The Healthcare Imperative Lowering Costs and Improving Outcomes: Workshop Series Summary (2010) / Chapter Skim
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11 Payment and Payer-Based Strategies
11 Payment and Payer-Based Strategies
Pages 359-406
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From page 359... ...
. The papers in this chapter cover a range of strategies targeting the payment and payer systems as sources of opportunities for lowering costs and improving outcomes, underscoring the importance of streamlined and harmonized health insurance regulation, administrative simplification and consistency, and payment redesign to focus incentives on results and value.
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From page 360... ...
Drawing on the lessons learned from one of the nation's most long-lasting and successful exchanges, operated by the Wisconsin State Employee Health Plan in Dane County, he suggests that three conditions must be in place to maximize the ability of health insurance exchanges in lowering costs: the pool of potential enrollees should have an average or near-average risk profile; the pool of enrollees must be at least 20 percent of the population; and the enrollees must have clear financial incentives for selecting health insurance plans that have the lowest risk-adjusted bids. Turning to consumer incentives, Niteesh K
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From page 361... ...
Episode-of-care payment and comprehensive care payment systems can help providers prevent health problems; prevent the occurrence of acute episodes among individuals who have health conditions; prevent poor outcomes during major acute episodes, such as infections, complications, and hospital readmissions; and reduce the costs of successful treatment. By using payment changes to help address these major sources of waste and inefficiency, healthcare costs can be reduced significantly without "rationing" or denying care that patients need (Figure 11-1)
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From page 362... ...
. Although only the fourth and fifth categories -- full-episode payments with a limited warranty based on either the type of treatment or diagnosis -- can address the full range of problems that occur within a major acute episode, the narrower forms of episode-of-care payment could be used for types of patients where only one issue is of concern, or the narrower forms could be used as transitional steps toward full-episode payment (Center for Healthcare Quality and Payment Reform, 2009b)
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From page 363... ...
PAYMENT AND PAYER-BASED STRATEGIES TABLE 11-1 Variants of Episode-of-Care Payment That Address Different Aspects of Waste and Inefficiency in Major Acute Episodes Impact of Current Component Current Payment System on Waste Improved Payment Category of Treatment System and Inefficiency Approach 1 Treatment for Hospitals and No financial Inpatient bundled conditions doctors are paid incentive exists payment: a single present on separately and for doctors and payment covering admission to independently hospitals to work both hospital and the hospital for the care they together to improve physician services for provide. Most hospital efficiency.
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From page 364... ...
for the diagnosis. Basing payment on diagnosis creates an incentive for a provider to use higher-value treatments -- those with equivalent outcomes and lower costs.1 Episode-of-care payment also enables providers to define a single, comprehensive price for an episode of care, which in turn would enable payers (and consumers, if the price is made public)
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From page 365... ...
. Using Comprehensive Care Payment to Help Prevent Episodes and to Encourage Use of High-Value Services Despite the many improvements of episode-of-care payment over current fee-for-service payment systems, it still does not encourage preventing episodes of care from occurring in the first place.
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From page 366... ...
Why Comprehensive Care Payment Is Better Than Other Payment Reforms Although "medical home" initiatives are attempting to change payment systems in order to fill some of the gaps defined above, there is no assurance that these programs will reduce spending since medical homes are not given explicit accountability for improved outcomes (Network for Regional Healthcare Improvement, 2009)
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From page 367... ...
could divide care payment could be treated as a budget, the payment among the involved providers and the payer (e.g., a health plan) could based on their proportional shares of the divide the payment among the involved care (Gosfield, 2009)
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From page 368... ...
but where there are opportunities to reduce the cost and complications of the treatment. As noted earlier, comprehensive care payment should be used for conditions such as chronic diseases where there is concern about unnecessarily high rates of hospitalizations.
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From page 369... ...
providers exist. Negotiation Commercial health Enables prices to be Result depends on size between payers insurance plans set based on the cost of payer vs.
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From page 370... ...
. PROMETHEUS Payment is one such approach that seeks to ignite a transformation in healthcare payment by challenging the way providers and insurers conduct business -- moving away from unit-of-service payment to episode-of-care payment (de Brantes and Rastogi, 2008)
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From page 371... ...
Covered services are determined by commonly accepted clinical guidelines or expert opinion that lay out the tested, medically accepted method for treating the condition from beginning to end. To date, PROMETHEUS Payment has developed evidence-informed case rates for a significant number of acute events, procedures, and chronic care, including heart attacks, hip and knee replacement, diabetes, asthma, congestive heart failure, and hypertension, to name a few (Rastogi et al., 2009)
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From page 372... ...
Figure 11-2.eps NOTES: AMI = acute myocardial infarction; CABG = coronary artery bypass graft labels have been reset surgery; CAD = coronary artery disease; CHF = congestive heart failure; COPD = chronic obstructive pulmonary disease; Hip = hip replacement surgery; Knee = knee replacement surgery; Overall = weighted average of costs all care defect as a propor tion of all costs of care for the 13 evidence-informed case rates in this figure.
