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Rethinking Health Care: Costs of Care Models: Is there a solution?

Massachusetts Medical SocietyState of the State October 23, 2008

Elliott Fisher, MD, MPHThe Dartmouth Institute for Health Policy and Clinical Practice

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Houston, we’ve got a problem…

The usual suspects:Uneven qualityRising costsDeclining access to care

Some looming challenges:Collapse of primary careCredibility of academic medicineLoss of professional authority of physicians

A window of opportunityHealth care reform debate set to beginWhat role will physicians play? Can Massachusetts lead the way?

33

Candidate proposalsCoverage reform – radically different proposals

McCain Obama

Coverage Reform

Aim for Universal coverage No Yes

Requirements to have coverage No Children only

Employer contribution No Yes

Changes to employer benefittax exemption Yes No

Regulation of insurance markets No Yes

Delivery System Reform

Health IT Yes Yes

Transparency Yes Yes

Malpractice reform Yes Yes

Prevention Yes Yes

Pay-for-performance Yes Yes

Comparative effectiveness/quality measurement Yes Yes

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Candidate proposalsDelivery system reform – similar, traditional approaches

McCain Obama

Coverage Reform

Aim for Universal coverage No Yes

Requirements to have coverage No Children only

Employer contribution No Yes

Changes to employer benefittax exemption Yes No

Regulation of insurance markets No Yes

Delivery System Reform

Health IT Yes Yes

Transparency Yes Yes

Malpractice reform Yes Yes

Prevention Yes Yes

Pay-for-performance Yes Yes

Comparative effectiveness/quality measurement Yes Yes

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Candidate proposalsDelivery system reform – similar, traditional approaches

Underlying assumptionsIndividual provider performance is the problem

Better evidence and more guidelines are needed

Transparency on price and quality will drive improvement

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Rethinking health care

Every system is perfectly designed to get the results that it achieves.

Paul Batalden

Insanity: doing the same thing day after day and expecting different results.

Albert Einstein

77

Per-capita Medicare spending1990 Boston, San Francisco and East-Long Island -- $4000

$8,363

1990 1995 2000 2005

East Long Island

San Francisco

Boston

$10,827

$9,544

88

Per-capita Medicare spending2006 Boston, San Francisco and East-Long Island -- $2500 spread

$8,363

1990 1995 2000 2005

East Long Island

San Francisco

Boston

$10,827

$9,544

99

What do high spending regions get? Use Rates in High vs Low

1.00 1.5 2.00.5 2.5

Reperfusion in 12 hours (Heart attack)Effective Care: technical quality

Ratio of rate in high spending to low spending regions

Aspirin at admission (Heart attack)Mammogram, Women 65-69Pap Smear, Women 65+Pneumococcal Immunization (ever)

Total Hip ReplacementTotal Knee ReplacementBack Surgery

Preference Sensitive Care: elective surgery

CABG following heart attack

Evaluation and Management (visits)ImagingDiagnostic Tests

Supply sensitive services: often avoidable care

Inpatient Days in ICU or CCUTotal Inpatient Days

1010

(1) Fisher et al. Ann Intern Med: 2003; 138: 273-298 (2) Baicker et al. Health Affairs web exclusives, October 7, 2004(3) Fisher et al. Health Affairs, web exclusives, Nov 16, 2005(4) Skinner et al. Health Affairs web exclusives, Feb 7, 2006(5) Sirovich et al Ann Intern Med: 2006; 144: 641-649(6) Fowler et al. JAMA: 299: 2406-2412

If all U.S. regions could adopt practicepatterns of most conservative fifth of US, Medicare spending would decline by 30%

What do high spending regions get? The paradox of plenty

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What’s going on?Research on causes of regional variations

(1) Pritchard et al. J Am Geriatric Society; 46:1242-1250, 199(2) Anthony et al, under review(3) Kessler et al. Quarterly Journal of Medicine 1996;111(2):353-90(4) Baicker, Chandra, NBER Working Paper W10709(5) Fisher et al. Ann Intern Med: 2003; 138: 273-298(6) Sirovich et al. Archives of Internal Medicine. 165(19):2252-6.(7) Sirovich et al, J Gen Intern Med. 2006;21(Suppl4):164.

