Blog Home

Archive for the 'Payment' Category




An Interview With George Halvorson: The Kaiser Permanente Renaissance, And Health Reform’s Unfinished Business


September 30th, 2014

For decades, health policymakers considered Kaiser Permanente the lode star of delivery system reform.  Yet by the end of 1999, the nation’s oldest and largest group model HMO had experienced almost three years of significant operating losses, the first in the plan’s history. It was struggling to implement a functional electronic health record, and had a reputation for inconsistent customer service.  But most seriously, it faced deep divisions between management and the leadership of its powerful Permanente Federation, which represents Kaiser’s more than 17,000 physicians, over both strategic direction and operations of the plan.

Against this backdrop, Kaiser surprised the health plan community by announcing in March 2002 the selection of a non-physician, George Halvorson, as its new CEO.  Halvorson had spent most of his career in the Twin Cities, most recently as CEO of HealthPartners, a successful mixed model health plan.  Halvorson’s reputation was as a product innovator; he not only developed a prototype of the consumer-directed health plan in the mid-1990’s, but also population health improvement objectives for its membership, both firsts in the industry.

During his twelve year tenure as CEO, Halvorson not only guided the plan to solid profitability, but added a million members in California, its largest market, despite a devastating recession and a national retreat of commercial HMO membership.  He invested over $6 billion in computerized patient care systems and population health management infrastructure, healed the breach with Kaiser’s physicians, and markedly increased its consumer satisfaction scores, earning 5 STAR ratings under Medicare Advantage.  He left the organization at the end of 2013 with more than $53 billion in revenues and more than $19 billion in reserves and investments.

This interview covers Halvorson’s time at Kaiser, his views of health reform, including the unfinished reform agenda, and his public health activism.  It was conducted by Jeff Goldsmith, a veteran health industry analyst, and Associate Professor of Public Health Sciences at the University of Virginia.  Jeff is a member of the editorial board of Health Affairs.

Read the rest of this entry »

The Payment Reform Landscape: Value-Oriented Payment Jumps, And Yet …


September 30th, 2014

Today, Catalyst for Payment Reform (CPR) unveiled some potentially exciting news: Our 2014 National Scorecard on Payment Reform tells us 40 percent of commercial sector payments to doctors and hospitals now flow through value-oriented payment methods, defined as payment methods designed to improve quality and reduce waste.  This is a dramatic increase since 2013 when the figure was just 11 percent.

Traditional fee-for-service, where we pay for every test and procedure regardless of its value, may rapidly be becoming a relic.  While the Scorecard findings are not wholly representative of health plans across the United States, they are directionally sound and allow us to measure progress toward value-oriented payment in the commercial sector.  (Scorecard findings are based on data representing almost 65 percent of commercial health plans across the country.)

On the face of it, this is thrilling news for CPR, especially since our organizational goal is that at least 20 percent of payments to doctors and hospitals will flow through methods proven to improve value by the year 2020.  But we are not closing up shop just yet.  The proliferation of value-based payment arrangements only matters if they succeed at reducing costs and improving the quality of care. And for many value-oriented payment models, we still don’t have the evidence.

We also remain a bit circumspect because only about half of the value-oriented payments (out of that 40 percent figure) put providers at some financial risk if they fail to improve care or spend over budget.  To employers and others helping to foot the bill for health care, many new payment methods often feel like “cost plus arrangements.”  Instead, purchasers would like to see risk sharing across payers and providers.

Read the rest of this entry »

IOM Report Calls For Transformation Of Care For The Seriously Ill


September 24th, 2014

The new Institute of Medicine (IOM) report on care near the end of life in the United States was released last week. I had the privilege of serving on the Committee for the last two years, involved both in the writing of the report itself and in coming to consensus on its recommendations.

The name of the report and the charge to the Committee from the IOM was focused on “end of life.” However, the title, “Dying in America,” is something of a misnomer. The report itself focuses extensively on people with serious and chronic illness with indeterminate prognoses, why the current health care system fails so consistently to meet their needs, and what must change to improve the situation.

Hospice is the gold standard of care quality for those that are predictably dying and clearly at the end of life, and we are fortunate as a nation to have such a strong (mostly home) hospice infrastructure, but that’s not where most of the problems lie. The problems lie in the lack of options for people who are either not hospice-eligible (prognosis uncertain or continuing to want and benefit from disease treatment) or are referred to hospice much too late in their disease course to influence their experience and their families’.

