pay for performance in health care: provider perspective jeff levin-scherz, md mba facp assistant...
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Pay for Performance in Health Care:Provider Perspective
Jeff Levin-Scherz, MD MBA FACP
Assistant ProfessorHarvard School of Public Health
February 4, 2009
Slide 1
Summary: Provider Goals in Health Care Finance
• Get paid for “value” delivered– Get paid enough to account for the opportunity cost of being
a clinician!
• Be held accountable for what providers control• Incentives aligned with patient needs• Minimize non-value-added work• Health plan does not perform medical management • Simple finances with prompt reliable payment• Full risk adjustment (at least theoretically)
Slide 2
My Prescription to Lower Health Care Inflation
Step One: Pay for bundles of services – not individual components
Step Two: Isolate and eliminate variation
Step Three: Enforce a high level of transparency for health care quality and value
Step Four: Increase consumer responsibility for preference-sensitive care, and reengage government for supply-sensitive care
Step Five: Pay more for better care, and pay less (or nothing) for worse care
Step Six: Calorie restriction
Step Seven: Yacht repo men!
From Harvard School of Public Health HPM 235, Managing Health Care Costs, 12/08 Final Class Summary
Agenda
Slide 4
Slide 5
Medical Inflation Persistently OutpacesOverall Inflation and Worker Earnings
Slide 6
Source: KFF/HRET Survey of Employer Sponsored Health Benefits, 2007www.kff.org/insurance/7672/upload/7693.pdf
Underuse: U.S. Adults Receive Half of Recommended Care, and Quality Varies Significantly by Medical
Condition
7
55
7665
5445
39
23
0
20
40
60
80
Overall Breast
Cancer
Hypertension Asthma Diabetes Pneumonia Hip Fracture
Percent of recommended care received
Source: E. McGlynn et al., "The Quality of Health Care Delivered to Adults in the United States,"The New England Journal of Medicine (June 26, 2003): 2635–2645.
Composite Diabetes Screening Measure
8
BCBS 0 144 2.11%BCBS 1 375 5.49%BCBS 2 778 11.39%BCBS 3 2,284 33.45%BCBS 4 3,247 47.55%
6,828
HPHC 0 52 1.82%HPHC 1 151 5.28%HPHC 2 304 10.62%HPHC 3 937 32.74%HPHC 4 1,418 49.55%
2,862
TAHP 0 50 1.76%TAHP 1 155 5.46%TAHP 2 358 12.60%TAHP 3 976 34.35%TAHP 4 1,302 45.83%
2,841
All Plans 0 246 2.0% Measures Percent1 681 5.4% At least One 94.6%2 1,440 11.5% At Least Two 88.5%3 4,197 33.5% At Least Three66.5%4 5,967 47.6% All Four 47.6%
Total 12,531 100.0%
Diabetes Screening Tests, 2005 All Payer
0
94.6%
88.5%
66.5%
47.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Measures At least One At Least Two At Least Three All Four
94.6%
88.5%
66.5%
47.6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
At least One At Least Two At Least Three All Four
Four Measures:
HbAIC,LDL,Eye ExamRenal Screen
Quality Is Not Proportional To Cost
9
Katherine Baicker and Amitabh Chandra Medicare Spending, The Physician Workforce, And Beneficiaries’ Quality Of Care Health Affairs Web Exclusive, April 7, 2004
10
Source: Boston Municipal Research Bureau, 11/06
“Boston’s health insurance spending increased by 92% over the past six years [while] all other operating spending excluding health insurance increased by 18%”
11
Slide 12 Slide 12
Initially published in 1992
Fragmentation of Physician Practices In the US
Slide 13Source: http://www.gao.gov/new.items/d0865.pdf
Slide 14
Levers
• Overarching payment methodology• Claims administration• Prior Authorization• Restrictions on choice
Slide 15
Slide 16
“There are many mechanisms for paying physicians; some are good and some are bad.
