Wednesday, September 12, 2012

Discussion on Payment Reform

Health Affairs published by Project Hope held a briefing September 7th at the National Press Club to unveil the September 2012 issue, “Payment Reform to Achieve Better Health Care”. Susan Dentzer, Editor-in-Chief opened the briefing, “We are still searching for an honest way to pay healthcare providers to reward their best work. By “best”, we more or less mean the Triple Aim to provide better healthcare, advance population health, and ideally to make it cost less.”

Keynoter Jonathan Blum, Deputy Administrator and Director for Center for Medicare Centers for CMS remarked that CMS needs to continue to ensure that the Medicare program both the Fee-for-Services and the private plan side of Medicare promote care that is patient-centered, safe, effective, and efficient.

Sam Nussbaum MD, Executive Vice President and CMO at WellPoint Inc. wants to see payment innovation achieved by developing new models where primary care is central, evidence-based medicine is available, information is provided at the point-of-care, there is a focus on health, prevention, and technology can effectively coordinate care. According to Nussbaum, this can be achieved by providing for new payment models involving pay for performance, medical homes, and bundled payments.

Other experts presented their ideas. R. Adams Dudley MD, Professor of Medicine and Health Policy and Associate Director for Research at the University of California San Francisco reports that Medicare’s new hospital pay-for-performance program for all acute care hospitals due to begin in October will have a small financial impact even at the extremes of best and worst performing hospitals. 

Stuart H. Altman PhD, Sol C. Chaikin Professor of National Health Policy at Brandeis University concluded that costs were not actually reduced as a result of the bundled payment system. However, the designers of the current bundled payment experiments are hopeful that by including physician expenses combined with DRG payments and post hospital care, costs will permit a wider focus on spending and thereby result in greater cost reductions.

He also expressed a cautionary note that if payment and delivery system changes are combined too quickly with reductions in revenue, the backlash from providers and patients could sabotage the program.

His lessons for the Prospective Payment System for bundled payments includes limiting savings for government, not to use the same system for all geographic areas or types of hospitals, provide for flexibility, develop methods for hospitals to coordinate care with physicians and post-acute care facilities, and link the Medicare payment system to payment methods used by private insurers.

Paul Markovich President and Chief Operating Officer, Blue Shield of California, described how his organization launched a pilot ACO with Dignity Health, a large hospital chain and Hill Physicians in 2010 serving 41,000 CalPERS employees and dependents. The approach was to develop an annual global budget with all parties sharing upside and downside risk.

In 2010, the pilot realized $15.5 million in savings to CalPERS with $20.5 million in total savings. The result was major reductions in readmissions, and inpatient stays. Further savings were achieved in 2010-2011 with $37 million in savings to CalPERS.

According to Markovich, the global budget model worked because this model aligns incentives among independent hospitals, doctors, and payers so that each party can share in the risk of their collective performance. It is easy to implement without complicated budget analytics or changes in payment methods, partners can quickly identify clinical and cost “hot spots”, and customers can get immediate visible premium relief.

To read the papers in the September 2012 Health Affairs issue, go to