Running Head: HEALTHCARE STAKEHOLDER CONFLICTS
1
HEALTHCARE STAKEHOLDER CONFLICTS
5
Stakeholder Conflicts in Healthcare Visions
Kendra Smith
Grand Canyon University: HCA 675
Introduction
The stakeholders in the healthcare service in any jurisdiction entail the government, the healthcare providers or the physicians, the payers, the patients as well as healthcare professional organizations.
These stakeholders work hand in hand to ensure efficiency and professionalism in healthcare delivery (Blair et al, 1988). They do this by developing succinct policies and effectively implement them for the sole purpose of improving healthcare services. However, there have been serious conflicts in opinion regarding enhancing healthcare service practices and proper administrative mechanisms for the achievement of better services, among the stakeholders.
Conflicts in Health Vision
One of the major health reform visions which have generated considerable debate concerns the accommodation of evidence-driven healthcare service practice, which the government of the United States has instructed all healthcare service providers or organizations to adopt. The major emphasis on this aspect of medicine is the requirement by the government that all healthcare service providers or organizations should document which healthcare services they provide and why they provide such healthcare services to the communit
y.
The argument behind this requirement is that it will enable the government, or it will be generally helpful in gauging the benefits the community gains from such healthcare services. In addition, establishing evidence-driven healthcare practice according to healthcare practitioners will help in identifying specific health problems within a community, and subsequently, design the most appropriate medical response. Some healthcare stakeholders also believe that this is an avenue that the government intends to use in creating and forging a closer working relationship between private and public healthcare providers. However much most stakeholders, both private and public, appreciate this evidence-based healthcare practice, as a vital component in improving healthcare services, the major concern is about how such data should be obtained. Some healthcare providers have reasoned that these data should be generated from the already existing data, due to the costs associated with activities that may lead to acquiring and establishing sound data or information domain. In response to this requirement, most of the healthcare organizations have established community-based information or data collection and management mechanisms, which enable them to collect data concerning community health concerns and threats, then define effective ways of response.
With the introduction and implementation of a series of healthcare reforms in the United States, such as the Obamacare and Trumpcare, there is general expectation that there will be enhanced access to healthcare service ...
Running Head HEALTHCARE STAKEHOLDER CONFLICTS1HEALTHCARE .docx
1. Running Head: HEALTHCARE STAKEHOLDER CONFLICTS
1
HEALTHCARE STAKEHOLDER CONFLICTS
5
Stakeholder Conflicts in Healthcare Visions
Kendra Smith
Grand Canyon University: HCA 675
Introduction
The stakeholders in the healthcare service in any jurisdiction
entail the government, the healthcare providers or the
physicians, the payers, the patients as well as healthcare
professional organizations.
These stakeholders work hand in hand to ensure efficiency and
professionalism in healthcare delivery (Blair et al, 1988). They
do this by developing succinct policies and effectively
implement them for the sole purpose of improving healthcare
services. However, there have been serious conflicts in opinion
regarding enhancing healthcare service practices and proper
administrative mechanisms for the achievement of better
services, among the stakeholders.
Conflicts in Health Vision
One of the major health reform visions which have generated
considerable debate concerns the accommodation of evidence-
driven healthcare service practice, which the government of the
United States has instructed all healthcare service providers or
organizations to adopt. The major emphasis on this aspect of
medicine is the requirement by the government that all
2. healthcare service providers or organizations should document
which healthcare services they provide and why they provide
such healthcare services to the communit
y.
The argument behind this requirement is that it will enable the
government, or it will be generally helpful in gauging the
benefits the community gains from such healthcare services. In
addition, establishing evidence-driven healthcare practice
according to healthcare practitioners will help in identifying
specific health problems within a community, and subsequently,
design the most appropriate medical response. Some healthcare
stakeholders also believe that this is an avenue that the
government intends to use in creating and forging a closer
working relationship between private and public healthcare
providers. However much most stakeholders, both private and
public, appreciate this evidence-based healthcare practice, as a
vital component in improving healthcare services, the major
concern is about how such data should be obtained. Some
healthcare providers have reasoned that these data should be
generated from the already existing data, due to the costs
associated with activities that may lead to acquiring and
establishing sound data or information domain. In response to
this requirement, most of the healthcare organizations have
established community-based information or data collection and
management mechanisms, which enable them to collect data
concerning community health concerns and threats, then define
effective ways of response.
With the introduction and implementation of a series of
healthcare reforms in the United States, such as the Obamacare
and Trumpcare, there is general expectation that there will be
enhanced access to healthcare services due to the expansion of
the Medicaid and other healthcare insurance covers to support
most of the healthcare needs of the American citizens (Berwick
et al, 2008).
However, this vision has generated serious conflicts among
3. stakeholders.
Firstly, there has been a concern on how the increase in the
number of patients who will be seeking healthcare service, due
to the expansion of healthcare access should be handled by
stakeholders (Skinner et al, 2007
). This issue has led stakeholders into questioning whether the
good.hospital
facilities do have the capacity, both in terms of sufficient
human resource availability and structural space, to effectively
provide the healthcare services and a accommodate their clients
(Skinner et al, 2007). This healthcare administrative concern is
also linked to how the healthcare services will be coordinated
under such congested systems as well as how payments for
health care services rendered shall be remitted to the hospitals.
In view of this concerns, certain healthcare facilities or
organizations have rolled-out home-based nursing or healthcare
programs or plans, as a mechanism of reducing congestion in
the facilities, even though this may not be 100% effective due
to considerable communication, transport, and other logistical
issues.
Secondly, the health reforms of universal healthcare access have
also introduced management or administrative concerns within
the healthcare facilities or organizations (Beaussier et al, 2014).
The government of the United States expects healthcare
organizations to provide quality services at a cheaper cost. The
center of ideological conflict among stakeholders with regard to
this aspect of quality-cheap healthcare services has always been
how the related health administrative costs shall be shouldered.
For instance, the private healthcare organizations-which by very
nature do not receive financial support from the government,
have raised concerns how the government expects them to roll-
out an effective, quality and cheap healthcare services to
patients without financial support (Beaussier et al, 2014
). Some of these organizations have been compelled, by
4. prevailing financial circumstances, to lay out some of their staff
and suspend other costly health programs in order to reduce
operation expenses as they endeavor to meet the requirement of
cheap-quality healthcare service policy as provided in the
reform agenda, by the government of the United States. Some
private healthcare organizations have alternatively closed down,
due insufficient funds to fully and effectively roll-out and
sustain the requirements of the policy.
Thirdly, another source of conflict among healthcare
stakeholders with regard to the healthcare insurance or
Medicaid reforms has been about the fiscal outlook of the
United States of America. The question has been whether the
government will be in a position to effectively and sufficiently
support and sustain the program (Skinner et al, 2007). With the
broadening of the Medicaid coverage eligibility, and the
undertaking by the federal government, as a stakeholder,
to finance the entire additional costs, other stakeholders have
consistently opined that State governments may not be in a
position to effectively and sufficiently support or finance their
Medicaid responsibilities, due to the fact that the healthcare
services budget has been consistently bulging to an extent that
it can no longer be effectively sustained, due to economic
recessions which often hit some of the states.
Fourthly, concerning healthcare accessibility as permeated in
the reforms, another eminent and legitimate concern is about the
fate of those who shall not be covered under the new healthcare
insurance reforms due to financial constraints, generally
referred to as the uninsured (Berwick et al, 2008). The state and
other stakeholders are gambling to address this concern, in the
face of serious glaring concerns. Some stakeholders have argued
that the uninsured persons, under the new healthcare reforms,
may have their health care needs cared for by "already existing
healthcare systems". However, stakeholders argue that this
concern has not been adequately and sufficiently addressed by
the government, and some healthcare organizations have
5. reported cases of either not offering healthcare services to the
uninsured patients or alternatively offering partial healthcare
service to such patients
.
Conclusion
In responding and solving the eminent conflicts regarding
health policies and reforms, the stakeholders in the healthcare
sector should have concrete health care reform implementation
processes, which creates and enhances the understanding of
each and every stakeholder. This will be important so as not to
hamper the provision of healthcare services to the citizens.
