Many of us remember the days of integrated delivery systems, global capitation and huge physician organizations. If you were not working in healthcare in the early 90s, I am sure you hear people talk about the failures associated with those models, including accusations of poor quality and challenges with patient access. The failure of hospital-owned physician practices, large physician practice management models and independent practice associations (IPAs) were all well-publicized. Part of the debate, and frankly the criticism, around the current health and payment reform is the concern that what we are doing now feels an awful lot like “back to the future.”

So, what makes payment reform different this time? You may question, and rightly so, what is so different about an accountable-care organization (ACO) versus an IPA that took capitation risk and failed? One of the major differences that everyone is counting on this time is information technology. That is a simple statement but a complex issue. It is not just the data that was late or missing in the 90s, it was the lack of a care-coordination model for managing a patient throughout the delivery system. Information technology allows information, not just data, to be shared and utilized.

Why do I make that distinction? We had data before, but it wasn’t timely or easily shared. Physicians in the IPA might have had the data, and it may have been timely, but it couldn’t be shared with the hospital or home health agency or anyone else for that matter, and certainly not the patient. This time physicians and hospitals will be able eventually to share quite a bit of information. Integration tools allow physician EMRs to “talk to” hospital EHRs. Non-affiliated physicians in a market can share information through local IT networks sponsored by hospitals, health plans or health-information exchanges (HIEs). New business intelligence tools will be able to extract the data and turn it into actionable information for both hospitals and physicians. Understanding if diabetic patients have received all their quality measures in the hospital or practice(s) can help both physicians and administrators manage to the standard of care. For the patient, Stage 2 meaningful use requires a patient portal, where the same information can be shared and acted upon by the patient. In turn, that data can be effectively utilized when communicating with payors about the collective efforts of the healthcare team.

Research has shown better utilization of services will result in lower costs and better quality care. Payors and the federal government will begin to pay based on the performance they see from the healthcare team, leading to payment reform. Those that have the information exchange and the tools to track and manage performance will be victors.

The concept of value-based healthcare purchasing is that buyers should hold providers of health care accountable for both cost and quality of care. In value-based purchasing, purchasers gather and analyze information on the costs and quality of competing providers and health plans. They contract selectively with plans or provider organizations based on demonstrated performance. Ideally, the best-performing plans and providers are rewarded with greater volume of enrollees or patients.

The implementation of VBP
Value-based purchasing marks the beginning of another significant change in how Medicare pays healthcare providers and facilities—for the first time, hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.

According to the CMS press release from spring 2011, “This initiative has the potential over the next three years to save 60,000 lives and save up to $35 billion in U.S. health care costs, including up to $10 billion for Medicare.” “Changing the way we pay hospitals will improve the quality of care for seniors and save money for all of us,” said HHS Secretary Kathleen Sebelius. “Under this initiative, Medicare will reward hospitals that provide high-quality care and keep their patients healthy. It’s an important part of our work to improve the health of our nation and drive down costs. As hospitals work to improve their performance on these measures, all patients – not just Medicare patients – will benefit.”

The better a hospital does on its quality measures, the greater the reward it will receive from Medicare. For a complete list of quality measures, visit www.HealthCare.gov/news/factsheets/valuebasedpurchasing04292011b.html.

For any of us that remember DRGs and their impact on Medicare and hospital operations, this has the potential to be a similar water-shed event. An estimated $850 million has been allocated for hospital payments in 2013 based on overall performance on a set of quality measures that improve care and patient satisfaction. This funding will be taken from what Medicare otherwise would have spent, and the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance.

For a fact sheet on the Hospital Value-Based Purchasing Program, visit www.HealthCare.gov/news/factsheets/valuebasedpurchasing04292011a.html. To learn more about hospital value-based purchasing, please visit www.cms.gov/HospitalQualityInits.

The final rule establishing the program was placed on display at the Federal Register today and can be found online at: www.cms.gov/HospitalQualityInits.

Well, last time I blogged, I talked a little about accountable care organizations (ACOs), which are part of the Patient Protection and Affordable Care Act (PPACA). Since that post, a study by Beacon Partners was published indicating that 92 percent of surveyed providers are preparing for ACOs, but few know what they are really preparing for. I have seen this movie before in the early 1990s. Then the alphabet soup was HMO, IDS, PPM and so on. All these attempts were also to reduce healthcare costs.