The three worst are fee-for-service, capitation, and salary”
James Robinson, PhDMilbank Quarterly, 2001
Correlation between perceived loss or gain and actual loss or gain
17
GainsLosses
Perceived Losses
Perceived Gains
Prospect Theory
Prospect Theory, Kahneman and Tversky, Econometria 1979
Slide 18
Behavioral Economics Principles• Losses valued more than gains• Certainty valued more than chance• Context matters• Percent difference valued more than than actual
dollar value• Endowment Effect: We like what we already have• We are unrealistically optimistic• We prefer patterns and meaning over randomness• Memorable anecdote valued more than just numbers
“There is nothing more difficult to carry out…than to initiate a new order of things. For the reformer has enemies in all whose who profit by the old order, and only lukewarm defenders in all those who would profit by the new order”
MachiavelliThe Prince
1513
Quoted in Emmanuel, HealthCare, Guaranteed, 2008
Loss Aversion: Fee For Service Vs. Capitation
GainsLosses
Perceived Losses
Perceived Gains
Incremental FFS Payment
Incremental Cap Payment
Loss Aversion: Fee For Service Vs. Capitation
GainsLosses
Perceived Losses
Perceived Gains
FFS Denial OR Capitation Resource Utilized
Loss Aversion: Value-Added Tax vs. Payroll Deduction
GainsLosses
Perceived Losses
Perceived Gains
VAT
Baggage fee vs. fuel surcharge?
Withhold vs Bonus
• Scenario One: $90 initial payment with $5 bonus• Scenario Two: $100 payment with $10 withhold, half
of which is returned
Loss Aversion: Scenario 1Bonus vs. Withhold
GainsLosses
Perceived Losses
Perceived GainsBonus Payment+ =
This assumes that bonus is bundled into regular payment, which lowers its emotional impact
Loss Aversion: Scenario 1 (version b)Bonus vs. Withhold
GainsLosses
Perceived Losses
Perceived Gains
Bonus Payment
+ =
Bonus, if paid separately, more likely to look like a new small payment rather than an increment atop a large initial payment.
Loss Aversion:Scenario 2 Bonus vs. Withhold
GainsLosses
Perceived Losses
Perceived Gains
-=
Incentives: Lessons from Prospect Theory
• Daniel Kahneman awarded Nobel Prize for Economics in 2002
• Explains what was previously considered economically irrational behavior
• More perceived value ascribed to– Losses (compared to gains)
• MDs dislike risk of a $100 loss more than they like potential for a $100 gain
– Percent difference (than actual dollar value)• People will drive two miles to save $1 on gallon of milk, but not
to save $1 on television set
27
Prospect Theory: Implications for P4P
• Multiple smaller incentive pools create more “bang for buck” than single larger pool
• Steep portion of curve -- Sum of two gains (or losses) have greater perceived value than single equivalent gain (or loss)
• Threat of loss of withhold creates more unhappiness – but more action – than offer of a bonus
• Sum of gain (e.g., $1,000) and smaller loss (e.g., $750) has less perceived value than total ($250)
29
Considerations for P4P Arrangements• Encourage providing the right care in the first place
rather than only identifying and remedying “defective” care
• Provide adequate incentives to increase primary care• Match provider incentives with patient benefits
Slide 30
Considerations for Contract Financing• Provide adequate reimbursement to sustain the
delivery system• Don’t overpay for overutilized procedures• Don’t underpay for underutilized procedures
Treating a Diabetic
Current Approach
Slide 31
OV: Diabetes OV: Diabetes OV: Diabetes OV: Diabetes
OV: Unrelated OV: Preventive
OV: Diabetes
RegistryShowsDefect
Phone Intervention
Process Measures Achieved by 12/31OV: Unrelated
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
Future ApproachOV: Diabetes OV: Diabetes OV: Diabetes OV: Diabetes
OV: Unrelated OV: Preventive
OV: Diabetes
OV: Unrelated
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec
All process and outcome measures addressed regularly. Patients have access to their own lab values and report card throughout the year.