The new report builds on the 1998 IOM report “Approaching Death” and goes well beyond the usual nostrums of calling for reimbursement for advance care planning and decrying all the “waste” in health care spending during the last year of life.

Read the rest of this entry »

Bundled Payments: Do They Put Innovation At Risk?


September 22nd, 2014

While the United States health care system is quickly shifting focus from volume to value, bundled payments have emerged as a promising lever for containing costs and improving quality of care. This model, designed to offset some of the downfalls of traditional fee-for-service payments, reimburses providers based on a predetermined cost of an episode, or group of related services.

The model calls for providers to take on some financial risk while meeting quality standards, especially in areas of well-defined procedures like hip and knee replacements. Now, many are beginning to experiment in other high-cost medical areas, such as behavioral health and oncology.

But what is the impact of bundled payments on medical advancement and innovation? Bundled payments are here to stay, but there remains serious apprehension among innovators adjusting to this evolving landscape. NEHI (Network for Excellence in Health Innovation) brought stakeholders together this July to create a conversation in which experts discussed how bundled payments already have, and will, impact patients’ access to innovation.

Read the rest of this entry »

Relative Value Health Insurance And Pay For Performance For Insurers: Complements, Not Substitutes


September 19th, 2014

Background

The quest for value dominates contemporary health policy.  Value, properly defined, is not about cost-savings but about the balance of costs and health benefits — improving the average cost-effectiveness of health interventions.  In choosing which care is funded, insurers are a crucial but commonly neglected driver of health system value.

Insurers can increase health system value by covering fewer cost-ineffective interventions or covering more cost-effective interventions.  Perhaps the earliest attempt to reform insurance, managed care, attempted to pursue both goals, but by the time it was implemented it widely focused (or was perceived to focus) on cost-containment.

A recent insurance reform proposal, known as Relative Value Health Insurance (RVHI), received considerable attention, for instance, in The Upshot, The Incidental Economist, and Forbes.  RVHI enables insurers to reduce their contractual obligation to cover “usual and customary” care.  This and similar earlier proposals rely on the insurers’ natural incentive to cut costs.  Less well-covered, however, are proposals to alter the very incentives of insurers to improve health, which we will call “pay-for-performance-for-insurers” (P4P4I).

Read the rest of this entry »

Pediatric Asthma: An Opportunity In Payment Reform And Public Health


September 18th, 2014

Editor’s note: The post is informed by a case study, the third in a series made possible through the Merkin Initiative on Physician Payment Reform and Clinical Leadership, a special project to develop clinician leadership in health care delivery and financing reform. The case study will be presented on Wednesday, September 24 using a “MEDTalk” format featuring live story-telling and knowledge-sharing from patients, providers, and policymakers. 

The Clinical Challenge: A Chronic, but Manageable Illness

Asthma affects 7 million children – more than 10 percent of kids in the U.S. – and is the most common chronic childhood disease. Yet even with high levels of insurance coverage, 46 percent of pediatric patients have uncontrolled asthma. There are substantial gaps in appropriate prescribing and adherence to effective medications. In addition, a multitude of non-medical issues influence a child’s ability to control their asthma: low parental health literacy, poor quality housing, and environmental triggers such as pests, mold, and cleaning chemicals. As a result 800,000 kids visit the emergency department (ED) for asthma each year.

In 2007 (the latest year which data are available) the U.S. spent over $56 billion on asthma care, of which nearly $27 billion was spent on pediatric asthma. Medicaid is the primary payer for pediatric asthma related hospitalizations with 55 percent of the market. Better control may also mean lower medical costs, due to reductions in ED visits, admissions, and other health care utilization – patients with poorly controlled severe asthma cost nearly $5,000 more per patient per year compared to average pediatric asthmatic costs.

Read the rest of this entry »

Reference Pricing And Network Adequacy Standards: Conflict Or Concord?


September 18th, 2014

With benefit designs and enrollee cost-sharing increasingly standardized across health plans under the Affordable Care Act (ACA), one of the remaining levers plans have to differentiate themselves—and to control premiums—is the size of their provider networks. Regulators have been caught in a crossfire between advocates of narrow networks who say they promote quality and keep prices down, and those who feel narrow networks could constrain access to necessary services.

