Tag Archives: pay for performance

Post-SB 863: Now How Do We Contain Costs?

Several recent articles and publications have highlighted the challenges we continue to face in California workers’ compensation. Following the “state of the state” report in August by the Workers Compensation Insurance Rating Bureau (WCIRB), Mark Walls noted in an article that the challenges in California continue to mount as California now accounts for 25% of U.S. workers’ comp premiums, with some of the highest medical costs in the nation.

The recent Oregon report noted that California now has the most expensive comp system in the nation, having risen from the third most expense in 2012 to the #1 spot — a dubious distinction that should serve as a continued call to action.

As Walls so aptly noted, we in California need to move beyond the notion that we are always going to be different. We cannot continue to mark our “progress” against our own past performance, overlooking the sobering comparison to other states. If we do, we’ll see the return of television commercials touting nearby states as welcoming alternatives for employers.

With no shortage of reforms over the past 15 years, Mark’s comment about our focus on reducing frictional costs in the system without really addressing medical provider behavior rings true.

The recent reform attempted to tackle the frictional costs, particularly the costs of liens and utilization review (UR) disputes. It was assumed that the lien filing fee and statute of limitations on liens would reduce the extraordinary burdens and costs that were expended to both litigate and settle these expensive and often unjustified charges. It was also thought that independent medical reviews (IMRs) would speed the delivery of necessary medical care and would keep UR disputes out of the courts.

Although there certainly appear to be fewer liens, the problem has not been solved. In addition to some inevitable liens for disputed medical treatment, we continue to see liens filed after bills are reduced to conform to the approved fee schedule. In a state with a fee schedule, why should an employer be forced to litigate or settle a lien for charges that exceed the fee schedule? We know we can resist the lien, have a bill reviewer testify at a lien trial and have a good chance of prevailing. Unfortunately, though, the cost of winning is very high, including the cost of the hearing and the larger cost of keeping a claim open, delaying a settlement and maintaining a reserve. This is the very real dilemma that often causes payers to settle a lien that is not owed, rather than defending against it.

What if the prevailing party was reimbursed for the full cost of a lien hearing? Perhaps that would persuade claimants to carefully evaluate their liens before proceeding, while also forcing the defense to evaluate the validity of the lien before allowing the lien to go to trial.

The other significant attempt at reducing the frictional costs was the introduction of independent medical review. What have we seen, as a claims administrator that limits the use of utilization review by empowering examiners to approve significant numbers of diagnostics and treatments? We’ve seen in excess of 97% of the URs submitted to IMR upheld by the IMR process. Yet, for those 97%, our clients have incurred the added expense (IMR is not inexpensive), and the claims process was delayed while the IMR process was completed.

Some oversight is definitely healthy and necessary. The challenge is in finding a less costly, less time-consuming method of ensuring that injured workers are treated fairly — a method that actually changes provider behaviors so that the injured workers who are treated by high-performing providers are not swept up in a system of reviews and re-reviews.

Although no solution is likely to satisfy all constituents, there must be something we can do to provide incentives for the right provider behaviors. What about using all the medical bill reviews and other data to analyze provider behavior and “certifying” providers? The consequences could be:

1- A fee schedule “add on” or bonus for the top quartile of providers
2- A six month “bye” from utilization review for the top 50% of providers
3- Some sort of added oversight for providers performing below the 50th percentile

This is certainly not as easy as it sounds. Perhaps some representative providers would have some suggestions. Perhaps we should engage them in a discussion.

But it doesn’t seem that there can be any harm in considering a “pay for performance” model.

The answers may lie in the data, and they may not. The answers may also lie in the programs of one or more of the 49 states that offer less costly workers’ compensation coverage to employers. It certainly behooves us to look everywhere until we find those answers.

Medicare Implements Value-Based Purchasing

aka Medicare Tries Some New Carrots and Sticks!

Effective October 1, 2012 Medicare is rolling out its new incentive program for hospitals where 1% of hospital payments are withheld by Medicare in a “pay for performance” or P4P program, with incentives paid out based upon performance against 20 quality metrics. Seventy percent of a hospital’s score will be based on 12 specific measures based upon performance to guidelines and protocols. The remaining 30 percent of a hospital’s value-based purchasing payment will be based on how it scored on random surveys of patients following discharge. These questions include ones asking how well their doctors and nurses communicated, whether rooms were clean and quiet and whether pain was dealt with promptly. Overall this is expected to redistribute nearly $1 billion among hospitals serving Medicare patients. These payments are funded by the 1% hospital withhold.