Slide 32
1976 Ford Crown Victoria 1990 Toyota Camry
Pay for Performance: Design Elements from the Provider Perspective
• Payment Methodology– Fee for service vs. capitation– Exclusions from “global” budget– Annual “inflation” rate
• Pay for Performance Methodology– Many measures vs. few measures– Process measures vs. outcome measures– Claims measures vs. EMR measures– Bonus vs. withhold
Slide 33
Case Study: Destruction of Value
Slide 34
Note that billing process yields costs to payer of $97 and yield to providers of $91. This $6 provides no value to patients
Numbers for illustrative purposes only
$0
$20
$40
$60
$80
$100
$120
Bill
ed
Adj
ud
Cos
ts
Sav
ing
s
App
eals
Pay
Bill
ed
Bill
Cos
ts
Rec
eipt
s
App
eal C
ost
App
eal P
ay
$100 $104 $94 $97 $100 $97 $90 $88 $91
Gardisil™ Case Study
• Cost per vaccine $120/dose; $360/recipient• For 325,000 delivery system, there are about 8400
females ages 14-171. • Delivering this vaccine at a rate of 100% would cost
over $3m in year one• Delivering this vaccine at a rate of 50% could
increase the entire practice’s “bottom line” by 6%
Slide 35
(1) Source: US Census Bureau demographic estimates, Massachusetts, 2008
Numbers are illustrative only
EMR Data vs. Claims Data
Slide 36
Claims EMRMammography 85.6% 75.1%Pap Smears 93.3% 87.8%Chlamydia (16-20) 51.7% 44.6%15 mo well visit 96.9% 79.2%3-6 well visit 93.4% 86.6%Adol well visit 79.0% 70.8%HbAIC Test 93.6% 88.3%DM: HbAIC <7 45.2% 50.8%DM: LDL<100 46.9% 54.5%COPD Spirometry 31.9% 42.1%URI 93.0% 98.6%ACE/ARB 78.5% 77.4%Digoxin 77.8% 84.2%Diuretics 78.8% 78.9%Seizure Meds 73.3% 66.3%DMARD Rheum 93.2% 83.1%
Slide 37
Jeff’s Provider Wish List
FROM
• Mostly fee for service• Payers and Providers
each make huge investments in promoting or denying payments
• Long claims delays• Health care delivery at
both health plan and provider network
• Variable quality• Confused, disheartened
patients
Slide 38
TO
• Capitation for services often overutilized; fee for service for underutilized services
• Plans and providers together create operational efficiencies
• Instant adjudication• Health care delivery in
provider network only• Reliable high quality• Engaged patients
Slide 39
Payer and Provider Point of View
Slide 40
Providers Payers Patients
Overall Costs High Low Low
Cost per Unit High Low (FFS)Agnostic (Cap)
Depends on Financial Exposure
Units Delivered High (FFS)Low (Capitation)
Low (FFS)Agnostic (Cap)
Ambivalent
Quality High for All Differentiated High by Plan
High for ME
Administrative Processes
Hate “hassles” Hassles can save money
No hassles for ME or MY physician
Disrupt Relationships
No No NO
Summary: Provider Goals in Health Care Finance
• Get paid for “value” delivered– Get paid enough to account for the opportunity cost of being
a clinician!
• Be held accountable for what providers control• Incentives aligned with patient needs• Minimize non-value-added work• Health plan does not perform medical management • Simple finances with prompt reliable payment• Full risk adjustment (at least theoretically)
Slide 41
My Prescription to Lower Health Care Inflation
Step One: Pay for bundles of services – not individual components
Step Two: Isolate and eliminate variation
Step Three: Enforce a high level of transparency for health care quality and value
Step Four: Increase consumer responsibility for preference-sensitive care, and reengage government for supply-sensitive care
Step Five: Pay more for better care, and pay less (or nothing) for worse care
Step Six: Calorie restriction
Step Seven: Yacht repo men!
From Harvard School of Public Health HPM 235, Managing Health Care Costs, 12/08 Final Class Summary