July 19th, 2013
The current Medicare fee-for-service system has been criticized for rewarding practitioners in the health system for doing more — more tests, more procedures, more expensive care — that may not be beneficial. The Affordable Care Act (ACA) sets up new payment systems, including Accountable Care Organizations (ACOs) and bundled payment initiatives, that are intended to fix the problem by rewarding providers for reducing healthcare costs while maintaining quality.
But there’s a big potential problem that few health policy analysts have noted. The incentives to cut costs are strong, but the individual quality measures chosen by CMS to assess quality in the new programs are limited in scope, and that can adversely affect patient care. These measures are focused on processes of care, rather than clinical outcomes, and do not measure quality for most complex diseases and conditions, including major heart procedures, neurological conditions, orthopedic procedures, or cancer treatments. Policymakers need to fix this problem without undermining the goals of the new systems.
As the CEO of a company that makes innovative, high-quality implants, such as artificial hips and knees, I am particularly concerned about these improperly balanced incentives. For millions of Americans, our products mean the difference between a life of pain and restricted mobility and the ability to lead a normal life — to climb stairs, to walk, to work. Studies have shown that replacing arthritis-damaged hips and knees not only improves people’s ability to function, but is associated with a dramatically reduced likelihood of mortality compared to osteoarthritic patients who did not receive joint replacement.
However, the incentives in the new delivery systems may lead hospitals and other providers to give greater weight to the short-term costs of replacing a hip or knee than to the longer-term savings to the healthcare system. The savings on which the financial rewards are based are measured over a relatively short period of time (a year for ACOs, a hospitalization plus 30 to 90 days for the bundling program). By contrast, health benefits and subsequent savings that result from for these procedures can occur over a period that is measured in years or even decades. And when surgery is indicated, the surgeon’s choice of which of the many available implants to prescribe should be dictated by patients’ individual needs, including age, activity levels and anatomy, and not by which product is least expensive.
Of course, most physicians strive to do the right thing for their patients. Clearly, however, the government believes that financial incentives can sway doctors’ judgment. Indeed, that is the premise of the new payment systems.
Until the passage of the ACA, a hospital offering certain incentives to surgeons to use a less expensive hip or knee, or a health system rewarding a primary care doctor for not referring people for surgery, would likely have been deemed to be violative of federal anti-fraud and abuse provisions. Indeed, the bonus components of the new payment methods required that the government first create a special waiver to the anti-kickback law. However, under the bundling and Accountable Care Organization (ACO) programs authorized under the ACA, a physician can significantly increase his or her income — by as much as 50 percent (potentially hundreds of thousands of dollars) in the bundling program, or by similar amounts in the ACO program — by cutting the cost of care.
That’s a potential danger for patients, and may not even save the government money over the long term. If a surgeon prescribes a knee implant that does not represent the standard of care, or does not offer the appropriate level of technology to treat a patient’s unique condition, that patient may in fact generate higher costs to the healthcare system. If a primary care physician treats a patient with severe osteoarthritis with temporizing therapies instead of referring that patient to a surgeon in a timely fashion, the doctor and the hospital may earn a bonus by delaying an indicated surgery, but the patient’s condition will likely worsen. Ultimately, the delay increases short-term costs, and merely kicks the cost of surgery down the road, while subjecting the patient to unnecessary disability and suffering.
Of course, it is not the goal of these new payment methods to save money by stinting on care. Instead, it’s to encourage care coordination and reduce unnecessary care so that patients and the government benefit from both better quality and lower costs. Yet these initiatives may have precisely the opposite effect. So how can physicians, hospitals and Medicare get the benefits of these programs while reducing the risk to patients?
The Path Forward
Here are a few simple steps we should take. First, we need to recognize that this is a potential problem.
Second, we should have full disclosure of the payments made to practitioners for reducing costs. It is illegal for my company to make payments to physicians to encourage them to choose my product; furthermore, my company must disclose to the government and the public virtually every payment made to physicians and teaching hospitals. The Medicare program should require the same full disclosure policies under the bundling and ACO programs.
Third, we need to consider whether the incentive payments allowed under the new programs are too high. It’s reasonable to allow physicians and other providers to share in the savings they generate from doing a better job of coordinating care and care management. But at the same time, it can be hard to determine whether financial incentives lead to better coordination and higher quality or, as an unintended consequence, simply result in cutting back appropriate care. At a minimum, the amount of the incentive payments should be much lower than the 50 percent established by CMS in designing the program. In earlier demonstrations providing for shared savings, the HHS Office of the Inspector General limited the amount and distribution of shared savings in order to safeguard patients.
Fourth, CMS should release the findings from all previous demonstration projects with similar payment incentives to provide valuable information about the impact of these incentives on patient care. The long-term outcomes for patients under these programs should also be evaluated. With about 10 percent of acute care hospitals participating in bundling and/or ACO programs, CMS needs to fully evaluate the effects on patient care and proceed with caution.
Fifth, the government has to institute a vigorous monitoring program to make sure that they identify stinting on care if it is occurring by closely examining clinical data, rather than claims data. Currently, Medicare is trying to monitor care to make sure quality remains high, but they are only looking at the information they get through the routine billing process. That’s not good enough. It will tell whether a knee has been implanted, but it won’t tell whether the implant is the right one for the patient, and it won’t tell whether someone who hasn’t received a knee should get one. Medicare should include in its monitoring activities a more in-depth clinical evaluation of a sample of patients in order to assure that appropriate care is provided, by comparing each patient’s care to professionally recognized standards of care.
Sixth, we need to include better quality measures in the program. Right now, there are huge gaps. As noted above, under the ACO program, for example, there are no quality measures for arthritis care, none for neurological diseases, none for cancer care, and only very limited ones for heart disease, to name just a few examples.
Finally, there should be adjustments to the calculation of shared savings to avoid penalizing physicians who are early adopters of new treatments and technologies. (Payment adjustments are made in the Medicare program for inpatient hospital services to incorporate new technologies.) Without these adjustments, physicians who adopt new treatments that are clinically superior to an older treatment but more expensive would see a reduction in their compensation. Likewise, quality scores should be adjusted when advanced therapies are not yet reflected in the quality measures, thereby creating disincentives for practitioners to provide advanced treatments and technologies to their patients.
Patients expect and deserve the best care American medicine can provide. New payment programs designed to reduce cost must be carefully designed and scrupulously monitored to ensure that they fulfill the promise of our healthcare system.Email This Post Print This Post
Don't miss the insightful policy recommendations and thought-provoking research findings published in Health Affairs.
to the #1 source of health policy research.