealthPartners’ medical director of clinical relations as saying.

“In general, it’s a bad thing when the doctor and patient can’t determine the treatment without interference from the insurance company or the government,” spine surgeon Jeffrey Dick was quoted as saying. But this is an exception, he said. Surgery is appropriate for only about one out of eight low back pain patients he sees. Getting them into appropriate care from the start can save money – not to mention years of lingering back pain.

“These aren’t HealthPartners criteria,” he added. “These are treatment algorithms for low-back pain that we all should be following – but maybe haven’t been by all practitioners.”

The story also noted how HealthPartners is working with stakeholders and monitoring patient reaction and satisfaction to minimize criticism and misunderstandings.

So what are those health reform themes?

Value-based purchasing – loosely translated – is paying for what works.

Evidence-based medicine is what it sounds like – and the evidence is that a lot of back surgery is unnecessary. Sounds simple but it’s not always practiced – even in those cases where the evidence is strong. Sometimes it’s even derided as “cookbook medicine.” Financial incentives are certainly one big impediment: surgeons, hospitals, etc., make money from procedures that may not always be the best choice for the patient. Practice patterns – how physicians are taught and what’s done in the medical culture of a given hospital or community – play a role. And patients often want treatments they don’t need because they don’t understand that it’s not necessary, or they think surgery is a reliable quick fix.

Some researchers exploring medical decision-making have found that physicians are a lot more likely to talk about why to have a certain procedure, including back surgery, than why not. Clinicians and researchers are beginning to develop models for “shared decision-making” and there’s even a bit of language in the health reform law to promote it.

So are there programs like this rolling out in your local hospitals or health plans? We’d like to hear more. It will be interesting, too, to watch how people react to the HealthPartners and similar ventures. Will patient/beneficiary attitudes begin to change? Will they come to understand that more isn’t always better? Will they be glad to find out they really don’t need surgery? Or will there be a backlash about choice and control. The answer may depend on whether patients feel the decision is shared, or imposed.