Sunday, September 21, 2014

Put Your Money Where Your Scalpel Is

We need to take value-based purchasing to the next level.

I propose taking value-based purchasing from the payor-provider contractual backroom and putting it in the health plan benefit design, where consumers directly see and are impacted by it.

One of the most troubling things about our health care system is the lack of accountability.  Providers get paid pretty much regardless of how patients actually fare under their care, and often even if demonstrable errors are committed (unless they happen to lose in the almost random lottery that is our medical malpractice system).

Patients don't get a pass when it comes to blame either.  They don't often take good care of themselves, they don't always follow instructions, and they sometimes opt for high risk and/or unproven procedures with limited chance of success.  I blame this in large part on television, where the heroic physicians battle insurance companies and their own administrators to save their dying patients, almost always with success.  Call this the CPR distortion.

I probably wouldn't get much argument about the lack of accountability; just in the past couple days, for example, we've found that 28%of hospital physicians order unnecessary tests and procedures, and the vast majority of surgeries for ovarian tumors may be unnecessary.   Those are just the tip of the iceberg, and that iceberg is sinking us.

    The mantra to combat all this is "value-based purchasing," a phrase whose meaning, like beauty, is largely in the eye of the beholder.  In theory, it involves adding performance-based financial incentives to payment arrangements, and may also include bundled payments, shared savings programspay-for-performance, or even penalties.

    Frankly, I think none of these go far enough, nor do they adequately involve the patients.

    I want to accomplish a few things with my proposed plan design approach.  One, I want to more directly relate provider payment to patient outcome -- not in the aggregate, as many incentive programs try to do, but at individual patient level.  Second, I want to reduce how much other health plan subscribers have to subsidize care that is of little benefit.  And third, I want to stop rewarding providers for care that has little or no positive impact.

    The following chart outlines how these might be accomplished (assume the "base" plan design was 80/20):


    Percent of Allowable Charges:

        Insurer     Patient     Provider

    Condition much improved 100 25 0
    Condition a little better 80 20 0
    Condition no better 60 15 0
    Condition a little worse 40 10 0
    Condition much worse



    Total Weighted Costs

    80 20 -5

    In other words, a surgical procedure whose allowable charges were $10,000 would pay the provider $12,500 (125%) if things went really well for the patient, only $7,500 (75%) if the patient was no better after it -- and the provider would actually owe the patient $10,000 if he/she ended up much worse after the surgery.  Providers would not be able to balance bill patients for any of the reductions.

    If I've done my math right, with the assumed prevalence rates shown above, the payouts are revenue neutral for payors (weighted cost of 80) and patients (weighted cost of 20), prior to the provider payback.  So it ends up costing 5% less overall, which doesn't bother me, because the reduction is all coming from surgeries where the patient ended up much worse.  Ideally, this approach would result in fewer of those surgeries being done at all.

    I'd initially wanted to also incorporate what the patient's expectations were prior to the surgery versus the actual outcome.  E.g., I'm more sympathetic when they were told to expect to be much better, yet ended up no better, than I am when they were told upfront not to expect any improvement yet still had the surgery.  In the latter case, it's hard to see why the health plan subscribers should subsidize the (low-value) choice.  However, I decided that building in the pre-surgery expectation would make an already complicated approach even more complex.  Perhaps later...

    Much depends, of course, on those prevalences.  I don't really know what they are.  More to the point, I don't think anyone does, and it's scary that we don't have good stats on what outcomes patients should expect.  Sure, there's lots of general or anecdotal information, but little, if any, actual data.

    That's all too typical for health care.

    Health plans and providers who want to test this approach would probably want to do at least a year of data collection so they can fine-tune the final payment levels for the different stages, based on the measured prevalences.  I think we might be surprised by what we'd learn.

    Some readers may be wondering how we'd collect the outcomes data.  After all, physician-specific patient satisfaction has been notoriously expensive to obtain.  That was in the old world.  All those providers are supposed to have EHRs, and part of Meaningful Use is getting patients to access their patient portals (although less than a third of patient report having been offered such access, according to ONC).  Patients should report their outcomes in the EHR.

    There is good evidence that direct engagement by physicians can boost patient use of portals, and I can't think of anything that would give physicians more incentive to do so than directly tying their payments to such use.  Tracking outcomes at periodic intervals following a surgery seems like a practice that responsible surgeons should want to do in any event, and I have no doubt that, once the data is in in the EHR, the physicians and health plans could figure out how to transmit it.

    Ideally, I'd like to see this approach applied not just to the surgeon's fees, but to bundled payments including the hospital/facility and any ancillary providers.  The more providers who have a direct financial stake in the actual outcome, the better.

    Bigger brains than mine would have to determine for which surgeries this approach would make the most sense, at what duration the outcomes should be measured (probably type-of-surgery-specific), and exactly what the patient would be reporting.  All those seem eminently solvable.  And I don't see any reason why it would need to be limited to only surgeries.  Those bigger brains could also think about what procedures and/or medical treatments other than surgeries this approach can be applied to as well.

    Providers may complain that predicting outcomes is impossible, that patients always vary in their results.  That may be true, but measuring is better than not measuring, and expecting to be paid the same for patients who end up worse as they are for actually healing patients is simply indefensible.  We should be paying for results, not effort.

    After reading the damning expose about gaming out-of-network charges in The New York Times, it's hard not to conclude that it's high time we ended our outdated provider network approach and start focusing on more transparent approaches that encourage the patient to shop and that reward performance.  I think this benefit design approach is one such way to accomplish that.

    What we need is a surgical practice and/or health system that has enough confidence in its outcomes to bet on it, and a health plan (or self-funded employer plan) who are willing to take not just the financial risk but also the risk of how to communicate the approach to members.

    The question is -- is anyone bold enough to try?

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