On February 24, 2016 Dr. John Peabody delivered an engaging presentation around structuring partnerships under the Center for Medicare and Medicaid Services’ Comprehensive Joint Replacement Bundle Program (CJR). Dr. Peabody and Jay Sultan of Edifecs provided examples of hands-on approaches for hospitals to strategically align orthopedic surgeons and post-acute providers under the CJR program. The presentation focused on tools that providers can use to help manage their performance to be successful under the new value-based environment.
The informative webinar focused on the following elements:
- Learning about the impact of unwarranted clinical variation on quality and cost.
- Tools and strategies for measuring clinical practice variation and engaging physicians in the new value-based environment.
- Examples in which hospital leadership can partner with their physician leaders to standardize practice under the CJR bundle.
- Effective strategies for accountability and alignment in the inpatient care and post-acute care through physician engagement and education.
A full audio recording of the webinar can be accessed here.
You have no doubt been hearing the buzz around bundled payments lately. The Bundled Payments for Care Improvement (BPCI) initiative, launched in 2013 by the Centers for Medicare and Medicaid Services (CMS), is growing rapidly and now includes 48 different clinical conditions and over 1,600 different bundles at organizations across the country. More recently, CMS released a Final Rule on November 16th outlining the first ever mandatory episode-based bundled payment program targeting hip and knee replacements, one of the most common inpatient surgeries for Medicare beneficiaries (more on this later…). United Healthcare also announced recently they would be expanding their innovative oncology bundled payment initiative following favorable results in a pilot across five oncology practices. In this pilot, cancer care costs were reduced by 34%– or approximately $40,000 per chemotherapy patient[i]. Remarkably, United was able to accomplish this even with the skyrocketing costs of chemotherapy drugs (see our last newsletter on increasing cost of cancer drugs)[ii].
Interest in bundled payments as a means of controlling costs and improving quality has steadily increased. With providers and payers experiencing greater success with bundles, we’ll look back at early programs and evaluate lessons for future implementations.
Overview of Bundles (A Reminder)
Under a bundled payment arrangements, providers are reimbursed for a set of services rather than for every individual unit of care (as in the standard fee-for-service model). Providers are reimbursed under payment arrangements that define the breadth of the bundle (i.e., what services are included and over what length of time) and contain specific financial and performance accountability measures. These episodes can be relatively straightforward, such as bundling inpatient hospital services with physician payments, but can also be extended to include readmissions, outpatient care, and/or post-acute services within a single payment. A bundled payment arrangement therefore asks providers to assume financial risk for a wider array of services and costs, while offering financial incentives to share in the upside if that care can be delivered more efficiently and cost-effectively.
Lessons from an Ambiguous Start
Results from early implementations of bundled payments were mixed. One of the first examples of payment bundles was the very successful introduction of the DRG payment system in the early 1980s. Bundling inpatient hospital services into a single payment had a profound effect on care, leading to a dramatic 24% reduction in length of stay (3.4 fewer days) with no change in mortality or readmissions 180 days post discharge[iii]. Expanding bundles beyond DRGs yielded mixed results. The Acute Care Episode (ACE) Demonstration, launched in 2009 by CMS, provided an early glimpse into how bundled payment could affect the quality cost ratio. The ACE project bundles covered all Medicare Part A and Part B services, including physician services, but were limited to specific cardiovascular and orthopedic procedures. Participating hospitals reported a 10 to 12 percent decrease in material costs during the first year and no corresponding price increases in later years. According to a report released by the Healthcare Financial and Management Association, the largest cost savings came from standardization of high cost supplies, such as stents and joint implants[iv]. Dr. Landgarten, MD, CMO and Chief Quality Officer of the Tennessee-based health system Ardent– one of the five participating hospitals in the ACE project– attributed savings in orthopedics to physician engagement around supply costs, remarking that, “[physicians] have a vested interest in the financial and clinical outcome, and it was that leverage that helped achieve supply costs savings.”[v] There is only so much juice, however, in supply costs.
