Tag Archives: leapfrog group

Employers: Don’t Pay for ‘Never Events’

The initial installment in this series expressed concern that too narrow a focus on wellness diverts companies’ attention from more compelling opportunities to save money and improve employee health outcomes. This installment starts with a related  shocker: By far the most costly inpatient diagnosis code, septicemia, is not addressed by any wellness program in the country.

Here is the government’s official ranking:

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Septicemia due to contamination, which is just one of many avoidable hospital errors, shows that there is a major opportunity to save money by directing employees to hospitals that are most likely to avoid errors. To back their commitment to avoiding errors, such hospitals also usually offer a “never-events” policy, meaning they agree not to be paid for events that are their fault and that should never happen. So your employees will be more likely to have a safer experience—and, if they don’t, you don’t pay. (To be fair to hospitals, not all septicemia is contracted there. At the same time, many blood infections contracted in hospitals are not primary-coded as septicemia.)

The opportunity for you would be to highlight hospitals within your network that agree to a list of specific items that make up a never-events policy. “Highlighting” might include waived deductibles or co-pays for employees who choose highlighted hospitals over others, thus noodging more employees to safer hospitals.

What is included in a “never-events” policy?

The Leapfrog Group, which is the nation’s leading arbiter of hospital quality, has a policy that requires hospitals to undertake five steps following a never-event:

  • apologize to the patient;
  • report the event;
  • perform a root-cause analysis;
  • waive costs directly related to the event;
  • provide a copy of the hospital’s policy on never-events to patients and payers upon request.

Examples of never-events culled from this complete list are:

  • Certain hospital-acquired infections/septicemia
  • Wrong-site/wrong surgery/wrong patient
  • Objects left in body
  • Wrong blood type administered
  • Serious medication errors
  • Air embolisms
  • Contaminated or misused drugs/devices
  • Death

Any given never-event is rare, but in total 5% to 10% of inpatients suffer a significant adverse event during their stays. The consequences – in cost, suffering and lost productivity – could be substantial.

No need to take my word for the cost: The Leapfrog Group provides a Hidden Surcharge Calculator that can be used to estimate the financial impact of hospital errors.

Do hospitals in your network have a never-events policy?

At the very minimum, by default they have such a policy for Medicare, which doesn’t pay extra for certain never-events. Medicare still pays the standard diagnosis-related group (DRG) case rate but doesn’t reimburse “outliers” separately if the added hospital time was caused by a never-event. Obviously, the DRG rates are set a little higher to begin with. So hospitals that do a good job – typically Leapfrog-rated “A” and “B” in the Hospital Safety Score report – embrace this payment scheme, while others would have been better off getting paid the old-fashioned way.

Some hospital systems extend this policy to employers – or will, if you or your carrier ask and you are a large enough customer, and their quality is high enough that the economics work out for them.

Leapfrog A-rated hospitals are therefore the most likely to be willing to negotiate a never-events policy for your employees. These hospitals aren’t necessarily the name brands in your marketplace. In Washington, for example, Virginia Mason Medical Center (VMMC) is the hospital consistently earning the highest Leapfrog scores. Not surprisingly, it was among the first hospitals in the country to offer a never-events policy to employers. The hospital was highlighted in Cracking Health Costs for its many best practices. VMMC is one of the few hospitals that Walmart, Lowes and other jumbo employers will actually fly employees into, to ensure the best care. And yet you’ve never heard of VMMC, have you?

So what should you do?

You still need to offer a wide local hospital network to employees. It simply isn’t worth the inevitable pushback to require a narrow hospital network.

Instead, just ask existing network hospitals to offer you a never-events policy, or let you become part of a policy they already offer to employers. There is plenty of precedent of this. For years, the state of Maine has tied hospital payments for its own employees to quality and safety standards, including Leapfrog standards. And Maine, despite being among the poorest states, consistently ranks #1 or #2 in Leapfrog quality ratings. Coincidence? I think not. Particularly if you can contract in conjunction with your local business coalition, you have the chance to influence hospital safety, just like Maine did.

Additionally, you can follow the lead of those other jumbo employers named above and contract with the country’s safest hospitals for any employees who wish to make the trip. Yes, I know, you aren’t a “jumbo employer.” But a firm named Edison Health helps small employers with the contracting and logistics of such arrangements. It also offers a tool, validated by the Validation Institute, to help you figure out if medical travel would be a worthwhile endeavor for you.

