Value-Based Payment: The Rush is On!

The most opportune time to jump off a bandwagon is just before the next person jumping on tips it over. If the accelerating movement toward value-based payment (VBP) models in healthcare could be metaphorically thought of as a bandwagon, then its passenger weight increased dramatically this week with two major announcements.

First, on Monday HHS Secretary Slyvia Burwell announced that within four years half of all Medicare spending will be VPB oriented (e.g., bundled payments, ACOs, capitation models). Then yesterday several of the country’s largest healthcare systems and insurers announced the creation of a Health Care Transformation Task Force whose stated goal is to shift 75% of their business to VBP type contracts by 2020 (as in 5 years).

I have been an acknowledged student and disciple of Michael Porter’s work on value in healthcare and have written about that subject here in the past. Porter and colleague Elizabeth Teisberg wrote the seminal work, Redefining Healthcare, which buttresses much of the practical theory that has been espoused in support of VBP. In my study, however, I came to believe the underlying structural challenges of our current delivery system would take a great deal of time and effort to overcome before value could work the magic as intended. And so when I read these two announcements I had to wonder whether fools are rushing in where angels fear to tread.

In other words, it’s not the direction of the bandwagon I find concerning but the pace of acceleration. There is so much unknown and so much to be learned regarding the organizational dynamics of healthcare delivery that putting deadlines on the pace of that knowledge-building is pure folly. To illustrate, let’s just look at Porter’s strategic agenda for creating a value-based healthcare delivery system and consider each in context of what we are witnessing today.

1. Organize care into integrated patient units around patient medical conditions.
Porter has travelled the world lecturing and observing healthcare delivery systems in other countries. He provides examples of structural reorganization for patient conditions (e.g., the West German Headache Center) that have achieved substantial improvements in patient outcomes at lower cost. The concept isn’t entirely new (e.g., MD Anderson Cancer Center reorganized its outpatient care services in the early 90s under the auspices of an IPU), but still rather rare and so not very well understood.

2. Measure outcomes and cost for every patient.
Another way of saying this is be able to measure cost and quality/satisfaction at the patient level. This is without a doubt the most difficult and controversial aspect of Porter’s agenda.
In June of last year I wrote a post that addresses the inherent subjectivity of patient outcomes and its impact on the value equation. If this cannot be worked out in a manner and fashion that achieves broad understanding and acceptance across patients, providers and insurers – well, see bandwagon discussion above.

3. Reimburse through bundled prices for care cycles.
When Porter talks of bundling his focus is on tying the bundle definition to the value achieved on behalf of the patient – e.g., the patient’s experience, impact on family, lifestyle functionality, etc. What I hear about mostly are efforts to define, articulate and divide up processes and procedures related to a diagnosis and/or condition, put some probability bookends around that understanding and then compare projected average payment to cost. The ability of value to be successful as a catalyst for aligning incentives has already been lost because the focus is on process – not the patient.

4. Integrate care delivery across separate facilities
The many challenges of integrated clinical care notwithstanding, improved performance through specialization is really the key concept here. Research has shown that volume in a particular medical condition is positively correlated with patient value. This runs counter to the notion that all healthcare is local. While every day we culturally become more comfortable with this notion – e.g., international medical tourism – there are still substantial social and political obstacles to overcome.

5. Expand areas of excellence across geography
We are seeing systems like the Cleveland Clinic, Geisinger and the Mayo Clinic exporting their knowledge and expertise across geographies. But the expansion has been primarily revenue-driven (relatively more patients with the financial ability to afford services). If value is to be the driver of alignment, then eventually those organizations will also have to demonstrate how knowledge exporting not only improves outcomes at the local level but also lowers costs (much harder to achieve).

6. Build an enabling information technology platform
Hoo boy, right? The challenge here, of course as I have written before, is properly utilizing IT to facilitate and enhance the productive value of human processes. If the underlying organizational structure and processes aren’t in alignment with the goals and objectives manifested through the five agenda items above, then all we will be doing is automating a system that we said we wanted to change.