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From page 373... ...
. One of the important features that makes PROMETHEUS Payment different from other healthcare payment systems and typical pay-forperformance models is its strong incentive for clinical collaboration to ensure positive patient outcomes.
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From page 374... ...
, diabetes, coronary artery disease (CAD) , chronic obstructive pulmonary disease (COPD)
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From page 375... ...
Conclusion Fee-for-episode payments when constructed fairly and with the right framework offer a realistic, rational, and sustainable blueprint for a new healthcare payment system. They could effectively promote and reward high-quality, efficient, patient-centered care; provide common performance incentives for all parties; and create an environment where doing the right things for patients would also allow providers and insurers to do well financially.
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From page 376... ...
Community Advocates Public Policy Institute Health insurance exchanges can be a powerful mechanism for lowering healthcare costs and improving healthcare quality. Evidence from one of the nation's most long-lasting and successful exchanges, operated by the Wisconsin State Employee Health Plan in Dane County, suggests, however, that those savings and quality improvements can be realized only under the following specific conditions: • The exchange overcomes adverse selection and presents health insurance companies with a pool of potential enrollees whose aver age or near-average risk profile does not discourage insurers from submitting bids.
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From page 377... ...
by government, which pools buyers of health insurance and gives them unimpeded access to multiple competing health insurance plans. Exchanges provide participating individuals with objective information about: Standard benefit packages3 provided by plans; • • The features of the competing healthcare plans themselves; • The plans' doctors, clinics, and hospitals; • The plans' premiums; • The portion of their premiums enrollees must pay to join a particu lar plan; and • The enrollment process.
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From page 378... ...
The Dane County Exchange Model The Department of Employee Trust Funds does not really operate a single statewide exchange; rather, it oversees 72 separate county exchanges. Depending on where a state employee resides, the employee enrolls in a different countywide exchange.
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From page 379... ...
Dane County, the seat of state government and home to the University of Wisconsin-Madison, was the residence in 2006 for approximately 40 percent of all state employees, or 81,832 of the Department of Employee Trust Funds' covered lives. This large pool exceeded 20 percent of Dane County's entire population not enrolled in Medicaid,6 Medicare, or other federally financed health insurance programs.
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From page 380... ...
for the Dane County exchange model, U.S. employers' average premiums rose faster -- 39 percent for singles and 40 percent for families -- during the most recent 6-year period for which we have national data (Kaiser Family Foundation, 2008)
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From page 381... ...
As of 2008, VBID plans involving incentive copayment reductions had been implemented by more than 15 percent of large self-insured employers, with virtually all others expressing interest in initiating a VBID plan within the next 5 years (Mercer National Survey of Employer-Sponsored Health Plans, 2008)
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Because these models assess cost savings over a wide range of time frames, the estimates are not directly comparable. To overcome these differences, relative savings can be calculated from the published data.
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From page 383... ...
Generating National Estimates Generating national estimates of the impact of VBID scaled to national levels is significantly hampered by the nascent research base in the area -- whether based on experimental design or on modeling. However, as a quicker approach, we can use estimates of the relative net savings from existing economic models of copayment reductions, apply these estimates to overall health expenditures for VBID candidate conditions, and test the generated results across a range of plausible relative savings estimates.
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From page 384... ...
.VBID plans are unlikely to be implemented by public plans that have very little cost sharing, such as Medicaid; thus Medicaid's contribution to overall health spending for these conditions should be excluded from national expenditure estimates. Disease-specific estimates, less Medicaid expenditures, for those conditions for which relative cost savings were generated above are presented here.
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From page 385... ...
A wealth of data demonstrates the effect of this strategy, which may be particularly important to offset the initial increase in costs from copayment reductions, yet this important part of VBID has not been successfully implemented in practice. Goldman and colleagues modeled the effect of raising statin copayments for low-risk coronary artery disease prevention while lowering them for higher-risk patients and found no change in short-run health plan costs and reduced long-run costs that were similar in magnitude from those obtained by only reducing copayments for higher-risk patients (Goldman et al., 2006)
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From page 386... ...
The success of this approach is predicated on the assumption that Aexcel designation can identify and then encourage patient access to specialists who have shown that they deliver efficient, effective care, which can lead to speedier recoveries, fewer complications, and fewer repeat procedures. Managing Healthcare Costs One option for managing healthcare costs has been the growth of consumer-directed health plans that place more decision making and financial responsibility directly on consumers.
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From page 387... ...
These specialty categories account for 70 percent of specialty spending and 50 percent of overall medical costs. Specialists who have met certain clinical performance and cost-efficiency standards are designated as physicians that have met these Aexcel standards.
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Benefit plan design with member incentives that requires the exclusive use of Aexcel-designated physicians for the 12 specialty categories appears
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From page 389... ...