References
Blair, J. D., & Whitehead, C. J. (1988). Too Many On The
Seesaw: Stakeholder Diagnosis And Managemen. Journal of
Healthcare Management, 33(2), 153.
Berwick, D. M., Nolan, T. W., & Whittington, J. (2008). The
triple aim: care, health, and cost. Health Affairs, 27(3), 759-
769.
Beaussier, A. L., & Raillard, S. L. (2014). American Health
Care Policy in a Time of Party Polarization. Revue française de
science politique, 64(3), 383-405.
Skinner, J., Fisher, E. S., & Wennberg, J. E. (2007). The
Efficiency of Medicare. Analyses in the Economics of Aging,
129.
Edwards, R. (2010). Access. (Cover story). H&HN: Hospitals &
Health Networks, 84(8), 16-19.
Birk, S. (2010). The evidence-based road: available data can
drive successful community benefit programs. Healthcare
Executive, 25(4), 28-36.
Hello Kendra, good attempt to do this assignment but you did
not clearly answer all parts of the question which is write a
6. paper to “compares and contrasts the competing visions of
health care administration among stakeholders, identifies the
areas where they conflict, and discusses how those conflicts
could be seen in the delivery system.”
There are three parts to this question:
1. Compare and contrasts the competing visions of health care
administration among stakeholders
2. Identify the areas where they conflict
3. Discuss how those conflicts could be seen in the delivery
system.
In your paper you mainly discussed conflicts I in the healthcare
system. Also, most of the first part of your paper was not
supported by any in text citation.
Please see my comments inserted in your paper. have attached a
copy of GCU’s guidelines under the Resourses Tab –ADD
ONNS in the classroom.
Please note the answers to this assignment are in the study notes
which you did not reference.
Continue to work hard.
Radha
�Kendra, please not according to GCU guidelines located under
the Resources Tab in the classroom, under ADD ONNs I
attached GCU guidelines on the APA format.
It states “<Note: Even though APA does not require the �date
on a title page, it is a requirement for GCU papers.>�
�Good thesis statement but needs improvement.
7. According to the grading rubric a thesis statement should be
comprehensive and convey the gist of the paper.
�It is important to support the contents of your paper with
credible references. It gives credit to the author, allows you to
claim ownership of your work and avoid plagiarism.
�You paper is informative but who says so? Are they you
thoughts or are they of an author?
�Excellent! you have a credible reference to support a very
important point.
�
�?
�Good example.
�Good discussion.
�Relevant information.
�Overall, good conclusion
8. Sheet1USA Civilian labor force & unemployment by
metropolitan area - August 2017* preliminary, not seasonally
adjustedCivilian labor forceUnemployed NumberUnemployed
PercentState and area20162017 *20162017 *20162017
*Alabama2,168,4602,162,768134,75492,8376.24.3Anniston-
Oxford-Jacksonville45,78745,3933,1232,2086.84.9Auburn-
Opelika73,35273,7844,0182,8535.53.9Birmingham-
Hoover535,382533,08431,32120,9235.93.9Daphne-Fairhope-
Foley91,33892,2914,9523,4835.43.8Decatur68,80268,6114,1212
,83164.1Dothan62,85262,3293,8772,6506.24.3Florence-Muscle
Shoals66,71665,6034,5233,0636.84.7Gadsden43,53843,7972,72
31,8916.34.3Huntsville212,978216,08111,5318,0825.43.7Mobil
e183,688181,10113,0709,3667.15.2Montgomery170,887170,426
10,2077,05664.1Tuscaloosa112,726112,8947,1274,7386.34.2Ala
ska366,325369,98221,30123,4305.86.3Anchorage198,924201,96
110,87912,1685.56Fairbanks46,82947,1642,2502,5894.85.5Ariz
ona3,243,6833,304,258186,548169,6705.85.1Flagstaff75,06075,
7054,6473,8396.25.1Lake Havasu City-
Kingman81,32382,6145,4544,7696.75.8Phoenix-Mesa-
Scottsdale2,242,3312,291,662108,75298,2164.84.3Prescott100,4
20102,0825,0104,49854.4Sierra Vista-
Douglas50,22950,0383,1342,7846.25.6Tucson466,964470,90824
,38621,4135.24.5Yuma98,285101,24623,49524,00623.923.7Ark
ansas1,345,0361,371,78052,96948,6333.93.5Fayetteville-
Springdale-Rogers265,220277,1817,5517,5182.82.7Fort
Smith121,797122,2315,6685,2024.74.3Hot
Springs40,51041,8881,6921,5754.23.8Jonesboro62,67864,5812,
1102,0493.43.2Little Rock-North Little Rock-
Conway353,122359,44812,35411,3843.53.2Pine
Bluff36,05236,0162,0591,7475.74.9California19,178,34019,293
,4971,069,0941,041,4995.65.4Bakersfield390,645391,79537,954
36,7869.79.4Chico101,826103,4246,6366,5606.56.3El
Centro77,88576,10921,14118,94727.124.9Fresno449,520448,58
538,12038,3748.58.6Hanford-
20. What’s the economic outlook for this industry? Briefly share
findings and metrics:
Find a specific job posting that would be realistic and enjoyable
for you based on your interests, experience and education. Job
title:
Post the link to the job listing:
What’s the economic outlook for this occupation? Briefly share
findings and metrics:
In what city and state would you like to work?
What’s the MSA (Metropolitan Statistical Area) population?
What’s the unemployment rate?
What can you expect to earn annually in your favorite industry,
position and location?
[ 2 ] ClInICAl leAderShIp & mAnAgement reVIew
21. B U S I N E S S A N D C L I N I C A L o P E R A T I o N S
Accountable Care Organizations
Laboratory leaders are challenged to embrace and lead
upcoming changes. Traditional fee for service healthcare,
including Medicare, neither incents nor rewards physicians,
hospitals, and other providers for coordinating care. Because
of rising healthcare costs and concerns regarding quality,
ACOs have been proposed. Dartmouth’s Elliott Fisher has
been credited with coining the term “Accountable Care
Organizations” in 2006 and the principles of ACOs were
included in the Patient Protection and Affordable Care Act
(PPACA).1 It is unclear at this time what impact ACOs will
have on laboratories across the United States. What is clear
is that ACOs are an attempt to pay for value, rather than vol-
ume or intensity of services, which is the current practice.
The Integrated Healthcare Association (IHA) stated that
ACOs are meant to “promote higher quality and more ef-
ficient healthcare delivery in the United States.”2
22. There are three levels of the proposed ACO Networks3.
See Figure 1.
An “ACO is a local healthcare organization and a re-
lated set of providers…that can be held accountable for the
cost and quality of care delivered to a defined population.”4
The ACOs that meet their cost and quality goals can expect
some kind of financial reward, while those ACOs that do
not meet their goals will likely receive a financial penalty.
The ACO needs to be able to plan its budget and resources
and to implement seamless, integrated healthcare for its
population of patients in different settings, both outpatient
and inpatient.
Kelly J. Devers, PhD, senior fellow and Robert A. Be-
renson, MD, institute fellow at the Urban Institute in their
Robert Wood Johnson-sponsored study, concluded that the
ACO model is “inherently flawed” and that “the weak fi-
nancial incentives in the SSP payment model will not bring
together these increasingly independent professionals.”5
The Laboratory Leader’s Dilemma
Responding to the Emergence of
New Healthcare Delivery Models
By James S. Hernandez, MD, MS
Due to the changing healthcare landscape, laboratory leaders are
best positioned to ensure
that their laboratories are effective, while simultaneously
striving for efficiency, quality, and
cost-effectiveness. This is especially true in the current
healthcare environment. Since
Accountable Care Organizations (ACOs) are being considered,
lab leaders must understand
23. the implications and respond appropriately.
Figure 1.
