Be Careful With My Heart Full Episode 212

[Renau Sheard]

Althoughthe broader health care reform debate has sidestepped in-depth discussion of provider payment reform, a consensus has emerged among health policy experts that fee-for-service payments contribute to:

For example, bundling payment for hospital readmissions into the inpatient diagnosis-related group (DRG) payment would encourage hospitals to reduce infections and improve care transitions for patients from the hospital to the community. A more ambitious intermediate model would be accountable care organizations (ACOs), where fee-for-service payment is augmented by bonuses or penalties based on the efficiency and quality of care for all services a patient population attributed to the ACO receives during a predetermined period.

The Medicare program has experimented with some forms of bundled payment. In the 1990s, Medicare conducted a demonstration to bundle physician and hospital payment for coronary artery bypass graft surgery (CABG). The demonstration produced cost reductions of between 12 percent and 27 percent across the participating hospitals.6 Despite this early success, Medicare did not broaden bundled payments to other major inpatient episodes until the 2009 Acute Care Episode (ACE) demonstration, which bundles payment for hospital and physician services for a select set of inpatient episodes of care for orthopedic and cardiovascular procedures.

As with all significant payment reforms, paying on the basis of episodes requires many design decisions, some of which have received more research and policy focus than others.7 Indeed, the effectiveness of the strategy will depend in large part on the wisdom reflected in these decisions. This analysis addresses the following design issues related to developing episode-based payments:

There are different ways to define an episode of care, and any given approach has more potential pitfalls for certain types of care episodes than others. Once the episodes are defined and those most suitable for bundled payment are selected, payment rates must be established. To thread the needle by setting payments in a way that is both fiscally sustainable and motivates providers to behave in desirable ways is a particularly thorny issue, technically and politically.

Another design issue is deciding which providers should be paid on the basis of an episode. This involves decisions regarding which providers to attribute an episode to and whether to spread the incentives broadly across the providers or to concentrate the incentives on a smaller number of providers.

There are also a wide range of other proposed payment reforms, and a question inevitably arises about which ones are mutually exclusive and which are complementary and can be pursued simultaneously with episode-based payments. The final issue is implementation strategies, including staging implementation to focus first on a narrow set of priority conditions, patients and providers, and addressing potential legal barriers. Such an approach allows both providers and payers to gather data and experience and make adjustments for a broader, more ambitious later phase.

Different approaches for defining episodes will require different types of data. For example, defining episodes retrospectively, after they have been completed, allows payers to use a variety of readily available data, such as claims. Defining episodes in real time as they occur may require more detailed clinical data and potentially patient input as well.

Episode groupers. Researchers and payers experimenting with episode-based payments typically identify episodes of care retrospectively using computer software packages, commonly referred to as episode groupers (see box below for more information on episode groupers). Episode groupers are designed to search data, such as medical claims or records of care encounters, to identify 1) whether or not patients have experienced particular types of episodes; 2) when the episode began and ended; and 3) the services received during the period that should be included in the episode.

Data needs. Efforts to define episodes in specific populations, such as the enrollees of a single health plan or patients in an integrated delivery system, require comprehensive data with accurate information on diagnoses, co-morbidities, types of services, dates of service, service costs, and patient and provider identifiers. Most medical claims or sources of encounter data contain the required types of information and can be used for specifying episodes. However, the amount of detail on both diagnoses and services is limited, because these systems were designed for use in fee-for-service payment rather than for defining episodes of care. Limitations in current procedure and diagnosis coding standards also are factors. In the future, electronic medical records or registries with more comprehensive and verifiable clinical information may permit more sophisticated methods to construct episodes in either real time as they occur or after the fact as current episode groupers do.

Policy makers will need to consider several key issues in selecting or developing a software tool to define episodes of care, link episodes to payment and select which episodes to include in a payment program.

Clinical features of episodes and feasibility of using available data. The selected episodes should have well-defined and well-understood clinical definitions, allowing both providers and payers to classify patients and group their associated services. For example, providers and payers should be able to tell which types of patients and services clearly fall into specific types of episodes. Episodes with clear beginning and end points would allow all participants to identify patients experiencing a measured episode and make it easier for payers to link payment to specific episodes.

For example, acute-care episodes may be more practical to define than those for chronic conditions because of their clear beginning and end points and generally predictable course of disease, assuming that practice norms and clinical guidelines are followed. Episodes of chronic conditions are more challenging because of an unclear onset period and lack of end point, with often-unpredictable needs for service use following onset. Chronic conditions can involve episodes of varying severity, but these are often difficult to identify with existing diagnosis coding schemes and data.

Provider attribution and accountability. Policy makers also must consider how easily or appropriately episodes can be attributed to providers for payment and accountability purposes. Some types of episodes may involve too much variation in the types of providers involved in treating different aspects of the underlying conditions. For example, it is more difficult to predict the relative involvement of primary care physicians, different subspecialists, hospitals and post-acute care facilities in an episode of heart attack than in an episode of cataract care. In the less predictable cases, it may be difficult to assign clear responsibility for the episode to a small enough number of providers to keep payment approaches simple and transparent.

Conversely, certain types of surgery-based episodes, such as orthopedic procedures, allow for clearer and more predictable assignment of care responsibilities, making them amenable to episode-based payment approaches. For instance, hip surgeries always involve a major procedure and hospital stay. The treating orthopedic surgeon and hospital could be assigned primary accountability for surgical outcomes and post-acute care, including avoidance of complications resulting in hospital readmissions or the need for subsequent procedures.

In practice, episode-based payment approaches may target only a certain subset of services within an episode. For example, payers could focus on physician services or diagnostic imaging services delivered during particular phases of the episode, such as during a hospital stay, or selected providers involved with the episode, such as only cardiologists involved in a heart-attack episode.

Alternatively, payers could put providers directly at financial risk for the cost of all or some portion of the services delivered within episodes through prospectively determined payments for bundles of services. For payers, this approach would likely require new or improved data on the typical or target costs of each episode. If a program focuses on only a small number of episode types, payers could negotiate the relevant payment amounts, as Medicare does in the ACE demonstration. For providers, it would require careful management of services delivered during the episode and plans for coordination with other providers.

Hybrid approaches also are possible, such as payers putting providers at partial risk for services within an episode. For example, payers could offer prospectively determined payments but establish risk corridors that set an amount above which providers would not be financially liable. Some providers also could share risk for certain services within episodes while being paid fee for service for other care. For example, all ambulatory physician, laboratory, pharmacy and imaging services delivered during an episode might be paid with a single bundled payment, but costs of hospital stays and post-acute care might be paid separately with fee for service or other payment structures, such as DRGs.

The main advantage of using historical costs is operational ease and the potential for payers to address a broad range of episode types. The main disadvantage is that relative benchmarks do not reflect the ideal patient care for a given episode and, therefore, lack clinical face validity with providers.

But normative payment rates pose several substantial challenges for payers. First, clinical guidelines do not exist for all types of episodes, although guidelines are available for some of the most prevalent and costly episodes, such as ischemic heart disease and diabetes. And, where they do exist, guidelines may not address the full range of services provided within a type of episode.

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