This type of contracting requires a little work on your end, but if all you want is discounts and coverage and don’t want to put in the work, you could punt to an exchange. On the other hand, you self-administer your health benefit for one good reason: to influence employee health, and this is a clear opportunity to do so. By contrast, wellness is a LOT of work…and likely increases your costs in the short run. Wellness will take years to pay dividends, if any, whereas you can start influencing employee hospital choice immediately.

Important Alliance to Fight Health Costs

The Wall Street Journal reported that 20 large U.S. companies joined to fight high healthcare costs, launching the aptly named Health Transformation Alliance. Employers account for one in five dollars spent on healthcare in the U.S., yet they have relatively weak influence in the marketplace. But these influential companies are intent on aggressive action. With this kind of unified leadership, the alliance promises to shake the foundations of our health care economy.

There have been other efforts to harness the power of the business community to improve health care. My organization, the Leapfrog Group, is one such effort, founded by Business Roundtable in 2000 to address quality and patient safety in hospitals. Based on what we’ve learned over the past 16 years, here are three key principles for the alliance to start with:

  1. Lowering costs won’t automatically lower prices.

Whenever the subject of cost reduction comes up, some providers tout the enormous cost savings they have put in place through improved efficiencies, better technology or less invasive procedures. Recently, they have also pointed to the potential of large hospital system mergers to reduce costs through economies of scale. But employers are right to wonder why their own healthcare price tag continues to rise, despite these marvelous advances. Why don’t they see the cost savings?

Simply put, cost savings to the provider are not the same as cost savings to the purchaser. This sounds like such an obvious point. But the obfuscation over whose costs are saved persists and trips up progress year after year, with purchasers left scratching their heads. The alliance members will succeed in cutting their own prices only if they clearly demand that cost-reduction strategies have visible and substantial effects on their own bottom lines.

  1. Lowering prices won’t automatically lower costs.

Even if purchasers do succeed in lowering prices, the cost-reduction job is not done. That’s because the amount of waste in healthcare is profound. The Institute of Medicine estimates that as much as one-third of all costs are associated with unnecessary services, errors, infections and management inefficiencies. Not all providers are the same, and some incur much more waste than others. Whatever the price of a particular procedure, it’s no bargain when there are infections, complications and mismanagement—or if the procedure wasn’t medically necessary in the first place.

This is not chump change, this is game change. A 2013 study in the Journal of the American Medical Associaton (JAMA) reported that, on average, purchasers paid $39,000 extra when a patient contracted a surgical site infection. That excess doesn’t show up on the claim as a line item called “waste.” It is buried in a series of excess fees, tests, treatments and time spent in the hospital. Employers intent on cutting costs must factor wastefulness into the pricing equation.

  1.  Focus on the market incentives.

Our system of costs and pricing creates perverse incentives. The more a provider wastes, the more it can bill the employers. New financing models are slowly emerging, aimed at achieving value—the novel idea that payments align with patient outcomes. One of the most promising models is called “bundled pricing,” in which a health system is paid one total price for a particular procedure, including physician fees, radiology, hospital charges, etc. In this model, a provider is given incentives to actually reduce waste, so it maximizes profit under the bundle.

Some large employers have developed bundled pricing arrangements with a select group of health systems, for a select group of procedures. Walmart is a leader in this, as are employer members of the Pacific Business Group on Health. What have they found? A significant reduction in waste and better care for employees.

Another promising use of bundled pricing is coming from international medical tourism. Health services and pharmaceuticals are often much less expensive overseas than in the U.S. Most international providers offer bundled pricing and concierge hosting services. For example, Health City Cayman Islands offers bundled prices for certain heart and orthopedic surgeries, including all facility and physician fees, along with pre- and post-operative care at a lovely beachfront hotel. Its prices are one-fourth to one-fifth those for comparable services in the U.S.

The problem with medical tourism: determining the quality of international providers. Employer groups, like the Health Transformation Alliance, must address this in their work. Once again, waste and quality need to be factored into the cost equation.

Better Way to Rate Work Comp Doctors?

USA Today recently published a story about ProPublica, a nonprofit news organization that has developed a metric to score surgeons’ performance, comparing them with their peers. The study is intended as a tool for consumers, but it has generated concern among surgeons, who feel they are being treated unfairly.

What the article neglects to mention is that rating doctors and hospitals is not new in the general health world. Scoring medical providers has been a practice for decades. The Leapfrog Group, which scores hospitals, has been in business much more than 20 years. Doctor Scorecard scores medical doctors, and a Google search will offer more.