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What’s going on?The key role of local context – and capacity – in the “gray areas”

Physician - PatientEncounter

Clinical EvidenceProfessionalism

Clinical evidence is an important -- but limited -- influence on clinical decision-making.

Consequence: reasonable individual clinical and local decisions lead, in aggregate, to higher utilization rates,greater costs -- and inadvertently -- worse outcomes

Physicians practice within a local organizationalcontext that profoundly influences their decision-making.

Payment system ensures that existing capacity is fully utilized. Physicians adapt to available resources:more referrals, more admissions, more ICU stays

Policy Environment(e.g. payment system)

LocalOrganizational Context(e.g. capacity - culture)

The more complicated care becomes, the more likely mistakes are to occur.

Hospitals are dangerous places if you don’t need to be there.

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Just the gray areas?

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Just the gray areas?

“These marketing ploys are wildly successful across the entire country. Patients are viewed as the ball in a pinball machine, popped back and forth, ringing up profits, until finally they escape past the paddles and can no longer render income. I believe that the fingers controlling those paddles often use those "gray areas of judgment" as an excuse to shoot the patient back to the triple-score bumpers.

Speaking just as some guy out in the boondocks, I can tell you that life's more like the Star Wars trilogy than one would guess. There's a"dark side". Difficult to resist and only a very few are able to throw themselves over the precipice to escape its clutches once they are embroiled within.”

Geoffrey G. Smith, MD, Casper Medical Imaging, PCMay 24, 2007 (email)

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Candidate proposalsDelivery system reform – similar, traditional approaches

Underlying assumptionsIndividual provider performance is the problem

Better evidence and more guidelines are needed

Transparency on price and quality will drive improvement

Alternative assumptionsLocal system – capacity, norms -- is the critical determinant of costs

and a powerful influence on quality

Most decisions require judgment (guidelines insufficient)

Current payment system is the fundamental problem

For some – drives unprofessional, entrepreneurial behavior

For most – creates conflict between values and daily work

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Failure to recognize key role of local system (capacity, local social norms)as a driver of cost and quality

Assumption that more is betterEquating less care with rationing

Payment system that rewards morecare, increased capacity, high margintreatments, entrepreneurial behavior

Foster development of local organizations(delivery systems) accountable for overallcost and quality of care

Comparative effectiveness researchBalanced information on risks / benefitsComprehensive performance measures

Reform of payment system (long term)Shared savings as interim approach

Underlying cause General Approach

Thoughts on moving forwardAddress the underlying causes of rising costs, poor quality

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Moving forwardSome recent recommendations

• IOM Pathways Series▫ Performance measurement: foster shared accountability

through comprehensive, longitudinal, system level measures

▫ Payment reform: Medicare should align incentives to promote better health and better value.

• Commonwealth Fund Framework for a High Performance Health Care system ▫ “…central to implementing these changes is the need to

establish more organized systems of care.”

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Moving forwardSome recent recommendations

• Rethinking Medical Professionalism, David Mechanic ▫ Information technology (EHR, decision support), care

management, payment reform, integrated systems

▫ “…but American physicians do not particularly like these types of organized medical groups, so much thought is needed about building virtual systems that can successfully incorporate these technologies and support services.”

Milbank Memorial Quarterly, 2008

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Organizational AccountabilityFoster Accountable Care Organizations (Systems)

• Essential attributes of an Accountable Care Organization▫ Provides (or can effectively manage) continuum of care as a real or

virtually integrated local delivery system▫ Sufficient size to support comprehensive performance measurement,

shared EHRs, decision-support▫ Capable of prospectively planning budgets and resource needs

• Potential Accountable Care Organizations ▫ Integrated delivery systems

(Partners, Kaiser-Permanente)▫ Physician-Hospital Organizations / Independent Practice Networks

(Middlesex Health System)▫ Regional Collaboratives

(Indianapolis IN, Vermont)

