Izabella Iizuka

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 care tested a bundled-payment reimbursement arrangement for cardiac bypass surgery at four hospitals and was able to document savings. Provider pushback hampered further efforts, and the bundled payment concept died out. Until now.  

Experts worldwide are now recommending some type of bundled payment system that incorporates a pay-for-performance (P4P) component. However, as James Bentley, senior vice president for policy planning at the American Hospital Assn., said in the 

, "We've got to learn to walk before we can run."  

The 1990s CMS project was not a rousing success from the providers' point of view. Some hospitals that lost market share believed the government didn't promote the project sufficiently to drive the volume they wanted. Hospitals were able to reduce unnecessary testing and make generic substitutions while also reducing lengths of stay. According to CMS, quality directors at those facilities said that increased physician emphasis on avoiding complications was the primary cause for quality improvements.  

With memories of the failed capitation movement, participating providers were reluctant to adopt bundled-payment projects anytime soon, and the majority believed they should have received extra payments to cover the expense of implementing the new billing arrangements. 

Current P4P trends have renewed interest in bundled payment and other types of payment reform, but this time, payers are counting on widespread provider support now that P4P has become more mainstream. In fact, a 2007 Med-Vantage national study showed that in 2003, there were only 39 P4P programs, but that number grew to 148 by 2007. 

The new CMS Acute Care Episode (ACE) project, scheduled to begin January 1, 2009, will be conducted in Texas, Oklahoma, New Mexico and Colorado, although there will be only one demonstration site in each market during the program's first year. Rather than the usual separate payments for Part A and Part B, CMS will provide a single payment to hospitals and providers for 28 cardiac and nine orthopedic inpatient surgical services. Because the predetermined payment will be split between the hospital and physicians, Medicare hopes they will collaborate more closely to avoid complications and unnecessary procedures, thus preserving more of the payment for themselves. 

Should the program be successful, it doesn't mean that there will be a one-size-fits-all approach to bundling payments in the future, experts say. As long as the payment model is fair, understandable and takes provider concerns about risk into account, the system should naturally organize itself around the model to make it more effective and efficient. 

Best of all, it doesn't require a complete tear-down of the current system, according to Stephen Schoenbaum, MD, MPH, the Commonwealth Fund Commission's executive vice president of programs and executive director of the Commission on a High Performance Health System. 

"The structural elements that we need currently exist in our healthcare system, but we need them to be better organized," he says. "We don't want fragments of care, because that leads to fragmented payment. By bundling care and payments, we take one step closer to caring for the whole person." 

In August, the Commonwealth Fund Commission published "Organizing the U.S. Health Care Delivery System for High Performance." While the report focused on fragmentation of care, particularly at the community level, payment reform was one of its major recommendations.  

Ideally, the payments would bundle all related medical services, from initial hospitalization to a defined period post-hospitalization, including preventable rehospitalizations. Payments also would be risk-adjusted to avoid adverse patient selection. The report continues to say that P4P should be expanded and that the more bundled the payment mechanism, the greater the proportion of the payment should be tied to performance. 

The study revealed four significant findings: 				

However, Dr. Schoenbaum  acknowledges that if we build it, they still might not come. After providers' experience with capitation in the 1990s, the majority might still be gun-shy about assuming financial risk for providing care.  

"To encourage [a bundled payment system], we're going to need to give significant attention to the incentives that we offer providers," Dr. Schoenbaum says. "Anything that sounds remotely like capitation is going to cause them to say, 'We've been there. It was awful, and we aren't doing that again.'"  

To get provider buy-in, payers will need to reassure providers that their needs have been addressed. If insurers agree to pay providers fairly, and providers are given the freedom to organize themselves in a model that allows them to provide high-quality care, then "we can at least sit down at the table and start to figure out the details," he says. 

The healthcare payment model of the future might be named after a mythical story from the past. According to Greek mythology, the gods kept the secret of fire from mortals, but Prometheus-one of gods' archrival Titans-taught humanity how to create fire.  

True to its name, Prometheus Payment Inc., a not-for-profit corporation launched with a $6 million grant from the Robert Wood Johnson Foundation, was created to shed light on these dark days of healthcare payment reform. The model's moniker, PROMETHEUS, stands for Provider payment Reform for Outcomes, Margins, Evidence Transparency, Hassle reduction, Excellence, Understandability, and Sustainability.  

By creating common clinical incentives for all parties, the organization strives to improve quality, lower administrative costs and facilitate better clinical coordination. Its payment model is expected to create an environment where doing the right things for the patient helps providers and insurers do well for themselves. Pilot projects target lung and colon cancer through Stage III; three interventional cardiology diagnoses; knee and hip replacements; primary care of diabetes and depression; and preventive care. 

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CMS will begin demonstration projects to further test the promise of P4P by bundling payments for certain services as single case-rates

Bundled payments expected to reward providers

It would seem that any healthcare entity able to introduce lower costs and greater convenience would be welcomed with open arms, if not a genuine ticker-tape parade. Yet, walk-in retail clinics, new players built on low cost and convenience, are struggling to gain a national foothold, and experts aren't sure the new guy will even make it in the end.  

Many retail clinic chains have already gone under, including Health Stop, a venture-capitalized chain of walk-in clinics launched throughout the East and Midwest in the mid-1980s. Considered the originator of the current movement-which is now led by chains such as MinuteClinic, RediClinic and Take Care Health Systems-the Health Stop facilities were designed to care for patients with minor ailments who had no primary care physician or who needed night or weekend appointments. At its peak, the chain had more than 100 clinics and $50 million in annual revenue but dissolved after 10 years.  

