The executive director of Catalyst for Payment Reform, a group of large employers, wants 20 percent of payments to hospitals and physicians to be value-oriented by 2020.
Suzanne Delbanco, Ph.D., executive director of Catalyst for Payment Reform, wants 20 percent of payments to hospitals and physicians to be value-oriented by 2020. Here's how she envisions payers, hospitals, physicians and patients being impacted as CPR pursues this goal.
Interviewed by Bob Kehoe
Our goals are to improve quality and contain costs. The specific goal is to have 20 percent of payments be value-oriented by 2020.
It will take incremental fixes and longer-term, bolder changes. Fee for service is predominant and it will be around for awhile, so we shouldn't ignore it as we evaluate options for payment reform. There are reforms to fee for service that could bring us closer to the goal without eliminating it.
A good example is that no matter what form of payment one uses to reimburse providers for labor and delivery services, we typically pay more for cesarean deliveries than we do for vaginal births. The evidence suggests that unnecessary interventions in labor and delivery not only cost more, but lead to poorer outcomes for mothers and babies — yet, all the financial incentives for providers are there to intervene.
If we had some type of blended payment where the hospital or physician stood to gain if the proportion of intervention was reduced and to lose if it stayed the same or increased, behavior would change quickly. It's really about creating incentives that are aligned with evidence-based care.
The two most important changes we want to see are that there be a performance-based component to all payment methods and a component to cut waste.
They appreciate that CPR is creating coordination among some of their customers. Health care purchasers are asking for the same thing at the same time, rather than each of us asking for something unique. That enables insurers to build the business case internally for changing the way they operate.
Also, all insurers are working on payment reform to varying degrees. The biggest challenge is that today only 1 to 3 percent of payments to doctors and hospitals is tied to performance. To get to that 20 percent threshold by 2020 we have to increase the percentage of value-oriented payments by 2.5 percent per year. While that sounds fairly modest, it's a steep growth curve.
Medicare is on an aggressive path on the hospital side, and the private sector is woefully behind. As much as 10 percent of Medicare reimbursement to hospitals is going to be at risk depending on their performance by 2017.
One thing CPR recommends to health plans is that they align with Medicare as quickly as possible. That's in part because the incentives Medicare is creating to reduce readmissions and health care-acquired infections are tremendous. We should add to that so that incentives are aligned for the provider to make the necessary changes to reduce all avoidable complications in care.
The other important reason for the private sector to align with Medicare is: As Medicare reimbursement becomes increasingly restricted, providers will try to make up that shortfall elsewhere. If they have the market power, providers will negotiate higher reimbursement from the private sector.
There is also a tremendous amount of innovation occurring in the private sector and, ideally, it will lead the way to future reforms that Medicare may consider. I think of it as a two-sided relationship where both sectors influence each other. That's healthy.
I would expect that hospitals already are working hard to put systems and processes in place to perform well on the measures that CMS will track. Pay for performance, value-based purchasing and other payment programs and incentives that are connected to performance are going to spur investment in making the tracking of quality information more automated. We're working toward being able to provide the CFO or the CEO with a dashboard of near real-time information on how the organization is performing.
There is a big effort under way to experiment with care delivery that will lead hospitals to perform better under these risk-based reimbursement arrangements.
Some of this is going on at the physician level, especially where there are experiments around medical homes; care coordination is supposed to move toward better tracking of these issues as well. Because we all respond to incentives in different ways, there's probably a lot of thought among providers about how to minimize the downside in the risk. Unfortunately, almost every form of payment is "gameable" in some form of perverse incentives.
There's also a lot of emphasis in negotiations around new forms of payment that provide physicians and hospitals with an upside only. This is a baby step toward two-sided risk, where providers stand to both gain or lose as do the payers, which some people think will be a more potent approach to inspiring better care at more contained cost.
The employers and other health care purchasers we work with are going to pair patients with education and information, coaching and decision support as well as financial incentives to make choices tending toward higher quality and more efficient providers.
Employers are good and ready. The question is: Are health plans ready and willing to do what it takes to negotiate new forms of payment with providers when, oftentimes, health plans are protective of their provider contracts and wary about reopening contract negotiations?
It's a bridge we have to cross because if you want to make new forms of payment sustainable beyond the first year of contract, they have to provide some kind of win-win.
CV: Executive director of Catalyst for Payment Reform, an independent, nonprofit corporation working for large health care purchasers to spur better care, payment models and value. Serves on the National Commission on Physician Payment Reform; founding CEO of the Leapfrog Group.
What she wants: "I'd like to help create an environment that's more conducive to improvement."
Greatest achievement: "That people now take public reporting on health care performance as a given."
What she'd change about health care: "To understand what value I'm getting for every health care dollar I spend."
This article first appeared in the November 2012 issue of H&HN magazine.