Next Things First

Value-Based Purchasing: Coming to a Hospital Near You (From Hal Andrews) by charlottegee
December 2, 2008, 11:15 am
Filed under: health policy, quality, value-based purchasing | Tags: , ,

Remember the halcyon days of 2007, when the stock markets reached their peak? In the midst of the (seeming) boom, Congress instructed CMS to submit recommendations for an initiative called Value-Based Purchasing (VBP). In November 2007, CMS submitted its outline of a VBP initiative to Congress. The lynchpin of VBP is “to transform Medicare from a passive payer of claims to an active purchaser of care”.

Since that day, CMS, particularly Thomas Valuck, MD, MHSA, JD, the Medical Officer and Senior Advisor to CMS, has spoken widely about its plans to implement VBP.

In a nutshell, VBP proposes to link payments to results, including quality, efficiency, patient satisfaction, and other measures. CMS’s November 2007 proposal suggests that hospitals should be rewarded for sustained excellence and improvements from a baseline. On November 26, 2008 CMS issued a release regarding the development of VBP for physicians.

Back to the fall of 2007 – if Congress was contemplating VBP when times were good, then today’s economic woes seem likely to accelerate the concept. Senator Baucus’ plan advocates the implementation of VBP, though a bit more slowly than CMS has proposed. The Baucus plan, which incorporates many of the tenets of President-elect Obama’s plans and received the initial blessing of Senator Kennedy, is a possible launchpad for reform in the Obama administration.

If you ask a hospital executive what VBP is, you get various answers, and occasionally a blank stare. If you ask the Federation of American Hospitals, you get a lecture on how CMS adopts regulations (sort of like the old Saturday morning “Schoolhouse Rock” episode on how a bill becomes a law).

On the other hand, every hospital executive knows about POA and RAC and P4P and HCAHPS and Never Events and Core Measures. Many hospital executives have approached these initiatives as discrete (and unrelated) initiatives. Connecting the dots of these seemingly unrelated initiatives reveals the outline of VBP.

Ask a hospital CFO to estimate the amount of revenue at risk under POA and RAC and Never Events and P4P – most of them can get to 5-10% of revenue pretty quickly. Couple that with declining investment income, and hospitals should have a new urgency to understand where they are in a VBP environment.

VBP, in some form, is headed to a hospital near you. Hospitals have always ultimately adapted to changes in the financing of healthcare, but usually reluctantly and slowly.

Value can, and will, be defined for healthcare, and CMS is leading the charge. History suggests that private payers will not be far behind. If you don’t know your value proposition today in comparison to your peers, time is not on your side. If you don’t join the discussion of how value should be defined, others will fill that void.

Submitted by Hal Andrews


Beyond the Partners Health Article: Looking at the Bigger Picture (From Howard Luks, MD) by charlottegee
November 19, 2008, 4:46 pm
Filed under: innovation, quality, wellness | Tags: , ,

The recent article in the Boston Globe regarding the perceived inequity of payments to the Partners system by local payors serves as notice on where the press and perhaps the public is going to come down on this issue. In the article, the authors assumed their conclusion and skewered Partners. I believe the authors missed a huge opportunity to explore the bigger picture. One of the more glaring problems I have with the article is that the authors begin with the assumption that institutional compensation (in medicine) is linked to quality.

Health care (medicine) is big business, the largest the world has ever known. The “average” successful hospital’s margin is 2%-2.5% at best. The payors are only interested in managing shareholder value and revenues and the effect of reimbursement on their valuation. How can the authors of the article find fault with Partners and their ability to negotiate from a position of strength, while they note that other local institutions are struggling and running in the red even prior to the enormous cuts that will come down from the state over the next quarter? How can they fault Partners’ quest for a profit to fund the next generation of technological advances, capital improvements and to fund care for the indigent and under-insured? Another interesting consideration is how the reporters gained access to the fees paid to institutions. There is NO transparency in this space. Confidentiality agreements between payors and institutions are SOP—which leaves one to imagine who wanted this article published in the first place.

The bigger picture that was not explored by the reporters is measuring quality and somehow tying quality measures to compensation. Measuring “quality” is a burgeoning practice (industry) that is trying to define and align itself in this highly fragmented and well-entrenched space. The definition of *success* and *quality*is the first of many roadblocks that exist. Is it a length of stay issue? Complication rate issue? Quality of life issue? Mechanical issue (healed rotator cuff in a patient who remains in pain)? Which of the overlapping systems are we referring to: the environmental level, the level of the health care organization, or the interface between clinicians and patients? There are numerous opportunities that exist within existing industry standards and industries that are just starting to emerge to enhance/streamline/incentivize (and profit from) the focus on *quality*.

A small, but certainly not exhaustive list of opportunities that exist are in various areas of the health care system:

Enabling rapid advances in health care: The need for federal, state and local governments to come together and guide reform platforms.

Health care delivery redesign: In order to provide safer, more reproducible, higher *quality* care, the environment in which health care is delivered needs to change. This will need to address, amongst other issues, management practices, workforce capability, work design and organizational safety culture.

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Maybe this will fill the “Capital Gap” by Rob Coppedge
October 15, 2008, 8:52 pm
Filed under: innovation, quality, venture capital | Tags: ,

For those with good ideas but no ability to talk VCs or angels into backing you – perhaps we can turn to the guys who brought average consumers access to really expensive manned space flight. The X Prize has teamed up with Wellpoint to launch a new prize: 

[X Prize and Wellpoint] have announced an open competition to devise solutions that improve health care cost and quality, and they’re dangling a prize of at least $10 million for the winner. “Reinventing and rebooting the U.S. health care system is not to be taken lightly,” said XPrize Chief Executive Dr. Peter Diamandis. “Its an audacious task but, we think, very achievable.”

Contest details will be worked out by early next year. But essentially the competition will look for ways to “dramatically improve” cost and quality, said Brad Fluegel, a WellPoint executive vice president… The contest organizers are thinking big picture. Fluegel said they will look for a system of solutions instead of one or two improvements…  Potential solutions might involve ways to streamline insurance reimbursement or the medical claims process that reduce administrative costs. They also might include solutions that help patients better manage chronic conditions like diabetes.

So we can’t raise $5 million for a company to do one thing, but we can get $10 million if we figure out how to do everything… only in health care.

Posted by RobC