Level One ACO Network Level Two ACO Network Level
Three ACO Network
No financial risk for providers Has financial risk for spending
that exceeds targets
Risk for full or partial capitation
Measures basic quality, efficiency,
and patient experience
Measures quality, efficiency,
and patient experience
Expanded measures for quality, efficiency,
and patient experience
Provides some share of savings Provides greater bonus potential
for savings Provides additional quality bonuses
Volume 25 / ISSue 1 / AprIl 2011 [ 3 ]
How do ACOs differ from other attempts to control costs
and improve quality? Like HMOs, the providers, not the insur-
ers, will be accountable. Ideally, ACOs will be physician led.
Kip Sullivan states that, like HMOs, ACOs are account-
24. able for cost and will shift the responsibility of cost sharing
from insurance companies and Medicare to providers. Kai-
ser Permanente is held as an example of an ACO.6
Recently, as part of its transformation efforts, the Col-
lege of American Pathologists (CAP) joined the Brookings-
Dartmouth ACO Learning Network. The CAP site states that
"to help ensure pathologists have a role in structuring new
healthcare delivery models, the College has joined the 2010-
2011 Brookings-Dartmouth Accountable Care Organization
(ACO) Learning Network.” Furthermore, the CAP site explains
that “The Network is headed up by Dartmouth Institute for
Health Policy and Clinical Practice's Elliott Fisher, MD, and
former CMS Administrator Mark McClellan, MD, PhD, who
is now with the Brookings Institution's Engelberg Center for
Health Care Reform. Both Drs. Fisher and McClellan are lead-
ing experts on ACOs; Dr. Fisher is credited with launching
the ACO concept.”7 The CAP website provides numerous
examples of healthcare organizations like Kaiser and Inter-
25. mountain Healthcare that have been cited as model ACOs.
Dr. Elizabeth Hammond, professor of pathology at the
University of Utah, outlines the 10 steps that a healthcare
organizations can take to form an ACO and several prudent
recommendations.8 The principles embraced at Intermoun-
tain Healthcare are quite similar to the principles espoused
in the Mayo Clinic integrated healthcare system.9
For example, both Intermountain Healthcare and Mayo
Clinic employ physicians, so financial incentives are easier
to align. Both systems are integrated and their labs are
aligned with the strategic plans of the overall healthcare
systems, not at cross purposes. Both embrace continuous
quality improvements in the laboratories, including the
use of Lean principles. Both organizations make use of
evidence-based principles, using local data, to make deci-
sions in the laboratories to improve quality and safety. Both
embrace a “compassionate, accountable culture”10 and both
organizations vigorously pursue innovation.
26. Efforts to Increase Quality, Improve Efficiency,
and Lower Costs
Quality process improvement efforts are less novel today
compared to five years ago. Many healthcare systems have
adopted the principles of Lean, Six Sigma, and Plan-Do-
Study-Act (PDSA).
The reason for using Lean principles is to eliminate waste
within the laboratories and to improve quality and safety.
The primary target is improving workflow, for example, by
eliminating or greatly diminishing batching and performing
[ 4 ] ClInICAl leAderShIp & mAnAgement reVIew
tests as they come into the lab, so-called single piece flow.
Six Sigma, on the other hand, is a statistical based problem
solving and improvement methodology. Six Sigma is used to
eliminate variation. An example in the labs is to establish a
standardized process to greatly eliminate labeling errors. Six
Sigma uses a framework called DMAIC in which the process
is to Define, Measure, Analyze, Improve and Control the
process, using various quality tools at each stage.
Many laboratories have embraced these quality im-
provement tools in order to improve efficiency and quality
while simultaneously lowering overall costs. Our organi-
zation is actively sponsoring a Quality Academy to teach
healthcare providers, side by side with systems engineers
27. who often have Six Sigma Black Belt credentials, how to set
up quality process improvement projects to increase quality
and safety, improve efficiency, eliminate waste, and lower
overall costs.11 Laboratorians have been trendsetters in our
organization, accounting for a large proportion of leaders
who have sought advanced training in Lean and Six Sigma.
For example, Lean and Six Sigma tools were used to
improve turnaround times and the granulocyte and collec-
tion process at our institution in the following manner:
“This was an overall look at a process that integrated
many work units and incorporated the need to understand
the work flow from many areas with many needs. One
dramatic example from Transfusion Medicine was dealing
with the granulocyte request and collection process. This
included physicians from primary care and transfusion
medicine, residents, the Therapeutic Apheresis Unit, the
Component Laboratory and the Transfusion Laboratory. All
of these units and groups of people needed to understand
each others’ processes and the needs of the whole system.
A systems engineer was able to help gather the information
and compile it in an understandable manner. The TAT from
initiation of the issue of a collected product was reduced
from originally 30+ hours to 24 hours for the first product.
Subsequent product collection and issue is now standard-
ized and much more efficient.”12
Productivity is relatively straightforward to measure. It
is a rate of work over time or a similar metric. Productivity
commonly applies to clinical practice or to academic pur-
suits such as publications or research grants.
The science of measuring healthcare efficiency is ad-
vancing. In 2005 Hollingsworth13 reviewed 188 published
papers on so-called frontier efficiency measurement. He
28. concluded that there are applications to both hospitals
and other healthcare organizations in assessing efficiency.
Frontier efficiency is adapted from finance models for ef-
ficient investing and includes measures of inefficiency.
For example, in his original research, Zuckerman “uses
a stochastic frontier multiproduct cost function to derive
hospital-specific measures of inefficiency. The cost func-
tion includes direct measures of illness severity, output
quality, and patient outcomes to reduce the likelihood
that the inefficiency estimates are capturing unmeasured
differences in hospital outputs. Models are estimated using
data from the AHA Annual Survey, Medicare Hospital Cost
Reports, and MEDPAR… We conclude that inefficiency
accounts for 13.6 percent of total hospital costs.”14
What Gets Lost in the Equation? Effectiveness
Though the levels of ACOs mention “quality, efficiency, and
patient experience,” there is no mention of ensuring that the
organization as a whole or that individual practitioners are
practicing effectively (doing the right thing), or whether the
chosen diagnostic and treatment modalities are supported
by evidence-based medicine. Furthermore, there is no indi-
cation that the pathways chosen in diagnosis and treatment
29. are medically useful, efficacious, or cost-effective. In other
words, who is tasked to make sure that patients are getting
the most effective care? Where are the incentives to align
good, effective care with the goals of improving efficiency,
cost-effectiveness, and patient satisfaction?
Leadership vs. Management
Laboratory directors are responsible for the leadership
of the laboratory and working with laboratory managers
and their staff. Leadership in the labs is about producing
needed changes to cope with a rapidly changing environ-
ment and setting a strategic direction. It includes determin-
ing the effectiveness (doing the right thing) in the labs by
identifying the overuse, underuse, or misuse of resources.
Laboratory directorship duties cannot be totally abrogated
to non-physician managers, but is a shared experience.
Leadership is about setting direction, strategy, and priori-
ties. It includes mentoring younger colleagues, modeling
behavior, and motivating others to move in a direction that
30. they may not, on their own, choose to go.
In contrast, management of the laboratories is a shared
responsibility between the laboratory directors and laboratory
administration and management. It addresses efficiency (doing
the thing well) and helps produce predictable results by meet-
ing measurable goals. Management is about planning and
tactics. It includes defining problems clearly, solving complex
problems, tracking changes, and controlling the status quo.
Leadership is about defining the mission. Management
is about fulfilling the mission.
Invariably, there is a natural and expected tension be-
tween laboratory directors and laboratory management. As
management guru John Kotter stated, “management is about
coping with complexity…leadership, by contrast, is about
coping with change.”15 In contrast to leadership, one can be
Volume 25 / ISSue 1 / AprIl 2011 [ 5 ]
an excellent manager without motivating or inspiring others
31. because “control is central to management…management pro-
cesses must be as close to possible to fail-safe and risk-free.”16
Efficiency and productivity are easier to measure com-
pared to effectiveness. To some extent, they are more mana-
gerial in nature. On the other hand, optimizing effectiveness
is a distinctly medical leadership task, in consultation with
the laboratory management and the physician staff.