The Integrated Healthcare Association (IHA) bundled payment initiative and the PROMETHEUS Bundled Payment Experiment yielded less promising results, but led to important insights into the importance and complexity of execution. IHA attributed the difficulties it faced in implementation to the lack of information technology infrastructure and capabilities to disburse revenue[vi]. Delays in regulatory approvals of contracts with payers and a lack of consensus around how to define the bundle also hindered implementation[vii]. The PROMETHEUS Bundled Payment Experiment faced a number of similar challenges as well, particularly with regard to payment methodology. Specifically, pilot sites had difficulty executing contracts due to conflicting interests from providers and payers around payment distribution and bonuses. Findings from the PROMETHEUS program were published in Health Affairs and the authors also cited hesitations from providers for fear of sustaining significant financial losses[viii].
A Strong Resurgence
Much of the recent activity around bundles has been spurred by CMS, which has prioritized bundled payments as a key value-based purchasing strategy to help achieve CMS’ ambitious goal of having 30% of Medicare fee-for-service payments switch to value-based payments by 2016 and 50% by 2018[ix]. Building on the success and lessons of previous programs, CMS has, for the first time, made bundled payments mandatory for hospitals, doctors, and other providers. Beginning in 2016, Medicare’s Comprehensive Care for Joint Replacement (CCJR) program for knee and hip replacements will be mandatory in 65 metropolitan areas[x]. As outlined in the Final Rule, hospitals would be financially accountable for not only the costs of the surgery and subsequent hospital stay but also the payments to the surgeons and related medical costs in the 90 days after discharge.
Commercial payers like United are also following in the footsteps of CMS. Baptist Health South Florida reported savings of approximately two percent after the first year of its special oncology bundle program and is expanding to additional surgical and procedural services[xi]. OrthoCarolina, a collection of orthopedic practices across North Carolina, has also expanded their bundle program to other payers following early success with Blue Cross and Blue Shield of North Carolina (BCBSNC) around total knee replacement surgeries [xii].Most recently, as participants of Medicare’s BPCI program, OrthoCarolina reported that they had observed reductions in readmission rates (down 77%), length of stay (down 18%) and postoperative skilled nursing facility care placement (down 31%). According to Daniel B. Murrey, MD, CEO of OrthoCarolina, the program’s success was largely attributed to case managers who arranged preoperative physical therapy, care planning and management, and patient-specific goal setting. Case managers also called patients regularly during the first year after surgery[xiii].
Going Forward: Ensuring Success of Bundled Payment
Bundled payment has laid down deep roots and is likely to only grow stronger over the coming years. Economic pressure to contain costs, greater transparency highlighting quality deficiencies, and stronger IT infrastructure to analyze and administer a bundle will support this growth. While these elements are all key, perhaps the greatest hurdle to a successful bundled payment, and thus the greatest opportunity for those that can successfully execute, is meaningfully engaging physicians to reduce unwarranted variation and standardize care around best practices.
Culture change and physician engagement have often been described as the most difficult challenges in healthcare. A number of the previous failures in bundled payment initiatives were attributed to a lack of engagement and alignment of objectives around the new payment model. Successful bundled payment initiative will require many doctors to change the way they think about and provide care. Hospitals and organizations will need to engage doctors by providing training tools, including measurement and feedback, which allow physicians to take the leadership role in modifying the processes of care to achieve improvement and financial success.
At QURE, we have a very unique tool, Clinical Performance and Value (CPV) vignettes, which are designed to engage clinicians in this exact type of care standardization. If success in bundled payment is top of mind for you, we would love to share more about how we can help.
