Monday, August 30, 2010

Healthcare Reform Models Focusing on Value to Consumers – Part 2

This post follows up on my previous one about Patient Centered Medical Homes (PCMHs), Accountable Care Organizations (ACOs), and Meaningful financial incentives models. In this post I focus on the issue of how to incentivize healthcare providers in PMCH-ACOs who render high value care to their patients.

According to a recent article by the New England Journal of Medicine:
The challenges to implementation of the PCMH model include two issues that lie beyond the direct control of the primary care practice. First, although the model calls for primary care practices to take responsibility for providing, coordinating, and integrating care across the health care continuum, it provides no direct incentives to other providers to work collaboratively with primary care providers in achieving these goals and optimizing health outcomes. Second, although evidence suggests that increased investment in primary care can result in savings from several types of reductions…most primary care practices do not…share in these savings…and under the…fee-for-service payment system it is unlikely that other providers will respond to reductions in the number of referrals or admissions by allowing their incomes to fall [Reference 1] .
These issues can be resolved if the PCMH model were implemented in the context of an ACO, which is:
…a provider-led organization whose mission is to manage the full continuum of care and be accountable for the overall costs and quality of care for a defined population. Multiple forms of ACOs are possible, including large integrated delivery systems, physician–hospital organizations, multispecialty practice groups with or without hospital ownership, independent practice associations, and virtual interdependent networks of physician practices.
Regardless of the organizational structure, an ACO will not succeed without a strong foundation of high-performance primary care…investment in the PCMH model could accelerate the development of high-performing ACOs…Performance measurement for determining the amount of shared savings or other financial incentives for ACOs must weight primary care measures heavily rather than focus narrowly on metrics related to hospital care…[And] the payment mechanisms used must align the incentives of the two models to increase accountability for total costs across the continuum of care while ensuring that a sufficient investment is made in primary care capacity. [Reference 1]
Payment models to support such PCMH-ACOs could include:
…fee-for-service payment and share in any cost savings achieved relative to a risk-adjusted projected spending target for their patient population; alternatively, payment could be partially or fully capitated, with risks and gains both being shared by all providers. Performance measurement to evaluate the quality of care and to prevent potential overuse (in fee-for-service organizations) and underuse (in capitated ones) is a cornerstone of the model. [Reference 1]
[For a PCMH]…a primary care fee for all primary care or a blended payment of part fee-for-service and part monthly medical home fees, is beginning to take hold…But the most complex case is when a single global fee (or risk-adjusted capitation payment) is made for all of the care a patient needs—including preventive care, basic primary care, specialty care, emergency care, hospitalization, and post-acute care that is provided by numerous independent providers over a period of time. In that case, where should the payment go? If savings across the entire continuum of care are to be shared with providers, how should those savings be distributed?
[If the PCMH were also an ACO (PCMH-ACO), then]…physicians and other providers…agree to be accountable for the total care of patients, their outcomes, and the resources used in providing it. This solves the basic question of "to whom should I write the check" and leaves it up to the organization to decide how best to compensate providers for their contribution. [Reference 2]
In other words, providers collaborating in a PCHM-ACO work together to prevent and treat patients' health problems by focusing on delivering higher quality and lower cost care through use of cost-effective evidence-based guidelines, along with more efficient and coordinated workflow processes. Instead of paying each provider a separate fee for tests and services rendered, the PCHM-ACO team approach can adopt a combination of the following payments models:
  • The primary care physician (PCP) could receive fee-for-service payments plus additional fees for running the PCMH.
  • The PCP and specialists treating the patient could receive a flat fee for each patient to cover the entire episode of care, with the amount based on the severity of the patient's health problems; if they deliver high quality care at a cost lower than projected for similar patients, they would share the savings as well.
And as with any performance-based accountability system, it is important to determine the best ways to measure important aspects of care quality, minimize the cost of delivering such care, and reward those who accomplish these objectives, including:
  • Mak[ing] the performance rewards large enough to matter, but not larger than the actual benefit of the improved performance.
  • Creat[ing] measures that people can influence. Do not hold people accountable for problems outside of their control. [Reference 3]
Note that various types of performance measures have been endorsed by different organizations, including Physicians Quality Reporting Initiative (PQRI) process guidelines [Reference 5] and ones that:
…can be calculated using longitudinal administrative data…but it should be possible to get even richer data more widely available…One 'gaping hole' where more experimentation is needed…risk adjustment…We don't know how to case-mix adjust for episodes of care. We can't even agree on the definition of episode of care. [Reference 6]
The "richer data" mentioned above should include comprehensive clinical biopsychosocial data … [wellness wiki Reference 6].

And finally, a PCMH-ACO ought to have these four characteristics, which shared by all ACOs:
  1. …an evidence-based approach to medical care; using the body of medical evidence
  2. …heavy investments in information technology to organize data so that caregivers have the most accurate information available
  3. …quality and cost reporting—the ability to actually report on costs and how quality is affected
  4. …To be successful…the purchasers of healthcare [must] distinguish between the highest value of all the ACOs in that market and direct their people to those organizations…Price…or premium controls…[should be] based on quality and cost reductions…demonstr[able] through data on a defined population. [Reference 7]
In my next post, I'll discuss the health IT requirements for a sustainable PCHM-ACO.


[1] Primary Care and Accountable Care — Two Essential Elements of Delivery-System Reform

[2] Coherent and Transparent Health Care Payment: Sending the Right Signals in the Marketplace

[3] Financial Incentives Can Improve Public Sector Performance

[4] Building A Path To Integrated-Care Payment Systems

[5] Physician Quality Reporting Initiative (PQRI)

[6] Wellness Wiki and

[7] Making Healthcare Accountable
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