I realize some of these concepts are above my pay grade, and I continue to believe the value concept – Patient Outcomes/Cost – is the key fundamental principle of structural system reorganization. But when I step back and compare the payment and care delivery models being pursued in the name of “value” against the strategic agenda that Porter laid out I worry greatly that we are not willing or prepared to take the time or effort to understand and address fundamental areas of concern.

It’s like building a pyramid. The more time you take to create a solid and expansive foundation, the higher you will ultimately be able to build. As much as I have supported the value driving structural change paradigm I would encourage all industry stakeholders and participants to be both pragmatic and cautious in advancing on VBP models. Take the time to observe, learn and adjust – and don’t let your timeline be driven by outside sources with no vested interest in your organization – or your patients!

  ~ Sparky

ACOs, Innovation and Edison

070209_edison_bulbUnited Healthcare announced this week that it will double to $50 billion annually over the next five years the value of contracts it has with doctors and hospitals based on quality and outcome measures. United is currently paying over $20 billion annually to doctors, hospitals and ancillary care providers under contractual arrangements based on value produced (i.e., quality outcomes over cost).

United’s Chief Medical Officer, Dr. Sam Ho, notes that “any bonuses will have to be earned and no longer a product of turning a page on a calendar – this is not a passing fancy for us. The United Healthcare strategy basically has expanded the accountable care concept to an accountable care platform.” Beyond just the symbolic importance, United has the largest provider network in the U.S. and already has accountable care relationships in place with over than 575 hospitals, 1,100 medical groups and 75,000 physicians.

Now, the glass-half-empty folks in healthcare are going to look at this move by United as somewhere between tyrannical, prehensile or just plain foolish, depending on individual perception, as well as position. They will argue this is just another example of non-provider influences in healthcare stealing more power from the patient. They will remind us again how HMOs failed and that ACOs are but profiteering wolves clothed in retrofitted HMO attire.

Of the two most significant challenges that ACOs face, creating financial incentives that are theoretically aligned with less care instead of more is certainly reminiscent of managed care circa 1990s – and it is a risk that must be aggressively monitored and mitigated. The other primary challenge – the inherent subjectivity of measuring patient outcomes – will have a dramatic impact on many areas of future healthcare delivery, not just provider networks and insurance contracting. It’s a challenge that will have to be effectively addressed if we ever have any hope of increasing access without bankrupting the country.

I think there are two ways to look at these challenges: in the context of the past where abundant evidence of failure exists – or in the future, where evidence of failure has not yet been created. There is a critically important difference between the two. The former is the world of intellects and philosophers, while the latter is the world of innovators and entrepreneurs. Case in point: Thomas Edison.

In failing continually to invent the light bulb Edison once remarked, “I have not failed. I’ve just found 10,000 ways that won’t work.” In similar fashion he once said, “negative results are just what I want. They’re just as valuable to me as positive results. I can never find the thing that does the job best until I find the ones that don’t.

I am not suggesting that unbridled experimentation is either wise nor prudent when the results impact human lives. But I also choose to resist the defeatist attitude among folks who become overly dependent upon history as a means of defining the future. While those who fail to learn from the past may be damned to repeat it – those who live in the past are damned to avoid innovation for fear of failure.

The underlying premise of the ACO model – financial reward for keeping people healthy, rather than reimbursement of costs for trying to make sick people well – represents a dramatic paradigm shift in thinking for this country that transcends all aspects of healthcare delivery. We should not expect it to be widely embraced in the short run. We should rightly expect a healthy amount of skepticism. And we shouldn’t be shocked if the model fails.

Those allowances, however, should not be permitted to thwart progress toward achieving expanded access to quality care, particularly for the least fortunate among us. If the failures of the past weighed most heavy on the efforts to define the future, we should not have to worry about how to make quality care available because there never would have been the advances achieved worth making available. Edison also once said that, “the doctor of the future will give no medication, but will interest his patients in the care of the human frame, diet and in the cause and prevention of disease. ~

Will he be right?