Unfortunately, recent federal guidance – addressing, among other related items, the issue of “reference pricing” — blurs the distinction between in-network and out-of-network providers and may make it more difficult for regulators and consumers to understand the effective “size” of a particular network.

This confusion could undermine the goal of improving transparency in consumers’ health care choices and make it difficult for consumers to use prices in choosing providers. More troubling, expanded use of “reference pricing” under the guidance could leave patients paying unexpectedly large out-of-pocket amounts for services provided by ostensibly in-network providers.

Below, we characterize reference pricing as a “sub-network” contracting strategy, and we describe some of the implications of reference pricing and the guidance for consumers, regulators, plans, and providers.

Read the rest of this entry »

Early Observations Show Safety-Net ACOs Hold Promise To Achieve The Triple Aim And Promote Health Equity


September 15th, 2014

Safety-net accountable care organizations (ACOs) have the potential to deliver cost-effective, patient-centered care that engages patients and contributes to achieving the Triple Aim in Medicaid. Safety-net ACOs are playing increasingly important roles in delivering care for vulnerable populations. Active ACO formation is occurring in at least 18 state Medicaid programs with considerable variability across states, although they have been slower to develop than ACOs serving Medicare or commercial populations.

This post will outline five key observations regarding emerging safety-net ACOs and suggest broad policy implications. We are defining safety-net ACOs as collaborative entities of providers and sometimes payers that are 1) accountable for managing the health of their population, 2) assuming upside and/or downside financial risk, and 3) serving predominantly Medicaid (including dual eligibles) and uninsured patients.

Read the rest of this entry »

The Latest Health Wonk Review


September 12th, 2014

At Health Business Blog, David Williams is not ashamed to be a wonk in his September 11 edition of the Health Wonk Review. David highlights many great posts, including “The 125 Percent Solution,” suggested by Jonathan Skinner, Elliott Fisher, and James Weinstein on Health Affairs Blog, which would give consumers and insurers the option of paying 125 percent of the Medicare price for any health care service.

Read the rest of this entry »

ACOs, Bundled Payment Lead Health Affairs Blog August Most-Read List


September 12th, 2014

Posts on payment and delivery reform head the Health Affairs Blog top-fifteen list for August. Suzanne Delbanco and David Lansky’s post on accountable care organizations was the most-read post, followed by Tom Williams and Jill Yegian’s post on bundled payment, written in response to an article published in the August issue of Health Affairs.

Next is Health Affairs’ Editor-in-Chief Alan Weil’s post on the five engagements that will define the future of health, drawn from his keynote presentation at the 2014 Colorado Health Symposium. This is followed by Rosemarie Day and coauthors’ post on the private health insurance exchange system.

The full list is below.

Read the rest of this entry »

The Payment Reform Landscape: Non-Payments


September 4th, 2014

Throughout 2014 here on Health Affairs Blog, I have shared Catalyst for Payment Reform (CPR)’s insights on different types of payment reform, which run along a spectrum of financial risk. We began the year by examining payment models that have “upside only” risk, such as pay-for-performance, which give health care providers the opportunity for financial gain from improving care with no added financial risk.

Then we examined payment models that contain “two-sided risk,” like shared-risk arrangements for ACOs, bundled payment, and capitation with quality, where providers can reap financial gain as well as experience financial losses depending on care outcomes and expenditures.

This month, we examine a model that presents “downside only” risk — non-payment to providers. This payment strategy puts providers at financial risk for care that could or should have been avoided.

Read the rest of this entry »

Projected Slow Growth In 2013 Health Spending Ahead Of Future Increases


September 3rd, 2014

Insurance Coverage, Population Aging, and Economic Growth Are Main Drivers of Projected Future Health Spending Increases

New estimates released today from the Office of the Actuary at the Centers for Medicare and Medicaid Services project a slow 3.6 percent rate of health spending growth for 2013 but also project a 5.6 percent increase in health spending for 2014 and an average 6.0 percent increase for 2015–23. The average rate of projected growth for 2013–23 is 5.7 percent, exceeding the expected average growth in gross domestic product (GDP) by 1.1 percentage points.