Finally, it is important to balance the leadership and
management duties with the regulatory and compliance
challenges that face pathologists and lab directors. This is
particularly true for medical directors of laboratories who
are predominantly anatomic pathologists. Some may be ful-
filling medical director duties and may not even realize the
critical importance of regulatory and compliance issues.17
Conclusion
It is incumbent on laboratory directors, due to their medical
and scientific training and understanding of both medical
processes and outcomes, to work with laboratory manage-
ment and physician staff to adequately assess if providers
32. are delivering effective care. With the explosion of medical
technology, a major driver in escalating costs, lab directors
must work with clinical physician staff leaders to assess the
effectiveness of the system and of individual providers.
The major challenge is for laboratory leaders not to
lose sight of striving for medical effectiveness in the zeal
to improve efficiency, quality, and productivity. The labo-
ratory leader’s dilemma is to respond to external pressures
to increase quality while lowering costs (increasing value)
and improving efficiency, and simultaneously increasing ef-
fectiveness, which is either ignored or assumed to be present
across all healthcare systems.
Though it is still too early to provide data other than
the outcomes of healthcare institutions like Intermountain
Healthcare and Kaiser, it is clear that the Patient Protec-
tion and Affordable Care Act includes ACOs. For laboratory
leaders, this indicates that the concept of paying for value,
rather than volume or intensity of services, is in vogue again.
33. What does this mean for laboratory leaders and what
must laboratorians do to prepare for the coming changes?
1. Learn about Accountable Care Organizations (ACOs).
2. Be open to change.
3. Improve your systems thinking. Think about how
your laboratory delivers care in the broader con-
text of your healthcare system and how you can
assist your entire healthcare team to make your
system more efficient and more effective.
4. Champion efforts to make the laboratories more
efficient by learning more about Lean, Six Sigma,
and other quality process improvement initiatives.
5. Advocate for effectiveness – doing the right thing –
by embracing data-driven evidence to improve the
practice patterns of your local healthcare system. ◾
References
1. The Patient Protection and Affordable Care Act (PPACA),
ac-
cessed 1/3/11 at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.
34. cgi?dbname=111_cong_public_laws&docid=f:publ148.111.pdf
2. Expert Says Accountable Care Organizations Must Embrace
Patient
Choice to be Successful, DARKDAILY, accessed 11/25/10 at
http://www.darkdaily.com/expert-says-accountable-care-
organiza-
tions-must-embrace-patient-choice-to-be-successful-1124
3. Ibid.
4. Devers, K. and Berenson, R. Can Accountable Care
Organizations
Improve the Value of Health Care by Solving the Cost and
Quality
Quandaries? Accessed 11/25/10 at
http://www.urban.org/upload-
edpdf/411979_acountable_care_orgs_summary.pdf
5. Ibid.
6. Sullivan, K. The History and Definition of “Accountable
Care Organizations.” Accessed 1/3/11 at http://pnhp-
california.org/2010/10/the-history-and-definition-of-the-
%E2%80%9Caccountable-care-organization%E2%80%9D/
7. New Economic Realities, CAP website. Accessed on 1/3/11 at
http://www.cap.org/apps/docs/membership/transformation/new/
new_economic_realities.html
8. Hammond, E. A Path to Becoming a Model ACO. Accessed
on
1/3/11 at http://www.cap.org/apps/docs/membership/transforma-
tion/new/aco_model.pdf
9. Mayo Clinic Model of Care. Accessed on 1/3/11 at
35. http://www.mayoclinic.org/tradition-heritage/model-care.html
10. Hammond, E. A Path to Becoming a Model ACO. Accessed
on
1/3/11 at http://www.cap.org/apps/docs/membership/transforma-
tion/new/aco_model.pdf
11. Hernandez, JS and Mustapha, M. Systems Engineers
Working with
Physician Leaders. Physician Executive Journal, Nov-Dec 2010:
44-48.
12. Ibid.
13. Hollingsworth, B. Non-Parametric and Parametric
Applications
Measuring Efficiency in Health Care, as cited in Health Care
Management Science, Vol. 6, No. 4, 203-218, 2005.
14. Zuckerman, S. Measuring hospital efficiency with frontier
cost
function. Accessed on 1/3/11 at
http://www.sciencedirect.com/sci-
ence?_ob=ArticleURL&_udi=B6V8K-45BCTHX-
C&_user=130561&_
coverDate=10%2F31%2F1994&_rdoc=1&_fmt=high&_
orig=browse&_origin=browse&_zone=rslt_list_item&_srch=doc
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fo(%23toc%235873%231994%23999869996%23290247%23FLP
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display%23Volume)&_cdi=5873&_sort=d&_docanchor=&_ct=1
4&_
acct=C000010878&_version=1&_urlVersion=0&_userid=13056
1&md
5=76a5374d7c448caec14c7480ee247589&searchtype=a
36. 15. Kotter, John P. What Leaders Really Do. In: Harvard
Business Review
on Leadership. Boston: Harvard Business School Publishing,
1998: 37.
16. Ibid, page 47.
17. Hernandez JS. Are you responsible for medical director
duties in
anatomic pathology--and why should you care? Adv Anat
Pathol.
2011 Jan; 18(1):75-8.
James S. Hernandez, MD, MS, is assistant professor
of laboratory
medicine and pathology at the College of Medicine, Mayo
Clinic. He is also
medical director of laboratories and chair of the Division of
Laboratory
Medicine at Mayo Clinic in Arizona. Dr. Hernandez has a strong
inter-
est in laboratory leadership, management, lab utilization,
quality process
improvements, safety, and cost-effectiveness. He can be reached
at
[email protected]
http://frwebgate.access.gpo.gov/cgi-
bin/getdoc.cgi?dbname=111_cong_public_laws&docid=f:publ14
8.111.pdf
http://frwebgate.access.gpo.gov/cgi-
bin/getdoc.cgi?dbname=111_cong_public_laws&docid=f:publ14
8.111.pdf
http://www.darkdaily.com/expert-says-accountable-care-
organizations-must-embrace-patient-choice-to-be-successful-
1124
40. Copyright of Clinical Leadership & Management Review is the
property of Clinical Laboratory Management
Association and its content may not be copied or emailed to
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Button 11: Button 12:
STATEMENT
Statement of
Glenn M. Hackbarth, J.D.
Chairman
Medicare Payment Advisory Commission
Before the
Senate Finance Committee Roundtable on
41. Reforming America’s Health Care Delivery System
Reforming America’s Health Care
Delivery System
April 21, 2009
1
Chairman Baucus, Ranking Member Grassley, distinguished
Committee members. I am Glenn
Hackbarth, chairman of the Medicare Payment Advisory
Commission (MedPAC). I appreciate
the opportunity to be part of the panel this morning and to share
MedPAC’s views on delivery
system reform.
The Medicare Payment Advisory Commission (MedPAC) is an
independent Congressional
agency established by the Balanced Budget Act of 1997 (P.L.
105-33) to advise the U.S.
Congress on issues affecting the Medicare program. The
42. Commission's statutory mandate is
quite broad: In addition to advising the Congress on payments
to private health plans
participating in Medicare and providers in Medicare's
traditional fee-for-service program,
MedPAC is also tasked with analyzing access to care, quality of
care, and other issues
affecting Medicare. The Commission's 17 members bring
diverse expertise in the financing
and delivery of health care services.
MedPAC meets publicly to discuss policy issues and formulate
its recommendations to the
Congress. In the course of these meetings, Commissioners
consider the results of staff
research, presentations by policy experts, and comments from
interested parties. Commission
members and staff also seek input on Medicare issues through
frequent meetings with
individuals interested in the program, including staff from
congressional committees and the
Centers for Medicare & Medicaid Services (CMS), health care
researchers, health care
providers, and beneficiary advocates.
43. Two reports – issued in March and June each year – are the
primary outlet for Commission
recommendations. In addition to these reports and others on
subjects requested by the
Congress, MedPAC advises the Congress through other avenues,
including comments on
reports and proposed regulations issued by the Secretary of the
Department of Health and
Human Services, testimony, and briefings for congressional
staff.
