Center for Improving Value in Health Care
Jan 23, 2012 | 0 comments | Posted by
Delivery System Redesign, Payment Reform, Controlling Costs
This week, the Congressional Budget Office (CBO) released an analysis of 10 Medicare demonstration projects undertaken over the last 20 years. All were designed to save the program money, but only one succeeded in doing so. Do these findings mean we should abandon efforts to redesign our country’s health care payment and delivery systems?
Not at all. In fact, when you look below the surface of the CBO report, you reach precisely the opposite conclusion. The reason most of these pilots did not achieve their desired goals is because they were built upon our existing fragmented delivery and fee-for-service/pay-for-piecework system—a system that incents more, not better care, pays a second time for avoidable complications and provides no and incentive for care coordination and better outcomes.
Indeed, CBO says explicitly:
Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and the nation’s decentralized health care delivery system, which does not facilitate communication or coordination among providers.
It is instructive to note that, of the four value-based-purchasing demonstrations studied, the only one to demonstrate cost savings was the one that didn’t use fee-for-service: bundled payments for heart bypass surgery. The beauty of bundled payments is that they align incentives between physicians, hospitals and health insurers by making a lump sum payment to cover all services related to a given procedure (e.g. pre-surgery, surgery hospital and follow-up care); they also include quality targets and cover costs of complications for at least 30 days. Because physicians and hospitals must meet both cost and quality targets, hospitals negotiate lower prices for supplies, physicians coordinate more closely on inpatient and follow-up care. And ultimately, it is the patients who benefit.
While CBO does not examine quality outcomes explicitly, it’s important to recognize that the bundling demonstration showed important quality improvements: both mortality rates and average length of hospital stay declined for patients in the pilot.
Medicare isn’t the only entity to demonstrate important quality improvements and cost reductions from bundled payments. A similar program at the Geisinger Health System in Pennsylvania reduced complications, infections, length of stay and hospital costs by meaningful amounts and provided a “warranty” for any avoidable complications. The incentive is to get it right the first time. Bundled payments for orthopedic surgeries at Dr. Ingham and Johnson Medical Center in Texas reduced potentially avoidable complications (e.g., post-surgical infections) and reoperations—again, leading to reduced costs.
While it is true that some other bundling initiatives (e.g., a Medicare cataract surgery pilot) haven’t demonstrated similar success, the improvements noted above illustrate the value this approach can add to our health care system. That is why CIVHC is actively engaged with health plans, hospitals and physicians in facilitating bundling pilots in Colorado.
The CBO analysis also points to lessons learned from other demonstration projects, which back up the need to fundamentally reshape our health care system:
Change isn’t easy. Medicare blazed the trail with their pilots, and we can learn valuable lessons from what worked—and what didn’t—in their demonstration projects. We know our current system is broken. It is extravagantly expensive, fragmented and ill-equipped to provide the quality care we all want. We know we need new approaches to better integrate care and pay our providers for delivery quality, not simply volume. Let’s use the CBO findings to accelerate change for the better.
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