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Policy Watch: Will a New Reimbursement Model be Coming to Your Area? Massachusetts Program Gains Traction



AMassachusetts plan that required nearly every citizen to obtain health insurance became the model for the Patient Protection and Affordable Care Act signed into law by President Obama on March 23, 2010. Now the state appears to be leading the way toward a new way of paying for health care that replaces traditional fee-for-service reimbursement with Alternative Quality Contracts, or AQCs, which provide global payments to physician groups, hospitals, and other providers for each patient and treatment episode. If the patient is treated for less than the payment amount, the provider keeps the difference. To discourage skimping on care, all providers will be expected to meet quality standards, with bonuses provided for those who exceed them.

And it seems to be working, according to a study by Harvard Medical School researchers published in the Sept. 8 issue of the New England Journal of Medicine (NEJM).

During their first year under AQC contracts, seven Blue Cross Blue Shield of Massachusetts providers representing about 380,000 people spent 2 percent less per quarter than comparable institutions operating under fee-for-service contracts, with savings derived “largely from shifts in outpatient care toward facilities with lower fees; from lower expenditures for procedures, imaging and testing; and from a reduction in spending for enrollees with the highest expected spending,” according to the study.

The AQC providers also achieved a 2.6 percent increase in meeting quality thresholds for chronic care, and an increase of 0.7 percent in pediatric care thresholds.

In February Governor Deval Patrick submitted a bill that would make global payments standard for most Massachusetts state employees, Medicaid recipients, and others with subsidized health insurance. And on June 23, while testifying before the US Senate Finance Committee about this proposal, he predicted, “just as Massachusetts is the home of the nation's most successful universal health care law, we are poised to crack the code on cost containment.”

DR. MICHAEL CHERNEW: “The imperative to control spending will dominate any other concern,” he said. “Fee-for-service will not be the system of the future because people are unwilling to pay for it. If youre a physician or specialist, the question is not: do you like global payments? The question is: do you prefer global payments or fee cuts?”

GLOBAL PAYMENTS OR FEE CUTS?

Although the AQC model is in a state of development, and vulnerable to unintended consequences, doing nothing is not an option, according to Michael Chernew, PhD, professor in the department of health care policy at Harvard Medical School, and a co-author of the NEJM article.

“The imperative to control spending will dominate any other concern,” he said. “Fee-for-service will not be the system of the future because people are unwilling to pay for it. If you're a physician or specialist, the question is not: do you like global payments? The question is: do you prefer global payments or fee cuts?”

Global payments conjure memories of managed care, which flourished in the 1980s and 1990s, and attempted to control costs through capitation — the payment of a fixed amount per patient to a health maintenance organization (HMO) or a similar entity. Capitation sensitized health care providers to the cost of treatment, but it also incentivized providers to increase profits by reducing services.

AQCs resist this tendency by requiring providers to meet certain quality measures, and by offering bonuses of up to 10 percent to those who exceed them.

For example, the medical groups operating under the AQCs in Massachusetts received performance bonuses for offering preventive care, and for carefully managing patients with chronic problems. “Some of the groups paid the full ambulatory care quality bonuses to their primary care physicians, which could increase compensation by more than 50 percent above the existing Blue Cross fee schedule,” according to an analysis in the September 2011 issue of Health Affairs. “Early results suggest that financial incentives that focus attention on quality improvement and efficiency help reduce growth in health care spending.”

Dr. Chernew, one of the authors of the Health Affairs article, acknowledges the importance of quality goals to the global payment system, but also recognizes that they can never be specific enough to cover every detail of care, especially in complex specialties such as neurology.

MASSACHUSETTS GOVERNOR DEVAL PATRICK submitted a bill in February that would make global payments standard for most Massachusetts state employees, Medicaid recipients, and others with subsidized health insurance.

DR. JACK A. MEYER said he believes the quality standards applied to global payments provide an incentive for the type of comprehensive care currently under-rewarded by fee-for-service reimbursement.