Our health care system today
The health care delivery system we see today is not a true
system: Care coordination is rare,
specialist care is favored over primary care, quality of care is
often poor, and costs are high and
increasing at an unsustainable rate. Part of the problem is that
Medicare’s fee-for-service (FFS)
2
payment systems reward more care, and more complex care,
without regard to the value of that
care. In addition, Medicare’s payment systems create separate
payment “silos” (e.g., inpatient
hospitals, physicians, post-acute care providers) and do not
44. encourage coordination among
providers within a silo or across the silos. We must address
those limitations—creating new
payment methods that will reward efficient use of our limited
resources and encourage the
effective integration of care.
Medicare has not been the sole cause of the problem, nor should
it be the only participant in the
solution. Private payer rates and incentives perpetuate system
inefficiencies, and the current
disconnect among different payers creates mixed signals to
providers. This contributes to the
perception that one payer is cross-subsidizing other payers and
further exacerbates the problem.
Private and other public payers will need to change payment
systems to bring about the
conditions needed to change the broader health care delivery
system. But Medicare should not
wait for others to act first; it can lead the way to broader
delivery system reform.
Because this roundtable discussion is intended to spark dialogue
on the solutions, I will focus
on the recommendations the Commission has made to reform the
health care delivery system
45. and to strengthen the Medicare program. MedPAC has testified
previously before Senate
Finance Committee on problems of our health care delivery
system and a detailed discussion of
these problems is in the attached Appendix.
Commission recommendations to increase efficiency and
improve quality
In previous reports, the Commission has recommended that
Medicare adopt tools to
surmount barriers to increasing efficiency and improving
quality within the current Medicare
payment systems. These tools include:
• Creating pressure for efficiency through payment updates.
Although the update is a
somewhat blunt tool for constraining cost growth (updates are
the same for all providers
in a sector, both those with high costs and those with low
costs), constrained updates will
create more pressure on those with higher costs. In our March
2009 Report to the
Congress, the Commission offers a set of payment update
recommendations that exert
fiscal pressure on providers to constrain costs. For example, the
Commission
46. 3
recommends a zero update for home health agencies in 2010,
coupled with an
acceleration of payment adjustments due to coding practices,
totaling a 5.5 percent cut in
home health payments for 2010. Another example is the
Commission’s recommendation
to reduce overpayments to MA plans by setting the MA
benchmarks equal to 100 percent
of Medicare FFS expenditures. This recommendation is
consistent with the
Commission’s commitment to retaining high-quality, low-cost
private plans in Medicare.
• Improving payment accuracy within Medicare payment
systems. In our 2005 report on
specialty hospitals, the Commission made recommendations to
improve the accuracy of
DRG payments to account for patient severity. Those
recommendations corrected
distortions in the payment system that—among other things—
contributed to the
47. formation of hospitals specializing in the treatment of a limited
set of profitable DRGs. In
another example, in our June 2008 and March 2009 Reports to
the Congress, the
Commission recommended increasing fee schedule payments for
primary care services
furnished by clinicians focused on delivering primary care. This
budget-neutral
adjustment would redistribute Medicare payments toward those
primary care services
provided by practitioners—physicians, advanced practice
nurses, and physician
assistants—whose practices focus on primary care. This
recommendation recognizes that
a well functioning primary care network is essential to help
improve quality and control
Medicare spending (MedPAC 2008, MedPAC 2009).
• Linking payment to quality. In a series of reports, we have
recommended that Medicare
change payment system incentives by basing a portion of
provider payment on the quality
of care they provide and recommended that the Congress
establish a quality incentive
48. payment policy for physicians, Medicare Advantage plans,
dialysis facilities, hospitals,
home health agencies, and skilled nursing facilities. In March
2005, the Commission
recommended setting standards for providers of diagnostic
imaging studies to enhance
the quality of care and help control Medicare spending.
• Measuring resource use and providing feedback. In our March
2008 and 2005 Reports to
the Congress, we recommended that CMS measure physicians’
resource use per episode of
4
care over time and share the results with physicians. Those who
used comparatively more
resources than their peers could assess their practice styles and
modify them as appropriate.
• Encouraging use of comparative-effectiveness information and
public reporting of
provider quality and financial relationships. In our June 2007
Report to the Congress, we
found that not enough credible, empirically based information is
49. available for health care
providers and patients to make informed decisions about
alternative services for
diagnosing and treating most common clinical conditions. The
Commission
recommended that the Congress charge an independent entity to
sponsor credible
research on comparative effectiveness of health care services
and disseminate this
information to patients, providers, and public and private
payers. Second, the
Commission recommended public reporting to provide
beneficiaries with better
information and encourage providers to improve their quality.
Third, the Commission
has recommended that manufacturers of drugs and medical
devices be required to
publicly report their financial relationships with physicians to
better understand the types
of financial associations that may influence patterns of patient
care.
The need for more fundamental reform
The recommendations discussed above would make the current
Medicare FFS payment
50. systems function better, but they will not fix the problems
inherent in those systems for two
reasons. First, they cannot overcome the strong incentives
inherent in any fee-for-service
system to increase volume, thus it will be difficult to make the
program sustainable.
Second, they cannot switch the focus to the patient rather than
the procedure because they
cannot directly reward care coordination or joint accountability
that cut across current
payment system “silos,” such as the physician fee schedule or
the inpatient prospective
payment system.
There is evidence that more fundamental reforms could improve
the quality of care and
potentially lower costs. For example, patient access to high-
quality primary care is essential for a
well-functioning health care delivery system. Research suggests
that reducing reliance on
specialty care may improve the efficiency and quality of health
care delivery. States with a
5
51. greater proportion of primary care physicians have better health
outcomes and higher scores on
performance measures (Baicker and Chandra 2004). Moreover,
areas with higher rates of
specialty care per person are associated with higher spending
but not improved access to care,
higher quality, better outcomes, or greater patient satisfaction
(Fisher et al. 2003, Kravet et al.
2008, Wennberg 2006). Countries with greater dependence on
primary care have lower rates of
premature deaths and deaths from treatable conditions, even
after accounting for differences in
demographics and GDP (Starfield and Shi 2002). Changing the
balance in the delivery system
between primary and specialist care may have high payoffs for
Medicare.
Evidence points to other potential reforms:
• Greater care coordination. Evidence shows that care
coordination can improve quality.
As we discussed in our June 2006 Report to the Congress,
studies show self management
programs, access to personal health records, and transition
coaches have resulted in
52. improved care or better outcomes, such as reduced readmission
for patients with chronic
conditions.
• Reducing preventable readmissions. Savings from preventing
readmissions could be
considerable. About 18 percent of Medicare hospital admissions
result in readmissions
within 30 days of discharge, accounting for $15 billion in
spending. The Commission
found that Medicare spends about $12 billion on potentially
preventable readmissions.
• Increasing the use of bundled payments. The Medicare
Participating Heart Bypass Center
demonstration of the 1990s found that bundling hospital DRG
payments and inpatient
physician payments could increase providers’ efficiency and
reduce Medicare’s costs.
Most of the participating sites found that, under a bundled
payment, hospitals and
physicians reduced laboratory, pharmacy, and ICU spending.
Spending on consulting
physicians and post-discharge care decreased and quality
remained high.
53. A direction for payment and delivery system reform
To increase value for the Medicare program, its beneficiaries,
and the taxpayers, we are
looking at payment policies that go beyond the current FFS
payment system boundaries of
scope and time. This new direction would pay for care that
spans across provider types and
time and would hold providers jointly accountable for the
quality of that care and the
6
resources used to provide it. It would create payment systems
that reward value and
encourage closer provider integration—delivery system reform.
For example, if Medicare
held physicians and hospitals jointly responsible for outcomes
and resource use, new
efficiencies—such as programs to avoid readmissions and
standardization of operating room
supplies—could be pursued. In the longer term, joint
responsibility could lead to closer
integration and development of a more coordinated health care
delivery system.
This direction is illustrated in Figure 1. The potential payment
54. system changes shown are not
the end point for reform and further reforms could move the
payment systems away from
FFS and toward systems of providers who accept some level of
risk, driving delivery system
reform.