In a nutshell, ACOs are very similar to HMOs in their risk profile and instead of capitation, the ACO is paid based on a shared savings model that not only must reduce cost but improve outcomes. Without lots of capital, an army of lawyers, an electronic health record (EHR) and pretty sophisticated users, not to mention additional software to manage claims and predict disease incidence, the ability to function as an ACO is remote.

So what is the new-new thing, now that many in the industry have complained loudly that ACOs are too complicated for the average hospital and physician group? The Centers for Medicare & Medicaid Services (CMS) announced in late August a request for applications for participation in its bundled payments for care improvement initiative (BPCI). The concept is for CMS to pay a bundled price for a particular episode of care. However, in this program, CMS is allowing much more flexibility in determining what clinical conditions (MS-DRGs) will be subject to bundled payments, which services will be bundled together, how long the episode of care will last and whether there will be gainsharing in the model.

The Institute of Medicine (IOM) just published its recommendations for essential health benefits (EHBs) to be included in the health exchanges mandated in PPACA and the open market. The IOM was asked by the Department of Health and Human Services (HHS) for a framework that would provide coverage for roughly 68 million Americans and to ensure affordability of that coverage. The IOM defined a premium target, taking into account cost of coverage and the associated EHB package. The IOM determined the average premium of a typical small employer plan in 2014 and matched the cost of the EHB package. The IOM went on to state that the HHS secretary and all stakeholders must address the problem of healthcare cost inflation as the premium target, and EHBs do not address cost.

Meanwhile, CMS is also implementing ICD-10 on Oct. 1, 2013, which is an attempt to gather additional data for the purpose of understanding costs associated with treatment. Basically, ICD-10 expands the number of diagnosis codes from 14,000 to over 69,000, while the number of inpatient procedure codes grows from almost 4,000 to 72,000. The conversion to the new coding system, the backbone of billing, will require even more specific documentation from physicians about work performed. Of course, this complicates exponentially the implementation of the three programs described above – all of which require forecasting and ultimately reduction of costs.

So, you might ask, why in the world would we be trying to do all this at the same time? And, why are we just now instituting the one element you must have to make any of this work – EHRs? The answer is simple – the cost of healthcare is unsustainable, and we didn’t take our medicine soon enough. Now instead of needing a statin for our heart condition, we need open-heart surgery, which will be much more painful. Had enough yet? After 25 years in healthcare and fearing another movie rerun, I am really hoping for a better ending.

I recently attended The National IT and Delivery System Transformation Summit in Washington, D.C. This was the second annual Summit conceived by Mark McClellan, M.D., former administrator of the Centers for Medicare and Medicaid Services (CMS), in response to the Patient Protection and Affordable Care Act and the numerous programs outlined to improve quality and contain costs.

I was most interested in attending because as the former SVP for business development and managed care for a 50-hospital system during the early 90s, I remember the efforts to build independent practice associations (IPAs), to take the risk of full capitation and to “manage” care. Then, we did not have the health IT systems necessary to produce the data needed to improve quality while we were managing utilization. Today, with the help of the HITECH Act, we have an unprecedented opportunity to get it right this time with new models of care.

The most frequently discussed delivery-system reform model is the accountable care organization (ACO). However, ACOs are only one of the numerous programs being tried. Others include patient-centered medical homes, bundled-payment arrangements and value-based purchasing. For any of these models to be effective, an IT strategic plan for sharing key information is necessary.

My single biggest “takeaway” from the Summit is the importance of IT to any of the above strategies. Second is the criticality of doing something. Numerous physician leaders, prominent researchers and policy makers reiterated that our current course as a nation is unsustainable. Even with ACO reforms, projections have Medicare insolvent by 2024.

In addition to Dr. McClellan, attendees heard from Kathleen Sebelius, secretary of Health and Human Services; Dr. Farzad Mostashari, head of the Office of the National Coordinator for HIT; and other nationally prominent physicians and leaders.

Early results shared at the Summit from the 17 “beacon communities” operating around the country stressed the importance of good data for improving quality and lowering costs. (Read more about the beacon communities here.) The beacon communities reported that the single commonality in every successful accountable care structure and process is leadership. Having leadership at the top and demonstrated leadership throughout with a clear definition of success are essential ingredients. The formal organization is less important than finding areas where improvements can be made, setting goals and holding participants accountable for achieving those goals.

According to Summit speaker Dr. Jim Walker, CMIO at Geisinger Health System, the rapid sharing of information close to the time of care is essential to achieving goals for process change and quality improvement. That is the aim for health technology and for HMS.