2020

Performance MeasurementMeaningful measures; strategically deployed

• Current performance measures seriously flawed▫ Focus on individual providers reinforces fragmentation, antiquated

professional models, current silos of practice

• How to measure: Accountable Care Organizations ▫ Fosters shared accountability among providers for full continuum of

care▫ Organizational support for managing and improving care essential▫ Only level of measurement that can account for capacity and costs

• What to measure ▫ Effectiveness: health outcomes over time▫ Care coordination: did care meet patients and families needs?▫ Total per-capita costs

2121

Payment reformValue, not volume

• Long-term: reward improved care, lower costs▫ Must decouple payment from volume; encompass entire population

served▫ Provider: Capitation – or other population-based cost accountability▫ Regional: prospective budgets for care of population served

• Short term -- Shared savings models▫ Establish target growth rate or prospective budget▫ Reward ACOs that achieve spending growth below target (if quality

benchmarks met)

• Advantages ▫ Preserves fee-for-service payment (good for patients and MDs)▫ Can be voluntary on part of enrollees (no lock in; less fear)▫ Provides incentive to avoid increases in capacity▫ Can be done with existing administrative data

2222

Moving forwardCould Massachusetts lead the way?

• Feasibility: how coherent are local physician-networks?

• Payment reform through shared savings: How much money is on the table?

What happens under a shared savings model?

• Practical steps forward

2323

Shared savingsHow much money is on the table? Lots

$8,363

1990 1995 2000 2005

East Long Island

San Francisco

Boston

$10,827

$9,544

2424

Shared-savingsWhat is current evidence?

• Physician Group Practice demonstrationShared savings payments if groups achieve target savings and

meet quality goals

Within 2 years, quality benchmarks achieved by all groups; almost all achieved some savings; 4 of 10 received shared savings payments

• Dartmouth experience – a new conversation Growing internal support for primary care & “medical home”

System beginning to focus on improving “population health”

Interest in all-payer model – essential to fully reorient system (Current incentives to increase volume in < 65)

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Moving forwardWhere do we go from here?

• Federal support for shared savings pilots essentialCongressional interest in ACO / shared savings growing: goal

to expand state and local pilots rapidlyStates with all-payer datasets best positioned to design and

implement all-payer models – critical for success!!

• Barrier: rapid – and conflicting – proliferation of P4P, quality measurement, medical home initiatives▫ Establish clear long term goals; align interim steps with long

term goals▫ Bring payers and providers together to design shared savings

programs▫ Short term savings: focus on acute care hospital

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Moving forwardCreating virtual integrated systems

1 2 43 5

Implementation Year

Provide list of MDs within network

Report on network quality usingadmin data (eg AQA), replacing PQRI

Report on care coordination, accessusing survey data (eg CAHPS)

Registries for expanding list of conditions

Health outcome measures for conditionsincluded in the registry (e.g. functional status)

Cost-measures for specific conditionsincluded in the registry

Support coordination & integration among physician groups

Performance measurement pathway to support quality improvement, shared savings and HIT

Shared savings payments for qualifying ACOs

Shared savings payments to ACOs that meetquality benchmarks (progressively increasingperformance standards, based on above)

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Q: How is a kilowatt-hour of electricity like

a day in the hospital?

A: Nobody wants either

A riddle for would-be health care reformers:

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California per-capita electricity use FLAT, while Gross State Product rose by 82%

Insights from the energyindustry

• Utility industry rewarded for producing energy. ▫Result: only interested in building power plants.

▫Reforms require new structure to reward “end-use efficiency”: light, heat, cold beer – at lowest cost.

• Key principles of energy reforms▫ Population-based accountability for end-use goals.

▫ Payment reform: (1) Decouple profits from volume (2) Shared savings

▫ Performance measurement

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Insights from the energyindustry – how applicable to health care?

• Providers now rewarded for producing services. ▫Result: focus on high margin services; volume growth.

▫Reforms require new structure to reward “end-use efficiency”: health promotion, restoring health / function; quality of life – at lowest cost.

• Key principles of health care delivery system reform▫ Population-based accountability for end-use goals (health).

▫ Payment reform: (1) Decouple profits from volume (2) Shared savings

▫ Performance measurement

Imagine if health care costs were flat for the next 10 years