Increased insurance coverage via the Affordable Care Act (ACA), projected economic growth, and population aging will be the main contributors of this growth, ultimately leading to an expected 19.3 percent health share of nominal GDP in 2023, up from 17.2 percent in 2012.  This compares to the Office of the Actuary’s 2013  report, published in Health Affairs, predicting an average growth rate of 5.8 percent for 2012–22.

Every year, the Office of the Actuary releases an analysis of how Americans are likely to spend their health care dollars in the coming decade. The new findings appear as a Health Affairs Web First article and will also appear in the journal’s October issue.

Read the rest of this entry »

The Winding Path To Effective Bundled Payment


August 28th, 2014

Tom Williams and Jill Yegian’s excellent blog post makes a great companion to our recent paper on the evaluation of the Integrated Healthcare Association (IHA) Bundled Payment Demonstration. Williams and Yegian offer lessons from their experience implementing a demonstration project that failed to meet its original objectives. This type of analysis is essential.

It’s not unusual for a demonstration to fall short of its original objectives. Learning from such cases is part of the innovation process. This is especially worthwhile for bundled payment, which has many potential benefits for patients, providers, and payers.

None of the barriers encountered in IHA’s demonstration signal a “death sentence” for bundled payment. However, the demonstration clearly shows that bundled payment is difficult to implement.

Read the rest of this entry »

The 125 Percent Solution: Fixing Variations In Health Care Prices


August 26th, 2014

Summer vacation’s finally here. You’re strolling along the beach, not a care in the world when – ouch – you step on a piece of broken glass and need a few stitches at the local hospital. Such routine procedures are painless enough, but depending on where you’re treated and by whom, the real pain could occur when you’re handed the ER bill.

In some of the latest evidence on the crazy-quilt patterns of U.S. health care prices, Castlight Health found prices in Dallas TX ranging from $15 to $343 for the same cholesterol test.  What makes these price variations particularly egregious is that the highest prices are typically reserved for those least able to pay, such as the uninsured.

What’s the solution?  In the long run, we need to establish a more transparent system where consumers can choose easily based on reliable quality and price measures.  But our current measures of quality are, to put it politely, inadequate, and people with insurance are often insulated or can generally afford those higher prices.  Reference pricing, in which insurance pays only enough to reimburse providers with adequate quality and relatively lower costs, would help to restrain high prices, but distracted patients or those with strong attachments to specific doctors or hospitals could still get stung with a big bill.

Capping payments at 125 percent of Medicare rates. We suggest a short-term solution: The federal Medicare program has in place a complete system of prices for every procedure and treatment.  It’s not perfect, but it is uniform across regions, with a cost-of-living adjustment that pays more in expensive cities and less in rural areas.  If every patient and every insurance company always had the option of paying 125 percent of the Medicare price for any service, we would effectively cap the worst of the price spikes.  No longer would the tourist checked out at the ER for heat stroke be clobbered with a sky-high bill.  Nor would the uninsured single mother be charged 10 times the best price for her child’s asthma care.  This is not just another government regulation, but instead a protection plan that shields consumers from excessive market power.

Read the rest of this entry »

Arkansas Payment Improvement Initiative: The First Year


August 25th, 2014

Editor’s note: This post is part of a periodic Health Affairs Blog series, which will run over the next year, looking at payment and delivery reforms in Arkansas and Oregon. The posts will be based on evaluations of these reforms performed with the support of the Robert Wood Johnson Foundation. The authors of this post are part of the team evaluating the Arkansas model.

Arkansas payers and providers actively participated in the design of both the episodic payment and patient-centered medical home (PCMH) models the state has recently implemented. We’ve written about each of these components of the multi-payer Arkansas Payment Improvement Initiative (APII) in our previous Health Affairs Blog posts.

The state’s fragmented and largely rural provider environment presents an important test for a novel episodic payment model that may, if successful, have broader applicability in other states sharing a similar health care landscape. Fourteen episodes have now been launched and provider participation is mandatory. While our first posting goes into greater detail on the nuances of Arkansas’ approach to episodes, we provide the following brief summary here to add context to this discussion.

Read the rest of this entry »

The “Failure” Of Bundled Payment: The Importance Of Consumer Incentives


August 21st, 2014

Bundled payment for orthopedic and spine surgery and other major acute interventions has many attractive features, in principle. But implementation has been difficult in practice.  The recent Health Affairs paper by Susan Ridgley and colleagues, and the Health Affairs Blog commentary by Tom Williams and Jill Yegian, list quite a few practical implementation problems, and the points raised in both these pieces are well taken.