“As a general rule quality measures will tend to be broad and tend to lag behind,” he told Neurology Today. “Quality measures aren't refined enough to keep up with all specialty care.”

They do, however, leave plenty of room for physician initiative, he added.

“Global payment systems are designed to give control to physicians, but in the context of a budget,” Dr. Chernew said. “Physicians can do whatever they want to do. They just have to figure out how to do it within a budget. The quality measures are not sufficiently comprehensive to capture all aspects of quality, so if physicians don't care about quality, the system will be bad. You just have to hope that physicians will provide quality care even in situations where it's not being measured.”

Jack A. Meyer, PhD, a professor in the School of Public Policy at the University of Maryland, believes the quality standards applied to global payments provide an incentive for the type of comprehensive care currently under-rewarded by fee-for-service reimbursement.

“For example, we know nearly one of five Medicare patients discharged from a hospital is r`eadmitted within 30 days, and the majority of those readmissions are avoidable,” he said. “One of the reasons is that a disproportionate number of them have no contact with medical system during those 30 days. Research shows that sending a nurse practitioner to visit them after discharge, or at least call them, significantly reduces readmissions, but under the existing system if a hospital invests in this, fewer patients come back, and since hospitals are paid by admission, if they lay out money for a nurse practitioner they lose money because admissions go down. Under a global payment system that hospital would have incentive to invest in nurse practitioner follow-up care because if they can reduce readmissions, they'll make more money. A global payment gives all players an incentive to make prudent investments and avoid adverse outcomes.”

Calculating global rates and quality measures will be challenging, Dr. Meyer said, “but if left to an unrestricted fee-for-service payment system, our health spending is going to continue to soar out of control. The fee-for-service system sends the signal: do more, more, more. Rewards are based on volume. That just pumps up spending and is not good in the long run for anyone. We need to reward providers who save money not by cutting corners, but by improving patient outcomes.”

CHALLENGES FOR NEUROLOGY

The president of the Massachusetts Neurologic Society, Avraham Almozlino, MD, worries about the difficulty of imposing quality measures on a specialty as complex as neurology.

“Neurology is one of the fast-moving, cutting edge specialties,” said Dr. Almozlino, associate clinical professor of neurology at Tufts University School of Medicine, and chief of the Division of Neurology at Newton Wellesley Hospital. “The last frontier in medicine is the central nervous system. There are many advances and discoveries being made that are at least partially financed and incentivized by high-tech, high-quality, very sophisticated neurological care. If we shoot for the lowest common denominator, the incentive for this quest for ongoing improvement and advances may diminish, and that may hurt neurology as a whole.”

He also has reservations about a system that encourages physicians to provide less care.

“There's no question that some physicians who are focused on financial self-interest probably have been doing a little too much,” he said. “But we have to be careful that incentives do not encourage physicians to not provide appropriate medical care. If a patient knows that the physician may have an incentive to minimize care, that may get in the way of the trust between the patient and the physician, and that trust is important.”

At the same time he believes the quality measures embedded in AQCs may reward the best providers. “Now we all get paid the same amount regardless of outcomes, unlike members of other professions who get paid more the better they do,” he said. “We are paid for process, not outcome. Measuring outcomes is difficult but do-able.”

The quality measures are what set global payments decisively apart from the capitation model, according to David Harlow, former Deputy General Counsel of the Massachusetts Department of Public Health, and principal of The Harlow Group LLC, a health care law and consulting firm.

“Capitation pushed insurance risk down onto the health care providers,” said Harlow, who writes about health care law on his blog (www.healthblawg.com). “That was inappropriate, but providers should be asked to assume the risk of providing high-quality care. With quality measures in place you can't succeed if you're making money by withholding care inappropriately. There's an emphasis on quality rather than sacrificing quality for cost savings.”

The challenge, he said, is coming up with health care measures that identify meaningful goals.