What is different about the ProPublica analysis is that it is based entirely on data and singles out surgeons treating the Medicare population. It also uses an adjustment score for the difficulty of cases analyzed called an adjusted complication rate.

The ProPublica study includes 17,000 doctors performing what are called low-risk, elective surgical procedures derived from Medicare data. The adjusted complication rate selects cases that are considered low risk, such as gall bladder removal or hip replacement. The study looks for complications such as infection or blood clots that require post-operative care, in this case re-hospitalization.

The cost of post-operative care requiring hospital readmission amounted to $645 million, which was billed to taxpayers for 66,000 Medicare patients from 2009 to 2013. Logic says that if surgical complications requiring hospitalization are so costly for Medicare patients, the costs must translate to astounding rates in workers’ compensation, as well. However, the study does not directly apply to work comp doctors.

The ProPublica study does not directly translate to workers’ compensation because the study examines Medicare patients only. While some injured workers qualify for Medicare, the majority are healthy, working adults under Medicare age.

What does translate from the study is that evaluating and rating medical doctor performance based on the data is do-able and important. However, it should not be limited to surgeons. The analysis of doctor performance must be comprehensive, accurate and fair.

Rather than using the limited measure of adjusted complication rate following surgery, a broader view of the claim and claimant is appropriate for workers’ compensation. Analysis is not limited to those cases with complications. Instead, all claims are analyzed. Results are adjusted by the claimant’s age, general health (indicated by co-morbidities), and the type and severity of the injury itself. Administrative management analyses are also important in workers’ compensation such as direct medical costs, indemnity costs, return to work, and case duration, among others.

Case complexity, sometimes presented as case mix adjustment, is important to fairness in rating doctors in workers’ compensation. Also, analyzing a broad scope of data elements smoothes the variability, leading to more accuracy. Fortunately, in workers’ compensation, claims have a very wide range of revealing data elements that can be drawn from a payer’s multiple data silos.

The ProPublica study has created pushback from the physician community for several reasons. For one, gall bladder surgery is often performed in an outpatient setting, so re-hospitalization is a meaningless metric. The same is also true for others of the so-called low-risk surgery category. Moreover, the study names names.

Published provider ratings from a national survey caused much of the angst noted in the USA article. Names were even published in local papers, naming physicians well-known in their communities. Doctors cried foul!

Expecting the general population of patients to understand what the ratings mean, regardless of their accuracy, is naive. Ratings listed as 2.5 or 1.6 have obscure meanings to the uninitiated. Fortunately, workers’ compensation providers do not face that level of exposure. Doctor ratings in workers’ compensation are not published for the general public or made available for consumer interpretation.

How to Avoid Paying for Hospitals’ Errors

There’s been a lot of talk lately about value-based purchasing and price transparency in the U.S. healthcare system. With the proliferation of high-deductible health plans, consumers and payers are now actively chasing “value”— high-quality care at the right price. But what happens when “value” calculates to a grand total of zero—or even less than zero?

Only in healthcare is that even possible. “Zero value” occurs when healthcare is harmful—and you, the patient or purchaser, pay extra for the privilege of that harm. This is the issue currently facing employers and other purchasers paying out of their own pockets when a hospital commits an error that results in injury, infection or other harm to a patient. It’s backwards and incomprehensible, but healthcare purchasers are at the mercy of these zero value “hidden surcharges.” The payer gets the bill for the added length of stay and treatment of the infection or the medication error, even if they were preventable. This is common, and it’s not cheap.

The Leapfrog Group created the Hidden Surcharge Calculator, which estimates that, on average, an employer pays approximately $8,000 per hospital admission for errors, injuries, accidents and infections. The calculator was recently awarded  a “Certificate of Validation Seal” by the Care Innovations Validation Institute, an organization established by Intel and GE to rate healthcare tools, plans and vendors to help industry consumers make educated choices. The Hidden Surcharge Calculator is free and allows plans and employers to determine surcharges they pay for their covered lives.

To build on the findings from the calculator, Leapfrog crafted additional tools to help purchasers apply their leverage with hospitals in their communities, communicate effectively with their employees about patient safety and try to reduce some of these shocking surcharges. So we launched the Hospital Safety Score Purchaser Toolkit, also free, created with the support of a grant from the Robert Wood Johnson Foundation. The toolkit is being released at a crucial time of year—the beginning of open enrollment season. We know that employers want to help their employees make the best decisions about their healthcare, and we hope that our toolkit will foster genuine conversations on these issues.