As leaders in the Integrated Health Association (IHA) bundled payment initiative, we shared the same hopes, devoted the same energies, and share the same frustrations with the modest results.  We feel it is important to emphasize what we consider to be the initiative’s most important design failure: the lack of engagement and alignment on the part of the consumer.  No one will ever reform the U.S. health care system without bringing the consumer along and, indeed, placing consumer choice and accountability at the very center of the reform initiative.

On an optimistic note, this design failure is being addressed by the larger health care marketplace in the wake of numerous failed attempts to reform health care by focusing exclusively on provider payment and incentives.

Read the rest of this entry »

Key Success Factors For the Medicare Shared Savings Program


August 21st, 2014

In January 2012 the Centers for Medicare & Medicaid Services (CMS) officially launched the Medicare Shared Savings Program (MSSP) for the formation of national Accountable Care Organizations (ACOs). Early participants were charged with bringing the theory of accountable care into practice.

Premier, a national healthcare improvement alliance of hospitals and health systems, created a population health collaborative in 2010 designed to assist providers with developing and implementing successful ACOs both in the public and private sectors.

Thus far, the Premier collaborative has advised nearly 30 MSSP applicants, and is working with another 30 more, on how to structure and manage an effective ACO. Through benchmarking tools, financial models, the sharing of best (and worst) practices, etc., members of the Premier PACT Collaborative have outperformed the national MSSP cohort.

Read the rest of this entry »

Hospital Readmission Reduction Program Reignites Debate Over Risk Adjusting Quality Measures


August 14th, 2014

Do safety net hospitals categorically under perform the national average in terms of managing readmissions? Or is something else triggering higher rates of readmissions in these facilities?  These questions are essential for policymakers to answer as pay-for-performance (P4P) penalties are having a disparate impact on hospitals that serve low-income areas.

Medicare’s Hospital Readmission Reduction Program (HRRP), for example,  links risk-adjusted hospital readmission rates to financial penalties. Hospitals with risk-adjusted readmission rates that fall below the national average are penalized by having their annual Medicare payments reduced by up to 2 percent. In 2015, hospital payments are scheduled to be reduced by up to 3 percent.

But the program’s current system for measuring readmission rates may be flawed. Numerous analyses have found that safety net hospitals, which care for low-income patients, are more than twice as likely to be penalized than hospitals caring for higher-income patients.

Read the rest of this entry »

Key Takeaways From The Medicare Trustees’ Report


August 14th, 2014

Depending on which article you read, either the Medicare Trustees think the program is coming to an end, or the news is great and we don’t need to do anything.

The reality is that the recent Trustees’ report contains both positive and sobering news: while costs have been flat for the last two years and growth is expected to moderate for some years to come, Medicare’s financing is still not in good shape over the long run. Current law benefits exceed financing to pay for them, and the Hospital Insurance Trust Fund will be unable to pay full benefits in 2030.

We cannot assume the problem will resolve itself, and action is needed to ensure the program’s stability.  Moreover, health care remains a substantial portion of the national budget – a whopping 25 percent — and addressing federal fiscal imbalances must include health programs.

Below we provide our key takeaways from this year’s Trustees’ report.

Read the rest of this entry »

Health Affairs Web Firsts: Two Studies Find Mixed Results On EHR Adoption


August 11th, 2014

Since the Health Information Technology for Economic and Clinical Health (HITECH) Act was enacted in 2009, Health Affairs has published many articles about the promise of health information technology and the challenges of promoting broad adoption and “meaningful use.”

Last week, on August 7, the journal released two new Web First studies, “More Than Half Of US Hospitals Have At Least A Basic EHR, But Stage 2 Criteria Remain Challenging For Most” and “Despite Substantial Progress In EHR Adoption, Health Information Exchange And Patient Engagement Remain Low In Office Settings.” These studies focus on the latest trends in health information technology adoption among U.S. physicians and hospitals. Both studies, which will also appear in the September issue of Health Affairs, show that while basic electronic health record (EHR) adoption plans have moved forward, more significant implementation remains a daunting challenge for many providers and institutions

Read the rest of this entry »

Click here to email us a new post.