[i]United Health Group, Study: New Cancer Care Payment Model Reduced Health Care Costs, Maintained Outcomes, July 2014, http://www.unitedhealthgroup.com/newsroom/articles/feed/unitedhealthcare/2014/0708cancercarepaymentstudy.aspx
[ii] Julie Appleby, UnitedHealthcare Expands Effort To Rein In Rising Costs Of Cancer Treatment, October 29, 2015. http://khn.org/news/unitedhealthcare-expands-effort-to-rein-in-rising-costs-of-cancer-treatment/
[iii] Kahn, Katherine L., David Draper, Emmett B. Keeler, William H. Rogers, Lisa V. Rubenstein, Jacqueline Kosecoff, Marjorie J. Sherwood, Ellen J. Reinisch, Maureen F. Carney, Caren Kamberg, Stanley S. Bentow, Kenneth B. Wells, Harris Montgomery Allen, David Reboussin, Carol P. Roth, Carole Chew and Robert H. Brook. The Effects of the DRG-Based Prospective Payment System on Quality of Care for Hospitalized Medicare Patients: Executive Summary. Santa Monica, CA: RAND Corporation, 1991. http://www.rand.org/pubs/reports/R3930.html
[v] Herman, Bob. Two Major Lessons From CMS’ Bundled Payment ACE Demonstration, http://www.beckershospitalreview.com/hospital-physician-relationships/2-major-lessons-from-cms-bundled-payment-ace-demonstration.html
[vi] Caillouette, James and Robinson, James. The “Failure” Of Bundled Payment: The Importance Of Consumer Incentives, August 21, 2014. http://healthaffairs.org/blog/2014/08/21/the-failure-of-bundled-payment-the-importance-of-consumer-incentives/
[viii] Peter S. Hussey, M. Susan Ridgely and Meredith B. Rosenthal, The PROMETHEUS Bundled Payment Experiment: Slow Start Shows Problems In Implementing New Payment Models, November 2011. http://content.healthaffairs.org/content/30/11/2116.full
[ix] Centers for Medicare and Medicaid Services, Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume, January 26, 2015. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html
[xii] BlueCross BlueShield of North Carolina, BCBSNC and OrthoCarolina Team Up to Reduce Cost and Improve Quality of Knee Replacement Surgeries, March 26, 2014. http://mediacenter.bcbsnc.com/news/bcbsnc-and-orthocarolina-team-up-to-reduce-cost-and-improve-quality-of-knee-replacement-surgeries
[xiii] Peggy L. Naas MD, MBA, and Brian McCardel, MD, Finding Value in Value-Based Payment Models: An update on bundled payment models for orthopaedics, http://www.aaos.org/AAOSNow/2015/Jul/advocacy/advocacy6/
QURE Publishes Article on Using Vignettes to Measure and Encourage Adherence to Clinical Pathways in a Quality-Based Oncology Network
Check out QURE’s latest published article in Managed Care on our experience building the Moffitt Oncology Network Initiative using CPVs.
Our study suggests that fostering the adoption of breast cancer clinical pathways into an oncology network is feasible; however, adherence to pathways in breast cancer is varied and reducing such variation is a priority as oncology networks continue to grow in popularity.
Check out the full article here.
On September 17th, Dr. John Peabody presented at a World Bank Brown Bag Lunch co-hosted by RBF Health. The topic for the BBL was improving the quality of healthcare around the globe. Dr. Peabody highlighted the need for additional studies on quality of health services and the necessity to measure physician skill where improvement is needed.
RBF Health provided an additional description of the event:
“While universal health care has certainly not been attained in all LMICs, better access and utilization have revealed striking gaps in the quality of health care that is provided. This raises the very worrisome practicality that “access to poor quality of health services may be no better than no access at all.” Raising the quality of health care, however, is arguably even more challenging than increasing access or other structural elements of care, such as drugs, equipment, and facilities.
Research and policy in the past decade have revealed the depth of this problem and illuminated some possible solutions. Quality of care criteria, for example, is increasingly available from the evidence-based literature. Measurement against those criteria, at a systemic level, is gradually being expected. ”
For more information on the event: https://www.rbfhealth.org/event/quality-health-care-link-between-universal-coverage-and-health-outcomes#sthash.xGLSupXk.dpuf
On August 25th, 2015, DCP3 authors Dr. John Peabody, Rohina Joshi, and Barbara McPake, as well as DCP3 advisory committee member Jaime Montoya, presented at COHRED’s 2015 Global Forum on Research and Innovation for Health in Pasay City, Philippines. Dr. Peabody presented on updates regarding the quality chapter of DCP-3 and the QIDS Project.