We include downloadable “plug-and-play” communications, including newsletter articles, internal memos template emails and even sample tweets. Messages educate employees about the problem of patient safety and what they can do to protect themselves and their families. It provides background and instructions for using the Hospital Safety Score, letter grades that assess the safety of general hospitals. There’s also a series of whiteboard videos that explain the issues in plain language and can be downloaded at no cost.

Just as importantly, we want to encourage purchasers to use their own leverage to effect change. Despite the harm to employees and expense to the bottom line, patient safety is rarely observable in claims data. Purchasers have to rely on hospitals to voluntarily report on safety to the Leapfrog Hospital Survey. By putting pressure on hospitals to publicly report to Leapfrog, healthcare purchasers can ensure that transparency and accountability are at the top of every hospital’s agenda. The toolkit offers suggestions on joining local business coalitions on health to maximize regional leverage, communicating with hospitals and getting needed provisions in contract language with plans.

Value-based purchasing is nonsensical when value is less than zero, so plans and purchasers need to be more aggressive on patient safety. Otherwise, payment reform loses its raison d’etre.

Because the safety problem is so large and hard to pinpoint, many payers just give up. The Purchaser Toolkit, Hospital Safety Score and Surcharge Calculator are meant to provide them with concrete steps that will make a difference immediately.

A Hospital That Leads World on Transparency

Jeremy Hunt, secretary of state for health in Britain, recently toured the Virginia Mason Medical Center in Seattle. He said the visit was “inspirational” and announced plans to have the British National Health Service (NHS) sign up “heart and soul” to a similar culture of safety and transparency. Hunt wants doctors and nurses in NHS to “say sorry” for mistakes and improve openness among hospitals in disclosing safety events.

I had a similar reaction to my tour of Virginia Mason. The hospital appears impressive—and truly gets impressive results. My nonprofit, the Leapfrog Group, annually takes a cold, hard look at the hospital’s data and named Virginia Mason one of two “top hospitals of the decade” in 2010. Every year, it ranks near the top of our national ratings.

Virginia Mason’s success is rooted in its famous application of the principles of Japanese manufacturing to disrupt how it delivered care, partly at the behest of one of Seattle’s flagship employers, Boeing. There are numerous media stories and a book recounting the culture of innovation Virginia Mason deployed to achieve its great results, so I won’t belabor the point here. But at its essence is Virginia Mason’s unusual approach to transparency. Employees are encouraged to “stop the line” – that is, report when there’s a near miss or error. Just as Toyota assembly workers are encouraged to stop production if they spot an engineering or safety problem, Virginia Mason looks for every opportunity to publicly disclose and closely track performance.

It is not normal for a hospital to clamor for such transparency. Exhibit A: the Leapfrog Hospital Survey, my organization’s free, voluntary national survey that publicly reports performance by hospital on a variety of quality and safety indicators. More than half of U.S. hospitals refuse the invitation of their regional business community to participate in Leapfrog, suggesting that transparency isn’t at the top of their agenda. But for Virginia Mason and an elite group of other hospital systems, not only is the transparency of Leapfrog a welcome feature, but they challenge us to report even more data, faster.

I hope the British health care system takes Virginia Mason’s model and runs with it, but, more than that, I hope the model takes hold here in the U.S. Too many hospitals in the U.S. avoid disclosing their performance instead of welcoming transparency as an opportunity to build trust with the patients in their care.

The movement toward transparency has a long way to go. We do not have publicly disclosed accreditation reports, even though those reports are tickets for hospitals to obtain public funding through Medicare. We do not yet know enough about infection rates, sentinel events, medication errors and outcomes including death rates from many common (or uncommon) procedures. Price transparency is also rare, according to a report by the Catalyst for Payment Reform.

The ultimate example of our tendency toward non-disclosure came last week, when USA Today reported that CMS quietly removed from public disclosure the incidence of certain “never” events, like objects left in after surgery. Experts disagree on the merits of how CMS counts these “never” events, and CMS—no doubt influenced by lobbyists—believes that they aren’t fair to hospitals. Yet, in a culture of transparency, CMS would do the opposite: first err on the side of reporting the “never” events, then let the experts refine the measure over time. Indeed, as the Virginia Mason experience demonstrates, the very act of reporting can accelerate improvement and transformation.

It’s time for the U.S. to ignite its passion for free speech and lead the world in applying it to health care.