Observation Deck: Time to rethink conventional wisdom

How many times have we heard that:

  • The fee-for-service system is bankrupting our healthcare system, and maybe our country?
  • Fee-for-service leads to overutilization of services – too much diagnostic testing, too many procedures, too many redundant visits, too much wasted time – with no improvement in patient outcomes or community health?
  • Concepts such as chronic disease management, prevention, evidence-based medicine, coordination of care and shared risk-and-reward will lead to better patient outcomes at reduced costs?
  • Spending more money on healthcare doesn’t necessarily lead to better care…in fact, spending less often leads to better outcomes?

Given all this conventional wisdom, what were we to think when the government released a report in mid-January that appeared to contradict these “truths?”

The report I’m referring to is “Lessons from Medicare’s Demonstration Projects on Disease Management, Care Coordination and Value-Based Payment,” produced by the Congressional Budget Office (http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf). Now, the CBO isn’t a front for the Republican Party intent on discrediting everything Obama. It’s a nonpartisan agency designed to perform analyses to aid in economic and budgetary decisions on programs covered by the federal budget. About three-quarters of its professional staff hold advanced degrees, mostly in economics or public policy. Smart people.

So what did they find? They found that most of 10 major Medicare demonstration projects failed to reduce Medicare spending. Nor did these projects yield many improvements in the quality of care either.

The CBO examined two types of demonstration projects:

  • Disease management and care coordination programs, which seek to improve the quality of care of beneficiaries with chronic illnesses and those whose healthcare is expected to be particularly costly.
  • Value-based payment demonstrations, which offer providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

In nearly all of the disease management and care coordination demonstrations, CBO reported that spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program. It’s true that programs in which care managers had “substantial direct interaction” with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs. “But on average, even those programs did not achieve enough savings to offset their fees,” said the CBO.

Results of four demonstrations of value-based payment systems were mixed. In one of the four, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. But other demonstrations of value-based payment appear to have produced little or no savings for Medicare.

Well, nobody said revamping our healthcare system would be easy, Affordable Care Act or not. Ask the Clintons. With that in mind, the CBO report yielded some constructive findings. Let’s call them the “new truths.”

  • Programs that collected timely data on when their patients’ health problems developed or became exacerbated and where they were treated seemed better able to coordinate and manage their patients’ care.
  • Programs that smoothed transitions (for example, by providing additional education and support to patients moving from a hospital to a nursing facility or between a primary care provider and a specialist) tended to have fewer hospital admissions.
  • Demonstrations that provided close collaboration between care managers and physicians–especially those with larger teams that included pharmacists, who could help patients manage their medications–appeared to have fewer hospital admissions.
  • Programs that targeted interventions to beneficiaries they identified as being at the greatest risk of being hospitalized–on the basis of medical condition, prior hospitalization, or predictive modeling–appeared to have fewer hospital admissions.

“The results of those Medicare demonstrations suggest that substantial changes to payment and delivery systems will probably be necessary for programs involving disease management and care coordination or value-based payment to significantly reduce spending and either maintain or improve the quality of care provided to patients,” says CBO. That’s another way of saying, as an industry and a society, we have a lot of work ahead of us.

About the Author

Mark Thill
Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master's degree in journalism from Northwestern University in Evanston, Ill.

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