Playing to a packed house of over 400 participants, DCP3 contributors spoke on themes of quality of care and quality improvement in low- and middle-income countries, themes which occur across DCP3 volumes and topics.
For more information on DCP-3 and COHRED: http://dcp-3.org/
Patients, employers and payers are increasingly feeling the pressure of rising drug costs. As one example of this pressure, a 2015 study in the Journal of Economic Perspectives found that oncology drug prices have increased by an average of $8,500 every year over the past 15 years. In response, insurers, providers and prescription benefit managers are now pushing back in creative ways. The prices for drugs, they argue, should be based on how well the drug works and the demonstrated value it provides. Express Scripts and Memorial Sloan Kettering are two organizations innovating new ways to evaluate the clinical utility of different drugs and price them accordingly.
Express Scripts, a large manager of prescription-drug benefits for U.S. employers and insurers, announced in May that it is developing a new system in which payments for cancer medications would vary based on how well the drug works. Currently, a drug’s price remains the same regardless of the condition it is being used to treat or the efficacy it has in a given indication. This new program would result in indication specific pricing where drugs that are more efficacious would garner higher payments than those that are less so. Approaches like this are not unheard of and have been applied in Europe. This push by Express Scripts, however, has the potential to disrupt US drug pricing and will put additional pressure on drug companies to demonstrate clinical utility that supports value-based prices.
In an effort to tackle some of the same issues, Memorial Sloan Kettering Cancer Center has developed a new online tool called DrugAbacus, which brings some transparency to the various costs and benefits of 54 different cancer drugs. The tool uses data submitted for FDA approval to model costs associated with factors like efficacy and toxicity to arrive at an estimated value-based price.
In an interview with the Wall Street Journal, Director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, Dr. Peter Bach said prices for many new cancer drugs don’t reflect their value to doctors and patients. “Right now, manufacturers have total price control, and total control of prices has led to irrational pricing behaviors,” he said. The DrugAbacus tool is designed to model value-based drug pricing and provide a more accurate picture of the clinical utility of a drug. An example of significant price differences using value-based pricing is Eli Lilly’s Erbitux (cetuximab), which is much less effective in advanced head and neck cancer than it is in colorectal cancer. Right now, the price of the drug is the same in both indications, but the DrugAbacus tool estimates that the current $10,320 price would drop to only $470 when used in head and neck cancer.
Pay-for-performance pricing and cost transparency are sweeping health care and hitting drug companies, life science vendors, health systems and providers in unique ways. The overall take-home, however, is that the old ways of doing business and charging for care will not be sustainable going forward. Demonstrating cost-effectiveness and clinical utility to payers and patients alike is no longer optional.
At QURE, we get up every morning because we believe in our mission to improve health care quality and reduce costs through measurement and feedback. We’ve naturally been excited by the growing body of literature showing that new payment models providing financial incentives for achieving these twin goals have a real impact.
In June of this year, Nyweide and colleagues at CMS added important additional evidence that properly aligned incentives lead to reduced cost without sacrificing quality. In JAMA, they reported results from the first two years of Medicare’s Pioneer ACO program, covering 2012 and 2013. As a brief reminder, the Pioneer ACO program is structured such that participating organizations that care for their patients at a lower total cost than expected receive a portion of those savings as direct payments. To receive the shared savings payments, however, organizations must also meet specific quality and patient experience thresholds. Compared to the more common Medicare Shared Savings Program (MSSP), the Pioneer ACOs have the opportunity for greater financial upside, but, as of 2013, the responsibility to also share in losses if spending exceeded targets.