Figure 1. Direction for payment and delivery system reform
History provides numerous examples that providers will respond
to financial incentives. The
advent of the inpatient prospective payment system in 1983 led
to shorter inpatient lengths of
stay and increasing use of post acute care services. Physician
services have increased as
payments have been restrained by volume control mechanisms.
Finally, a greater proportion
of patients in skilled nursing facilities (SNFs) were given
therapy, and more of it, in response
Recommended tools
- Comparative
effectiveness
- Reporting resource use
- Pay for Performance
- Individual services
“bundled” within a payment
55. system
- Readmissions
- Gain sharing
- Creating pressure for
efficiency through updates
- Price accuracy (e.g.
primary care adjustment)
- Disclosure of financial
relationships
Potential system
changes
Pay across settings and
across time
For example:
- Medical home
- Payments “bundled”
across existing payment
systems
- Accountable care
organization (e.g. PGP
demo)
Current FFS
payment systems
- Physician
- Inpatient &
outpatient - hospital
- LTCH
- IRF
- Psych
56. - SNF
- Home health
- DME
- Lab
- Hospice
- Dialysis Services
+ +
7
to the SNF prospective payment system incentives. Financial
incentives can also result in
structural changes in the health care delivery system. In the
1990s, the rise of HMOs and the
prospect of capitation led doctors and hospitals to form
physician–hospital organizations
whose primary purpose was to allocate capitated payments.
Paying differently will motivate
providers to interact differently with each other, and—if
reforms are carefully designed for
joint accountability—to pay more attention to outcomes and
costs. To be sure, implementing
these changes will not be easy. Changes of this magnitude will
undoubtedly be met with
opposition from providers and other stakeholders. In addition,
57. the administrative component
of the proposed payment system changes will require refinement
over time.
Recommended system changes
We discuss three recommendations the Commission has made
that might move Medicare in
the direction of better coordination and more accountable care:
a medical home pilot
program, changing payments for hospital readmissions, and
bundling payments for services
around a hospital admission.
Medical home
A medical home is a clinical setting that serves as a central
resource for a patient’s
ongoing care. The Commission considers medical homes to be a
promising concept to
explore. Accordingly, it recommends that Medicare establish a
medical home pilot
program for beneficiaries with chronic conditions to assess
whether beneficiaries with
medical homes receive higher quality, more coordinated care,
without incurring higher
Medicare spending. Qualifying medical homes could be primary
care practices,
58. multispeciality practices, or specialty practices that focus on
care for certain chronic
conditions, such as endocrinology for people with diabetes.
Geriatric practices would be
ideal candidates for Medicare medical homes.
In addition to receiving payments for fee-schedule services,
qualifying medical homes would
receive monthly, per beneficiary payments that could be used to
support infrastructure and
activities that promote ongoing comprehensive care
management. To be eligible for these
monthly payments, medical homes would be required to meet
stringent criteria. Medical
homes must:
8
furnish primary care (including coordinating appropriate
preventive, maintenance, and
acute health services);
use of a team to conduct care management;
use health information technology (IT) for active clinical
decision support;
59. have a formal quality improvement program;
maintain 24-hour patient communication and rapid access;
keep up-to-date records of beneficiaries’ advance directives;
and
maintain a written understanding with each beneficiary
designating the provider as a
medical home.
These stringent criteria are necessary to ensure that the pilot
evaluates outcomes of the kind
of coordinated, timely, high-quality care that has the highest
probability to improve cost,
quality, and access. The pilot must assess a true intervention
rather than care that is
essentially business as usual. In rural areas, the pilot could test
the ability for medical homes
to provide high-quality, efficient care with somewhat modified
structural requirements.
Beneficiaries with multiple chronic conditions would be eligible
to participate because they
are most in need of improved care coordination. About 60
percent of FFS beneficiaries have
two or more chronic conditions. Beneficiaries would not incur
60. any additional cost sharing for
the medical home fees. As a basic principle, medical home
practitioners would discuss with
beneficiaries the importance of seeking guidance from the
medical home before obtaining
specialty services. Participating beneficiaries would, however,
retain their ability to see
specialists and other practitioners of their choice. Under the
pilot, Medicare should also
provide medical homes with timely data on patients’ Medicare-
covered utilization outside the
medical home, including services under Part A and Part B and
drugs under Part D.
A medical home pilot provides an excellent opportunity to
implement and test physician pay-
for-performance (P4P) with payment incentives based on quality
and efficiency. Under the
pilot project, the Commission envisions that the P4P incentives
would allow for rewards and
penalties based on performance. Efficiency measures should be
calculated from spending on
Part A, Part B, and Part D, and efficiency incentives could take
the form of shared savings
61. 9
models similar to those under Medicare’s ongoing physician
group practice demonstration.
Bonuses for efficiency should be available only to medical
homes that have first met quality
goals and that have a sufficient number of patients to permit
reliable spending comparisons.
Medical homes that are consistently unable to meet minimum
quality requirements would
become ineligible to continue participation.
It is imperative that the medical home pilot be on a large
enough scale to provide statistically
reliable results with a relatively short testing cycle.
Additionally, the pilot must have clear
and explicit results-based thresholds for determining whether it
should be expanded into the
full Medicare program or discontinued entirely. Focusing on
beneficiaries with multiple
chronic conditions and medical homes meeting stringent criteria
should provide a good test
of the medical home concept.
Readmissions and bundled payments around a hospitalization
62. Evidence suggests there is an enormous opportunity to improve
care and address the lack of
coordination at hospital discharge. Discharge from the hospital
is a very vulnerable time for
patients, and in particular for Medicare beneficiaries, who often
cope with multiple chronic
conditions. Often they are expected to assume a self-
management role in recovery with little
support or preparation. They may not understand their
discharge instructions on what
medications to take, know whom to call with questions, or know
what signs indicate the need
for immediate follow-up care. Often they do not receive timely
follow-up care and
communication between their hospital providers and post-acute
care providers is uneven.
These disjointed patterns of care can result in poorer health
outcomes for beneficiaries, and
in many cases, the need for additional health care services and
expenditures.
The variation in spending around hospitalization episodes
suggests lower spending is
possible. There is a 65 percent difference in spending on
readmissions between hospitals in
63. the top quartile and the average of all hospitals; the top quartile
is almost four times higher
than the bottom quartile. The spread between high- and low-use
hospitals is even larger than
spending for post-acute care. These high-spending hospitals
often treat the beneficiaries with
the costliest care. Greater coordination of care is needed for this
population, and changing
incentives around their hospital care could be the catalyst.
10
How can Medicare policy change the way care is provided?
First, the Commission
recommends that the Secretary confidentially report to hospitals
and physicians information
about readmission rates and resource use around hospitalization
episodes (e.g., 30 days post-
discharge) for select conditions. This information would allow a
given hospital and the
physicians who practice in it to compare their risk-adjusted
performance relative to other
hospitals, physicians, and post-acute care providers. Once
equipped with this information,
64. providers may consider ways to adjust their practice styles and
coordinate care to reduce
service use. After two years of confidential disclosure to
providers, this information should
be publicly available.
Information alone, however, will not likely inspire the degree of
change needed. Payment
incentives are needed. We have two recommendations—one to
change payment for
readmissions and one to bundle payments across a
hospitalization episode. Either policy
could be pursued independently, but the Commission views
them as complementary. A
change in readmissions payment policy could be a critical step
in creating an environment of
joint accountability among providers that would, in turn, enable
more providers to be ready
for bundled payment.
Readmissions
The Commission recommends changing payment to hold
providers financially accountable
for service use around a hospitalization episode. Specifically, it
would reduce payment to
65. hospitals with relatively high readmission rates for select
conditions. Conditions with high
volume and high readmissions rates may be good candidates for
selection. Focusing on rates
rather than numbers of readmissions serves to penalize hospitals
that consistently perform
worse than other hospitals, rather than those that treat sicker
patients. The Commission
recommends that this payment change be made in tandem with a
previously recommended
change in law (often referred to as gainsharing or shared
accountability) to allow hospitals
and physicians to share in the savings that result from re-
engineering inefficient care
processes during the episode of care.