In addition, Medicare is also assessing a penalty to more than 2,200 hospitals with higher than average readmission rates. Hospitals with the highest rates for heart attack, heart failure and pneumonia patients will lose 1 percent of their regular reimbursements. This is expected to result in almost $300 million of savings. The penalty grows to 3% by October 2015.

This activity is a new step for Medicare. Before now its pay for performance programs were limited to those voluntarily participating in various programs. The new programs are mandatory for most acute care hospitals.

So what does this mean for the consumer? Is this a good things or a bad thing? Many are fearful that the government is starting to seriously meddle with their opportunity to get good health care. Some fear that hospitals are going to be pushing people out of the hospital too soon. Some are afraid that hospitals are going to be motivated more by the money than by what is right.

As a health care consultant who has practiced in this area for most of my 41+ year career, I am pleased to say I am more encouraged about this initiative than discouraged. This effort is a net positive to our quality of care. Here are some of my comments and reactions:

  • Quality of care can readily be measured and compared to evidence-based clinical guidelines: The P4P program implemented by the government includes both specific clinical measures and direct patient surveys. It’s not just based upon the numbers, but includes both measurable performance criteria and actual patient experiences. Today our firm’s studies show that a significant portion of inpatient care historically reimbursed by Medicare is potentially avoidable. Longer than needed hospital stays generally reduce the quality of care and create a significant opportunity to acquire hospital based infections (e.g., MRSA) or perhaps even incur an injury or accident while hospitalized. The bottom line — hospitals should not be a desired place to be unless you are getting needed care only available in a hospital. One physician once stated, “hospitalization is a bad outcome of ambulatory care”.
  • Behavior follows reimbursement: As hospitals are motivated to perform better they will find a way to accomplish that. As with most businesses, when held accountable they will perform. In the past, performance wasn’t a high priority and our results demonstrate that quite nicely. Hospitals for the most part have been paid on a fee-for-service basis, getting more for doing more.
  • Incentives have to be meaningful: I am concerned that the 1% withhold will not have an adequate impact on the performance change. One percent falls into the “rounding” category. Until more meaningful the performance change will not be adequate. Our studies suggest that as much as 35% – 45% of today’s Medicare hospital days are potentially avoidable. Until we see the chance for major improvement we are still only impacting the edges of our opportunity.
  • Redo’s are unacceptable: Readmission for particular conditions are evidence that the previous admission ended poorly. Sometimes patients are not appropriately treated or diagnosed and more work is required. Early discharge when care is not completed appropriately is a sign of bad quality. Early or prompt discharge when care is completed is a sign of good quality. Lengths of stay are generally too long or excessive on the average, not on every patient. However, you have to identify which patients can be discharged on a timely basis. Statistics show that as much as half of Medicare patients fall into a category known as the “uncomplicated” patient, a patient that can match ideal performance and medical criteria. The other half of the patients require additional care because of delayed recovery and other complications. The high quality institution will monitor and measure this and keep those needing longer stays and discharge those which no longer need care without delay. This incentive program is a good thing and those hospitals not appropriately discharging their patients need to be held accountable. Kudos to Medicare for this bold step.
  • “Early” might not be “too early”: Many times individuals complain that someone was discharged too early. In reality the standard many patients and family members use to determine this is flawed. It might be earlier than what someone else experienced, but it doesn’t necessarily mean it is too early. Timely is important. Health care resources are scarce and we should only use them when appropriate. An extra day here and an extra day there adds up to significant waste. The average net charge per day in my region is close to $4,500. Is it really worth $4,500 to stay in a setting that is really not much better than a not-so-fancy hotel? Evidence based clinical criteria helps everyone understand when a patient is appropriately progressing towards discharge. When built on the most efficient path, with monitoring for indications that complications are necessary which might require additional days, patients are more appropriately discharged. As a result, costs go down, patients experience higher quality, and re-admits are reduced.

Medicare has introduced some useful and very helpful tools to improve our health care system. The private sector is already using many of these tools and will model more after these programs. Hopefully this will provide an improved foundation to make even more improvements to our health care system.