We found three key take-aways from this latest report:
- We can reduce spending without sacrificing quality or experience
The headline from the study is that the 32 Pioneer ACOs saved a total of $385M in 2012 and 2013, when compared to similar groups of patients not attributed to one of the ACOs. It’s not often that programs can claim saving hundreds of millions of dollars. Not surprisingly, reductions in inpatient spending showed the largest cost savings, and decreases were also seen in physician services, ED and post-acute care. Importantly, quality measures did not suffer and Pioneer ACO patients even reported higher satisfaction with access to timely care and clinical communication.
- Achieving savings is hard
The aggregate numbers above are impressive, but the Pioneer ACO experience also shows that achieving and sustaining these savings is difficult work. First, most of the savings was realized in the first year. After achieving $280M in savings in 2012, this total fell to $185M in 2013, suggesting that finding savings after targeting the initial low-hanging fruit is more difficult. Second, 13 of the original 32 participants have left the program. Many of the departures were from organizations that were unable to achieve or sustain savings.
- There is much more to do
The numbers reported here are trivial when compared to Medicare’s nearly $600 billion annual spend, but they do represent a 4% reduction in spending that, if extended nationwide, would go a long way in “bending the cost curve.” Recognizing this, CMS has announced that they will expand the Pioneer model to other organizations. However, given the struggles many of the hand-picked, well-established early Pioneer participants faced, it is clear that others moving down this road must be thoughtful and deliberate about the tools and strategies they employ.
Driving these savings in a sustainable way, without sacrificing quality, will require multiple approaches including better patient engagement, big data analytics and tighter integration across the care continuum. Most importantly, it will also require directly involving providers around evidence-based care that reduces unwarranted variation. At QURE we have proven that engaging clinicians with Clinical Performance and Value (CPV®) vignettes supports cost savings efforts within ACOs. As one example, our recently published work with the Providence Medical Group demonstrates nearly $800,000 in annual savings opportunities across just 24 cardiology providers.
QURE continues to generate exciting evidence that measuring care practice and engaging providers around variation reduction is essential to realizing the twin goals of high quality and low cost. These goals will increasingly define success as new payment models, like the Pioneer ACO, become more and more common across the country.
Sources: Nyweide DJ, et al. Association of Pioneer Accountable Care Organizations vs Traditional Medicare Fee for Service With Spending, Utilization, and Patient Experience JAMA. 2015; 313(21):2152-2161.
QURE Healthcare is very pleased to announce the appointment of David Paculdo MS, as Director of Analytics and research. David comes to QURE with a strong background in data analytics and public health. David will continue to bolster QURE’s data analysis capabilities and ensure continuation of a robust literature pipeline continuing to validate the CPVs.
As Director of Analytics and Research at QURE Healthcare, David will be primarily responsible for planning and executing data analyses related to QURE’s core business, as well as guiding and overseeing the overall analytics and statistical modeling projects of the analytics team.
David received his Master of Public Health from Dartmouth College in 2003, with an emphasis in quality improvement and biostatistics, and a Bachelor of Science in Electrical Engineering from the University of California, Irvine. He has over ten years of experience related to healthcare analysis and outcomes, and he has been a contributing author to over a dozen peer-reviewed articles.
Prior to joining QURE, David worked in semiconductor technology at IBM, where he fulfilled several technical and information technology roles for US and international clients to enable the success of a multiple projects.
“As QURE growth accelerates, David comes to us at a critical time to oversee and build our analytics team. Joined by our current analysts in our San Francisco and Manila offices, David will lead the team and the critical interface between measurement data and performance analytics,” said Dr. John Peabody, QURE’s President and Founder. “David’s extensive programming and statistical experience means QURE will refine our industry leading approach and scale our reach to QURE’s clients and strategic partners.”
David described his addition to the QURE team by saying, “I am delighted to join such a fast growing company involved in one of the most important challenges facing health care: improving the quality of care. Patients everywhere want their doctors to be supported as well as accountable and I think QURE’s CPV technology does this in a unique, powerful and effective way.”