Physician performance measurement initiatives and healthcare transparency are at the top of the list for professional medical organizations, health plans, legislators, consumer rights groups, and providers themselves. Many health plans now operate under the oversight of an external monitor, a third party that regularly audits these selection processes.
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From page 390... ...
These efforts have sparked renewed interest within the national dialogue on health reform. The Council for Affordable Quality Healthcare, a nonprofit healthcare industry alliance that is helping drive payer collaboration and process consolidation through national, multistakeholder initiatives, is engaged in two initiatives that are producing real results in the marketplace today: the Committee on Operating Rules for Information Exchange (CORE)
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From page 391... ...
The initiative has received strong and broad-based industry support from America's Health Insurance Plans, American Academy of Family Physicians, American College of Physicians, American Health Information Management Association, American Medical Association, Medical Group Management Association, Healthcare Administrative Simplification Coalition, and others. Although the UPD was originally conceived as a credentialing tool for hospitals and health plans, its value as a data source for other uses is quickly growing.
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Committee on Operating Rules for Information Exchange (CORE) CORE is developing and promulgating operating rules built on national standards, such as the Health Insurance Portability and Accountability Act (HIPAA)
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SOURCE: IBM Global Business Services, 2009. groups with all but some providers CORE certified, including national and regional health plans, clearinghouses, vendors, and providers representing 33 million commercial members and 30 million claims per month.
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Percent change first quarter 2008 over first quarter 2007. Plans in the study had high baseline electronic eligibility volumes compared to the industry, so results could be even more substantial for health plans with lower electronic verification rates SOURCE: IBM Global Business Services, 2009.
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From page 395... ...
CAGR Estimated number of electronic eligibility 650 813 1,016 2,478 transactions with CORE, 25% CAGR Additional electronic eligibility transactions due to 78 183 324 585 CORE Savings due to additional electronic transactions $359 $843 $1,488 $2,690 due to CORE Foundation for other administrative healthcare $90 $211 $372 $673 transactions TOTALS $449 $1,054 $1,860 $3,363 Other Impacts Percentage of visits verified with CORE (target 55% 61% 69% n/a 100%) Reduced claim denials due to eligibility 10-12% reduction in denials, 0.5 1.5% of net patient revenue Reduced time to set up new information exchange 20-80% partners Reduced connectivity costs To be determined *
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From page 396... ...
It can be used to support near-term populationlevel research priorities, to benchmark quality initiatives, and to support the growing adoption of electronic personal health records and electronic medical records. Administrative data also serves as part of the foundation needed to promote coordination of care across providers in a health information exchange.
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From page 397... ...
CORE continues to expand operating rules built on national standards that are helping organizations achieve the interoperability that has eluded the healthcare industry for many years. Continued collaboration focused on both short- and long-term goals, coupled with appropriate policy support through the federal government, is necessary to achieve the widespread adoption of administrative simplification solutions; solutions that promise real reform in both cost efficiency and quality.
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From page 398... ...
11 Each of the options is thoroughly explained in the working paper prepared by the UnitedHealth Center for Health Reform & Modernization titled Health Care Cost Containmen -- How Technology Can Cut Red Tape and Simplify Health Care Administration. These savings estimates mostly derive from real-life experience at UnitedHealth Group compared or applied to the available opportunity in broader industry as determined through external studies and sources: Council on Affordable Quality Healthcare (IBM Global Business Services, 2009)
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From page 399... ...
Use Common Technology and Information Standards, with Enhanced Interoperability and Connectivity The necessary reforms for reducing administrative waste require a firm foundation. More rapid adoption of tighter data and transaction standards, starting with CORE phase I and II eligibility and benefit rules, should precede a quick move to tightened standards for exchanging other HIPAA items, including claims submission, claims inquiry, electronic funds transfer, electronic remittance and autoposting, prior authorization/notification, and demographic updates.
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From page 400... ...
C Streamline provider credentialing, privileging, and quality designation processes Option 11: Eliminate multiple payer credentialing and separate hospital ~$18 billion privileging.
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From page 401... ...
But if the variation arising from individual payers' requirements were meaningfully reduced or eliminated, direct provider Practice Management Information System to payer connectivity would be possible. The resulting system would support a few superregional hub gateways that aggregate payer connectivity and that provide gateways to direct provider connectivity or local geographic aggregator health information exchanges.
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From page 402... ...
The momentum is building. America's Health Insurance Plans, the Council for Affordable Quality Healthcare, the American Medical Associa 12 It is for this reason that the Congressional Budget Office argues that "medical cost ratios" (which measure the share of spending on medical costs versus administrative items)
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From page 403... ...
2009. What does it cost physician practices to interact with health insurance plans?
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2008. Fifth Annual Survey of Health Information Exchange at the State and Local Levels: Overview of 200 Findings.
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From page 405... ...
:w262-w271. MedPAC (Medicare Payment Advisory Commission)
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From page 406... ...
2004b. It's your choice: Group health insurance plans and provisions: 2009.A-4 and A-5.
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