“The Centers for Medicare and Medicaid Services recently finalized the Accountable Care Organization [ACO] regulations,” he said. “They proposed tracking 65 quality and performance measures, which they narrowed it down to 33 measures, and that might be a good starting point to get a sense of what kind of measures are useful.” [An analysis of the new ACO rules will be published in the next issue of Neurology Today.]

Harlow believes that resistance to global payments arises from fear of change, but change to the system of reimbursement is essential.

“Any time someone in this country talks about making decisions about how to invest health care resources, people start to warn about rationing,” he said. “But there simply isn't a limitless supply of cash to pay for health care services. Other countries have recognized this and taken a reasoned approach to getting the most bang for the buck.”

WHERE DOES NEUROLOGY FIT IN THE NEW PAYMENT PARADIGMS?

DR. NEIL BUSIS: “The entire quality system can be dragged down by physicians who dont follow guidelines, so there must be coordination of care. We have to develop ways to share information and be alert to anyone who is not meeting the goals.”

In accountable care organizations (ACOs), neurologists and other specialists will find their quality measures dependent to some extent on general practitioners and other front-line physicians, according to Neil Busis, MD, chairman of the AAN Medical Economics and Management Committee.

“The quality measures that have been proposed are mostly relevant to primary care doctors,” said Dr. Busis, chief of the Division of Neurology in the department of neurology at the University of Pittsburgh Medical Center, Shadyside. “Our quality scores will be tied to other physicians. The entire quality system can be dragged down by physicians who don't follow guidelines, so there must be coordination of care. We have to develop ways to share information and be alert to anyone who is not meeting the goals.”

In a presentation to the Massachusetts Neurological Association titled “Beyond Fee for Service: Dollars and Incentives,” Dr. Busis pointed out that neurologists must develop neurology-specific measures.

“Currently there are quality measures for stroke, but others are in the pipeline,” he said. “The Practice Committee is developing quality measures for important neurological diseases right now. You can go to the AAN website and see them.”

The presence of a neurologist in an ACO, however, will depend on non-neurologists in the group.

“The issue will be the group's perception of the value of neurologists,” Dr. Busis said. “Do they consider neurologists a necessity or an expensive frill?”

He believes skimping on a neurological assessment can lead to crucial misdiagnoses that could affect quality measures. As an example, he pointed to a woman he recently examined who had been diagnosed as having a transient ischemic attack. She was about to be discharged from the emergency department because the weakness in one arm was disappearing. “When I examined her, however, I found a profound deficit in her left field of vision,” Dr. Busis said. “Primary care doctors may not always have the knowledge necessary to use the quality guidelines appropriately.”

Many non-neurologists now treat Alzheimer disease and Parkinson disease, “and the danger of misdiagnosis is huge,” according to Dr. Busis. “The most common cause of tremor is not Parkinson disease; it's essential tremor, which is misdiagnosed all the time. And there are several types of dementia.”

In short, the idea of quality measures is a good one, Dr. Busis believes. “No one is against the concept of paying for value and paying to make patients healthier,” he said, “but to get there from where we are today is going to be very hard. People may understand quality when they see it, but the hard part is trying to quantify it.”

—Tom Valeo

On Oct. 20, the Centers for Medicare and Medicaid released a more flexible and potentially profitable final shared savings rule. Look for a more detailed analysis of how the new rules could affect neurology in the Nov. 17 issue of Neurology Today.

REFERENCE:


Song Z, Safran DG, Landon BE, He Y, Ellis RP, Mechanic RE, Day MP, Chernew ME. Health Care Spending and Quality in Year 1 of the Alternative Quality Contract. N Engl J Med 2011;365:909–918.
Mechanic RE, Santos P, Landon BE, Chernew ME. Medical Group Responses To Global Payment: Early Lessons From The “Alternative Quality Contract” In Massachusetts. Health Aff 2011;30(9):1734–1742.