Currently, Medicare pays for all admissions based on the
patient’s diagnosis regardless of
whether it is an initial stay or a readmission for the same or a
related condition. This is a
11
concern because we know that some readmissions are avoidable
and in fact are a sign of poor
66. care or a missed opportunity to better coordinate care.
Penalizing high rates of readmissions encourages providers to
do the kinds of things that lead
to good care, but are not reliably done now. For example, the
kinds of strategies that appear
to reduce avoidable readmissions include preventing adverse
events during the admission,
reviewing each patient’s medications at discharge for
appropriateness, and communicating
more clearly with beneficiaries about their self-care at
discharge. In addition, hospitals,
working with physicians, can better communicate with providers
caring for patients after
discharge and help facilitate patients’ follow-up care.
Spending on readmissions is considerable. We have found that
Medicare spends $15 billion
on all-cause readmissions and $12 billion if we exclude certain
readmissions (for example,
those that were planned or for situations such as unrelated
traumatic events occurring after
discharge). Of this $12 billion, some is spent on readmissions
that were avoidable and some
on readmissions that were not. To target policy to avoidable
readmissions, Medicare could
67. compare hospitals’ rates of potentially preventable readmissions
and penalize those with high
rates. The savings from this policy would be determined by
where the benchmark that
defines a high rate is set, the size of the penalty, the number
and type of conditions selected,
and the responsiveness of providers.
The Commission recognizes that hospitals need physician
cooperation in making practice
changes that lead to a lower readmission rate. Therefore,
hospitals should be permitted to
financially reward physicians for helping to reduce readmission
rates. Sharing in the financial
rewards or cost savings associated with re-engineering clinical
care in the hospital is called
gainsharing or shared accountability. Allowing hospitals this
flexibility in aligning incentives
could help them make the goal of reducing unnecessary
readmissions a joint one between
hospitals and physicians. As discussed in a 2005 MedPAC
report to the Congress, shared
accountability arrangements should be subject to safeguards to
minimize the undesirable
68. incentives potentially associated with these arrangements. For
example, physicians who
participate should not be rewarded for increasing referrals,
stinting on care, or reducing
quality.
12
Bundled payments for care over a hospitalization episode
Under bundled payment, Medicare would pay a single provider
entity an amount intended to
cover the costs of providing the full range of care needed over
the hospitalization episode.
Because we are concerned about care transitions and creating
incentives for coordination at
this juncture, the hospitalization episode should include time
post-discharge (e.g., 30 days).
With the bundle extending across providers, providers would
not only be motivated to
contain their own costs but also have a financial incentive to
better collaborate with their
partners to improve their collective performance. Providers
involved in the episode could
develop new ways to allocate this payment among themselves.
69. Ideally, this flexibility gives
providers a greater incentive to work together and to be mindful
of the impact their service
use has on the overall quality of care, the volume of services
provided, and the cost of
providing each service. In the early 1990s, Medicare conducted
a successful demonstration of
a combined physician–hospital payment for coronary artery
bypass graft admissions,
showing that costs per admission could be reduced without
lowering quality.
The Commission recommends that CMS conduct a voluntary
pilot program to test bundled
payment for all services around a hospitalization for select
conditions. Candidate conditions
might be those with high costs and high volumes. This pilot
program would be concurrent
with information dissemination and a change in payment for
high rates of readmissions.
Bundled payment raises a wide set of implementation issues. It
requires not only that
Medicare create a new payment rate for a bundle of services but
also that providers decide
how they will share the payment and what behavior they will
70. reward. A pilot allows CMS to
resolve the attendant design and implementation issues, while
giving providers who are ready
the chance to start receiving a bundled payment.
The objective of the pilot should be to determine whether
bundled payment for all covered
services under Part A and Part B associated with a
hospitalization episode (e.g., the stay plus
30 days) improves coordination of care, reduces the incentive
for providers to furnish
services of low value, improves providers’ efficiency, and
reduces Medicare spending while
not otherwise adversely affecting the quality of care. The pilot
should begin applying
payment changes to only a selected set of medical conditions.
13
Conclusion
The process of reform should begin as soon as possible; reform
will take many years and
Medicare’s financial sustainability is deteriorating. That
deterioration can be traced in part to
the dysfunctional delivery system that the current payment
71. systems have helped to create.
Those payment systems must be fundamentally reformed, and
the recommendations we have
made are a first step on that path. They are, however, only a
first step; they fall far short of
being a “solution” for Medicare’s long-term challenges.
MedPAC has begun to consider
other options, such as accountable care organizations (ACOs).
In addition, MedPAC will
consider steps to alter the process by which payment reforms
are developed and
implemented, with the goals of accelerating that process. I
thank the Committee for its
attention, and look forward to working with you to reform
Medicare’s payment systems and
help bring the health care delivery system into the 21st century.
14
APPENDIX
The Case For Fundamental Change
The Medicare program should provide its beneficiaries with
access to appropriate, high
72. quality care while spending the money entrusted to it by the
taxpayers as carefully as
possible. But too often that goal is not being realized, and we
see evidence of poor-quality
care and spending growth that threatens the program’s fiscal
sustainability.
Poor quality
Many studies show serious quality problems in the American
health care system. McGlynn
found that participants received about half of the recommended
care (McGlynn et al. 2003).
Schoen found wide variation across states in hospital
admissions for ambulatory-care-
sensitive conditions (i.e., admissions that are potentially
preventable with improved
ambulatory care) (Schoen et al 2006). In Crossing the Quality
Chasm, the Institute of
Medicine pointed out serious shortcomings in quality of care
and the absence of real progress
toward restructuring heath care systems to address both quality
and cost concerns (IOM
2001).
At the same time that Americans are not receiving enough of the
recommended care, the care
73. they are receiving may not be appropriate. For 30 years,
researchers at Dartmouth’s Center
for the Evaluative Clinical Sciences have documented the wide
variation across the United
States in Medicare spending and rates of service use (Figure 1).
Most of this variation is not
driven by differences in the payment rates across the country
but instead by the use of
services. Dartmouth finds most of the variation is caused by
differing rates of use for supply-
sensitive services—that is, services whose use is likely driven
by a geographic area’s supply
of specialists and technology (Wennberg et al. 2002). Areas
with higher ratios of specialty
care to primary care physicians also show higher use of
services.
15
Figure 1. Total Medicare spending by Hospital Referral Region
Source: Dartmouth Atlas of Health Care, 2005 Medicare claims
74. data.
The higher rates of use are often not associated with better
outcomes or quality and instead
suggest inefficiencies. In fact, a recent analysis by Davis and
Schoen shows at the state
level that no relationship exists between health care spending
per capita and mortality
amenable to medical care, that an inverse relationship exists
between spending and
rankings on quality of care, and that high correlations exist
between spending and both
preventable hospitalizations and hospitalizations for
ambulatory-care-sensitive conditions
(Davis and Schoen 2007). These findings point to inefficient
spending patterns and
opportunities for improvement.
Sustainability concerns
This inefficiency costs the federal government many billions of
dollars each year,
expenditures we can ill afford. The share of the nation’s GDP
committed to Medicare is
75. projected to grow to unprecedented levels, squeezing other
priorities in the federal budget
(Figure 2). For example, the Supplementary Medical Insurance
Trust Fund (which covers
outpatient and physician services, and prescription drugs) is
financed automatically with
general revenues and beneficiary premiums, but the trustees
point out that financing from the
$8,560 to $14,360
$7,830 to $8,560
$7,190 to $7,830
$6,640 to $7,190
$5,280 to $6,640
16
federal government’s general fund, which is funded primarily
through income taxes, would
have to increase sharply to match the expected growth in
spending.
In addition, expenditures from the Hospital Insurance (HI) trust
fund, which funds inpatient
stays and other post-acute care, exceeded its annual income
from taxes in 2008. In their most
recent report, the Medicare trustees project that, under
intermediate assumptions, the assets
76. of the HI trust fund will be exhausted in 2019. Income from
payroll taxes collected in that
year would cover 78 percent of projected benefit expenditures.
