The Sinister Forces

March 2016

Some providers of care see sinister forces gathering that will threaten the economic well-being of physicians and hospitals. On April 1, 2016 the Centers for Medicare and Medicaid Services (CMS) launches the mandatory Comprehensive Care for Total Joint Replacement (CJR) program. A few weeks after that, the next set of procedures to enter bundled payment will be announced. Early indications from the Health Care Payment Learning and Action Network (HCP LAN), suggest those procedures will be coronary artery bypass surgery, percutaneous coronary interventions, and mother baby.

Numerous other surgical and medical inpatient (and outpatient) episodes of care will surely follow. What’s more, private insurers are already following CMS’s lead with their own bundled payment offerings.  Make no mistake, this will shift substantial medical and economic risk to providers and away from payers of care.  Indeed, providers will start to look more and more like insurers in important ways.  These forces are a cause for concern for providers.  The question is, are they sinister?

The reality is that the re-engineering of payments in healthcare is not the consequence of sinister forces, but rather of the need to lower costs and improve quality.  As the Commonwealth Fund concluded in a recent study, “despite having the most expensive health care system, the United States ranks last overall among 11 industrialized countries on measures of health system quality.”   Bundled payment systems address this in part by incentivizing providers to reduce those aspects of care that provide relatively little benefit for the money.  For instance, services such as laboratory studies, imaging, and consultations may be seriously reevaluated for medical necessity.  Bundled payment means that hospitals and clinicians need to know their results, and benchmark those results, so that meaningful redesign of care can be undertaken.

Another example of this is post-discharge care.  Bundled payments under CJR require the provider to be responsible for care 90 days post discharge.   A study by Jencks et al[1] has identified that 34% of Medicare inpatients are readmitted within 90 days of discharge. Of readmitted patients, 22% of readmissions across the 90-day post-discharge period were not seen by a physician. In most cases, readmissions reflect events that are associated with the index hospitalization. In fact, complications of care during the index hospitalization predicts readmission to the hospital in surgical patients. In the fee for service world this a fact that might be ignored.  But in the bundled world this becomes a key focus if you are going to stay under budget.  When you can reduce complications of care—which reduces costs and improves quality—you reduce readmission rates—which does the same.

To be clear, readmissions in the Medicare population are not all avoidable.   But there are enough avoidable cases to warrant closer examination for many hospitals.  A risk-adjusted comparison of readmission rates has demonstrated dramatic differences among the hospitals across the nation.[2]

So what about those sinister forces?  It is indeed sinister to impose penalties for arbitrarily defined rates of readmissions.[3] But it is not a sinister force that defines a fair and equitable bundled payment and presents the opportunity for improved margins for good care, and lost margins when care is suboptimal.

In fact, “opportunity” is just how we think providers should see these trends.  This is an opportunity for providers to offer greater value to their patients; an opportunity to provide greater returns to their shareholders; and an opportunity to provide greater satisfaction to their employees.  If you’re not sure where to start.  Give us a call.  We can help.

[1] Jencks SF, Williams MV, Coleman EA: Rehospitalizations among patients in the Medicare fee-for-service program. N Engl J Med 2009; 360:1418-28.

[2] Fry DE, Pine M, Nedza SM, Locke DG, Reband AM, Pine G: Hospital outcomes in inpatient laparoscopic cholecystectomy in medicare patients. Ann Surg 2016 Feb 1. [Epub ahead of print].

[3] MPA Healthcare Solutions: The Floggings will continue until morale improves? MPA Newsletter. June 2015.

Donald Fry

Donald E. Fry, M.D. is Executive Vice President for Clinical Outcomes Management at MPA Healthcare Solutions, Adjunct Professor of Surgery at Northwestern University, and Professor Emeritus of Surgery at the University of New Mexico School of Medicine. At MPA Healthcare Solutions, Dr. Fry provides clinical leadership in analyzing and evaluating clinical performance, guiding quality improvement, and creating incentives for coordinated, cost-effective care.

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