Managing Specialty Care in an Era of Heightened Accountability: Emphasizing Quality and Accelerating Savings
Engaging specialists in accountable care organizations (ACOs) is a challenge that has not been addressed by many health systems or payers. A novel accountable care design among a group of cardiologist was published today in the American Journal of Managed Care.
ACOs increasingly rely on risk-based contracting to avoid over-provision of services under fee-for-service arrangements. However, under-providing necessary services maybe an unintended consequence of global budget or pre-payment schemes. To guard against this, the Cardiology ACO design project, called ACT-C3 and led by Dr. John Peabody, President of QURE Healthcare and Dr. Xiaoyan Huang, Cardiologist at Providence Health System, introduced an approach whereby the shared savings payment was conditioned upon reaching a series of practice based quality standards. Standards were set using a well-established quality measurement and feedback system, called Clinical Performance and Value (CPV®) vignettes. In this study, CPVs measured clinical practice variation in treating coronary heart disease (CHD), coronary heart failure (CHF), and atrial fibrillation (AF).
In collaboration with the Providence Medical Group, in Portland, Oregon, cardiologists and advanced practice practitioners completed a set of cardiology CPVs. Then, drawing upon claims data from 2009 through 2011, QURE and Providence then created a historic budget to capture cardiovascular disease (CVD)-related costs for attributed patients on a per patient per year basis. This budget identified a spending target and the shared savings that would be realized if quality targets – based on the CPVs – were met.
At baseline, CPV quality scores measured against evidence-based cardiology guidelines, ranged from 48.9% to 85.4% (mean = 66.8%; SD = 5.4%), and the prevalence of unnecessary testing was 46% in CHD, 71% in CHF, and 30% in AF. The authors then determined the potential savings from the specialty ACO design. Forecasts showed that if unnecessary care were reduced by 15% to 25% using CPV measurement and feedback to reduce variation in care practice, there would be a savings of $200,000 to $498,000 ($50-$83 per patient visit) annually. In addition, when they targeted the top 10% most expensive providers as determined by CVD-related costs and reduced their spending by 25%, savings would result in an additional $283,512 in savings per year.
“We believe our study at Providence will have significant implications for a large number of ACOs and similar organizations as they begin to bring specialists into their ACOs”, said Dr. Peabody. “As much as 70% of all health care spending is specialty based and the model we designed at Providence shows how shared accountability can lead to higher quality and dramatically lower costs.”
About QURE Healthcare
QURE Healthcare is a research and business strategy firm committed to improving the quality of clinical care. QURE uses its proprietary software technology, CPV® (Clinical Performance and Value) vignettes, to evaluate clinical practice and the cost-effectiveness of health care services at the level of individual physicians and other health care providers. CPV® vignettes are used in health systems in the US and over 30 countries worldwide. Core services include CPV® studies, health economic analyses, and physician-level data collection. The ease, validity and affordability of CPV® vignettes attract a wide array of clients: payers, hospital systems, life science firms, medical technology companies, medical licensing and education institutions as well as international health development organizations. For more information visit LinkedIn (https://www.linkedin.com/company/qure-healthcare), Twitter (https://twitter.com/QURE_Healthcare) or the QURE homepage (http://www.qurehealthcare.com).
About the Journal
The American Journal of Managed Care, now in its 20th year of publication, is the leading peer-reviewed journal dedicated to issues in managed care. Other titles in the AJMC family of publications are The American Journal of Pharmacy Benefits, which provides pharmacy and formulary decision makers with information to improve the efficiency and health outcomes in managing pharmaceutical care. In December 2013, AJMC introduced The American Journal of Accountable Care, which publishes research and commentary devoted to understanding changes to the healthcare system due to the 2010 Affordable Care Act. AJMC’s news publications, the Evidence-Based series, bring together stakeholder views from payers, providers, policymakers and pharmaceutical leaders in the areas of oncology, diabetes management, and immunology and infectious disease. To order reprints of articles appearing in AJMC publications, please call (609) 716-7777, x 131.