(The recent downturn in the
economy is expected to move the HI exhaustion date closer by
one to three years in the next
Trustees’ Report (BNA 2009).)
Figure 2. Medicare faces serious challenges with long-term
financing
0%
2%
4%
6%
8%
10%
12%
1966 1976 1986 1996 2006 2016 2026 2036 2046 2056 2066
2076
P
er
77. ce
nt
o
f G
D
P
Payroll taxes
Tax on benefits
Premiums
General revenue
t f
State transfers
Total expenditures
Actual Projected
HI deficit
Note: GDP (gross domestic product), HI (Hospital Insurance).
These projections are based on the trustees’ intermediate
set of assumptions. Tax on benefits refers to a portion of
income taxes that higher income individuals pay on Social
Security benefits that is designated for Medicare. State transfers
(often called the Part D “clawback”) refer to
payments called for within the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 from the
states to Medicare for assuming primary responsibility for
78. prescription drug spending.
Source: 2008 Annual Report of the Boards of Trustees of the
Medicare Trust Funds.
17
Rapid growth in Medicare spending has implications for
beneficiaries and taxpayers.
Between 2000 and 2007, Medicare beneficiaries faced average
annual increases in the Part B
premium of nearly 9.8 percent. Meanwhile, monthly Social
Security benefits grew by about 4
percent annually over the same period. The average cost of SMI
premiums and cost sharing
for Part B and Part D absorbs about 26 percent of Social
Security benefits. Growth in
Medicare premiums and cost sharing will continue to absorb an
increasing share of Social
Security income. At the same time, Medicare’s lack of a
catastrophic cap on cost sharing
will continue to represent a financial risk for beneficiaries.
Almost 60 percent of beneficiaries
79. (or their former employers) now buy supplemental coverage to
help offset this risk and
Medicare’s cost sharing.
Barriers to achieving value in Medicare
Many of the barriers that prevent Medicare from improving
quality and controlling costs—
obtaining better value—stem from the incentives in Medicare’s
payment systems. Medicare’s
payment systems are primarily fee-for-service (FFS). That is,
Medicare pays for each service
delivered to a beneficiary by a provider meeting the conditions
of participation for the
program. FFS payment systems reward providers who increase
the volume of services they
provide regardless of the benefit of the service. As discussed
earlier, the volume of services
per beneficiary varies widely across the country, but areas with
higher volume do not have
better outcomes. FFS systems are not designed to reward higher
quality; payments are not
increased if quality improves and in some cases may increase in
response to low-quality care.
For example, some hospital readmissions may be a result of
poor-quality care and currently
80. those readmissions are fully paid for by Medicare.
While this testimony focuses on changes to Medicare FFS
payment systems that would
encourage delivery system reform, the payment system for
Medicare Advantage (MA) plans
also needs reform, as we have previously reported. In
aggregate, the MA program continues
to be more costly than the traditional program. Plan bids for the
traditional Medicare benefit
package average 102 percent of FFS in 2009, compared with
101 percent of FFS in 2008. In
2009, MA payments per enrollee are projected to be 114 percent
of comparable FFS
spending for 2009, compared with 113 percent in 2008. Many
MA plans have not changed
18
the way care is delivered and often function much like the
Medicare FFS program. High MA
payments provide a signal to plans that the Medicare program is
willing to pay more for the
same services in MA than it does in FFS. Similarly, these
higher payments signal to
81. beneficiaries that they should join MA plans because they offer
richer benefits, albeit
financed by taxpayer dollars. This is inconsistent with
MedPAC’s position supporting
financial neutrality between FFS and MA. To encourage
efficiency across the Medicare
program, Medicare needs to exert comparable and consistent
financial pressure on both the
FFS and MA programs, coupled with meaningful quality
measurement and pay-for-
performance (P4P) programs, to maximize the value it receives
for the dollars it spends.
MedPAC has identified five specific problems that make it
difficult for Medicare to achieve
its goals: lack of fiscal pressure, price distortion, lack of
accountability, lack of care
coordination, and lack of information. These are discussed
below.
Lack of fiscal pressure. Medicare payment policies ought to
exert fiscal pressure on
providers. In a fully competitive market, this happens
automatically through the “invisible
hand” of competition. Under Medicare’s administered price
systems, however, the Congress
82. must exert this pressure by limiting updates to Medicare rates—
or even reducing base rates
in some instances (e.g., home health). MedPAC’s research
shows that provider costs are not
immutable; they vary according to how much pressure is applied
on rates. Providers under
significant cost pressure have lower costs than those under less
pressure. Moreover,
MedPAC research demonstrates that providers can provide high-
quality care even while
maintaining much lower costs.
Our analysis shows that in 2007 hospitals under low financial
pressure in the prior years had
higher standardized costs per discharge ($6,400) than hospitals
under high financial pressure
($5,800). Over time, aggregate hospital cost growth has moved
in parallel with margins on
private-payer patients. Due to managed care restraining
private-payer payment rates in the
1990s, hospitals’ rate of cost growth in that period was below
input price inflation. However,
from 2001 through 2007, after profits from private payers
increased, hospitals’ rate of cost
growth was higher than the rate of increase in the market basket
83. of input prices. All things
being equal, increases in providers’ costs will result in lower
Medicare margins. We also
19
found that hospitals with the highest private payments and most
robust non-Medicare sources
of revenues have lower Medicare margins (–11.7 percent) than
hospitals under greater fiscal
pressure (4.2 percent).
Price distortion. Within Medicare’s payment systems, the
payment rates for individual
products and services may not be accurate. Inaccurate payment
rates in Medicare’s payment
systems can lead to unduly disadvantaging some providers and
unintentionally rewarding
others. For example, under the physician fee schedule, fees are
relatively low for primary
care and may be too high for specialty care and procedures.
This payment system bias has
signaled to physicians that they will be more generously paid
for procedures and specialty
care, and signals providers to generate more volume. In turn,
84. these signals could influence
the supply of providers, resulting in oversupply of specialized
services and inadequate
numbers of primary care providers. In fact, the share of U.S.
medical school graduates
entering primary care residency programs has declined in the
last decade, and internal
medicine residents are increasingly choosing to sub-specialize
rather than practice as
generalists.
Lack of accountability. Providers may provide quality care to
uphold professional standards
and to have satisfied patients, but Medicare does not hold them
accountable for the quality of
care they provide. Moreover, providers are not accountable for
the full spectrum of care a
beneficiary may use, even when they make the referrals that
dictate resource use. For
example, physicians ordering tests or hospital discharge
planners recommending post-acute
care do not have to consider the quality outcomes or the
financial implications of the care
that other providers may furnish. This fragmentation of care
puts quality of care and
85. efficiency at risk.
Lack of care coordination. Growing out of the lack of
accountability, there is no incentive for
providers to coordinate care. Each provider may treat one aspect
of a patient’s care without
regard to what other providers are doing. There is a focus on
procedures and services rather
than on the beneficiary’s total needs. This becomes a particular
problem for beneficiaries
with several chronic conditions and for those transitioning
between care providers, such as at
20
hospital discharge. Poorly coordinated care may result in patient
confusion, over-treatment,
duplicative service use, higher spending, and lower quality of
care.
Lack of information and the tools to use it. Medicare and its
providers lack the information and
tools needed to improve quality and use program resources
efficiently. For example, Medicare
lacks quality data from many settings of care, does not have
timely cost or market data to set
86. accurate prices, and does not generally provide feedback on
resource use or quality scores to
providers. Individually, providers may have clinical data, but
they may not have that data in
electronic form, leaving them without an efficient means to
process it or an ability to act on it.
Crucial information on clinical effectiveness and standards of
care either may not exist or may not
have wide acceptance. In this environment, it is difficult to
determine what health care treatments
and procedures are needed, and thus what resource use is
appropriate, particularly for Medicare
patients, many of whom have multiple comorbidities. In
addition, beneficiaries are now being
called on to make complex choices among delivery systems,
drug plans, and providers. But
information for beneficiaries that could help them choose higher
quality providers and improve
their satisfaction is just beginning to become available.
21
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