Even the newest of these chains often find the going tough: Wellness Express, a San Ramon, Calif.-based company that opened its first clinic in April 2005, closed its four locations in November 2006.  

According to the University Of Michigan's Consumer Satisfaction Index, consumers are less satisfied with the provision of healthcare than they are with the U.S. Postal Service. One of the few things even lower on that list is consumer satisfaction with their health insurance. 

Consumer choice (in the form of health savings accounts and other CDHC options) and political pressure (in the form of employers and organizations such as the Leapfrog Group) are changing the rules.  

Although prices get most of the attention, some experts say that money isn't the primary driver of retail clinics' emergence. "When it comes to common, self-limited complaints such as earaches, sore throats, minor coughs, sprains and strains, both the insured and uninsured prefer the option of prompt walk-in visits rather than scheduled appointments that are delayed from the onset of symptoms," says Steven Goldberg, MD, corporate medical director, clinical policy for Louisville, Ky.-based Humana Inc. "Retail clinics often more clearly detail the complete cost of services and are located at sites that are more convenient to families."  

Several physician organizations, including the American Academy of Pediatrics, have opposed-or at least expressed concerns about-the growing number of retail clinics. Among their concerns are increased fragmentation of care, a lower quality of care, higher risk of contagion and the possibility that indications of more serious health issues will go unnoticed by nurse practitioners (NPs), who have replaced physicians as caregivers in many of the clinic chains.  

But others appear resigned to the fact that the clinics are here to stay. The American Academy of Family Physicians has encouraged its 94,000 members to adapt by expanding their office hours and accepting same-day appointments.  

Emotions are running high, but there is not much available as far as hard data and analysis of clinics' operations, says Margaret Laws, director of public financing and policy for the California Healthcare Foundation, which commissioned perhaps the most in-depth report available to date: "Health Care in the Express Lane: The Emergence of Retail Clinics," released in July 2006. 

"Part of the reason that there is so little empirical and analytical information on clinics is because they are still a work in progress," says Laws, who co-wrote the report. "Some employ physicians, others use NPs, and their list of services and prices sometimes vary as well. It's an emerging industry, so even the clinics themselves haven't all figured out what they want to be when they grow up." 

Wellness Express, when it closed its doors three months ago, needed between $5 million and $15 million to sustain its operations until it reached profitability, but wasn't able to raise the capital from equity or venture capital firms. And by some standards, that chain was doing well: of the 10,000 patients Wellness Express served, repeat customers accounted for approximately 44% of that total.  

It would seem that any healthcare entity able to introduce lower costs and greater convenience would be welcomed with open arms, if not a genuine ticker-tape parade. Yet, walk-in retail clinics, new players built on low cost and convenience, are struggling to gain a national foothold, and experts aren't sure the new guy will even make it in the end.

Retail ready: Is value enough to keep convenient retail clinics on a roll?

FOR YEARS, HEALTH PLANS have struggled to achieve one of their primary objectives: the ability to influence their members' healthcare habits and choices.  

The advent of disease management and, more recently, consumer-directed health plans (CDHPs) hasn't magically granted that ability, but it's definitely a step in that direction. The typical target is the chronically ill, since they make up a large part of the people who consume a disproportionate amount of healthcare resources. 

Only a little more than 40% of members have ever visited their health plan's Web site, according to Forrester Research, and only 5% of all commercially insured consumers who report a disease diagnosis go to their plan's Web site for information on how to manage their conditions.  

That's the position of Paula Sauer, vice president of care management for Cleveland-based Medical Mutual of Ohio, an editorial advisor for MANAGED HEALTHCARE EXECUTIVE. "On the chronic illness/DM front, we need more and better Web technology," she says. "Much of the cost of DM is the labor costs of putting nurses on the phone with people. If we can provide a convenient and secure way members can communicate with healthcare providers via the Internet, consumer confidence will go up and costs will go down." 

Biometrics is one area that health plans can explore today-and potentially reap tremendous benefits soon-with almost no additional effort from members, Sauer says.  

"People struggling with their weight might step on a scale every day, but they probably won't get on a computer or a phone to relay that information to their physicians. The technology exists to make that happen securely and automatically, and it meets both critical criteria for effectiveness: providers get better, more thorough information about their chronically ill members at a minimal cost, and consumers get convenience."  

Medical Mutual also uses the Internet for "marquee events" with respected partners that garner plenty of interest from its members.  

"We have a relationship with WebMD called 'WebMD University,' and twice a year we choose a topic to feature for our members," she says. "We make a lot of educational materials available and give our members the opportunity to go online and chat with a national expert." 

The next marquee event will focus on obesity, and one week after announcing it, more than 6,000 members had already signed up to participate. That's a strong indication that the consumerism movement is a fit with the evolution of disease management and the technology that supports it. 

Technology alone will never be a magic bullet for healthcare, because the human element can't be removed, says Ralph Prows, MD, chief medical officer for Regence Blue Cross Blue Shield of Oregon.  

"Technology will provide the tools people desperately need to manage their health, but that's all it can be-a tool," he says. "No amount of technology can do the job itself. Even on Star Trek, they still needed Dr. McCoy on board the Starship Enterprise." 

In spite of the uncertainty, consumer-directed healthcare (CDHC) experts largely agree on what needs to be done to support consumerism. A tentative three-tier game plan might look like this: 

For years, health plans have struggled to achieve one of their primary objectives: the ability to influence their members' healthcare habits and choices.

Izabella Iizuka

Articles

Bundled payments expected to reward providers

Retail ready: Is value enough to keep convenient retail clinics on a roll?

Tech tools reduce labor costs for DM programs