Payment model finds avoidable complications
September 1, 2008
Payment model finds avoidable complications
An experimental payment system modeled for heart attack and diabetes demonstrates potentially avoidable complications are significantly inflating health care costs. Researchers using the evidence-informed case rate (ECR) model developed by Prometheus Payment estimate that the total cost of all potentially avoidable complications across U.S. patients could exceed one-half trillion dollars per year. Thus, they say, significantly reducing the number of potentially avoidable complications could transform delivery of care in America, the ability to provide coverage to the uninsured, and the economics of the delivery system.
ECRs combine global fees with an allowance for complications and performance incentives. When researchers modeled ECRs for heart attack and diabetes, they found that under fee-for-service payments, some 30% of heart attack payments and 60% of diabetes care payments are for potentially avoidable complications.
Under ECRs, providers receive a risk-adjusted payment to care for a patient diagnosed with a specific condition across inpatient and outpatient settings. Payment amounts are based on the resources needed to provide care as recommended in well-accepted clinical guidelines.
Prometheus Payment first assembled clinical working groups to develop the first layer of ECRs in specific clinical areas including cancer care, chronic care, interventional cardiology, and orthopedic care. In the last 18 months, the effort has shifted to modeling ECRs to determine the extent to which a fully priced episode of care can be assembled in a way that distinguishes between the different types of risks embedded in the total cost of health care. In particular, they sought to separate probability risk from technical risk.
Lead author François De Brantes, CEO of Bridges to Excellence, says probability risk, the classic form of insurance risk, is caused by the likelihood of a negative event occurring to a patient as a result of his or her genes, health status, and any external event not controllable by the provider, such as contracting a virus or breaking a leg. In the ECR model, insurers bear full financial responsibility for probability risk.
Providers can control technical risk
By contrast, technical risk is related to "care production." Providers can control technical risk as a result of their clinical skills. In the payment model, the negative consequences of a technical risk are defined as potentially avoidable complications.
Examples of potentially avoidable complications among heart attack patients admitted to a hospital are urinary tract infections, graft complications, phlebitis, and strokes. Both the Centers for Medicare & Medicaid Services and WellPoint have said they will no longer pay for some potentially avoidable complications.
ECRs separate technical risk from probability risk to hold doctors accountable for technical risk but not for probability risk. As a result, in the model providers carry some financial risk for patient outcomes that are the result of poor quality care. While providers may argue that some potentially avoidable outcomes are not under their control, but rather are controlled by another provider, Mr. De Brantes says ECRs' goal is to pay for care across the continuum, creating collective responsibility for managing a patient's condition.
In the modeling for heart attack, the researchers found that on average, potentially avoidable complications add nearly $17,000 in health care costs per case. They include infections and routine complications from medical care incurred in hospitals as well as avoidable complications specific to treating a heart attack in a hospital, such as hemorrhage or complications from a graft or implanted device. The costs of these complications vary from a few thousand dollars for an allergic reaction to medication to tens of thousands of dollars for hemorrhage. Under the current payment system, all those costs end up in the hospital and professional claims charged to payers.
Readmissions to the hospital within 30 days for causes related to the prior heart attack double the cost of the original case. Overall, the readmission rate was 10% and the total cost of readmissions was some 9% of the total cost for all heart attacks. So the researchers conclude that significantly reducing readmissions would have an important impact on the total care costs.
'Added burden'
"Based on our study," Mr. De Brantes says, "the total cost of all potentially avoidable complications and readmissions is significant, representing 30% of the total cost of all heart attacksa considerable added burden for payers."
The results of the diabetes modeling found that while the total average cost for all patients with diabetes is $6,000 per year, the annual cost for typical care is only half that amount. The total burden of potentially avoidable complications is some 60% of the overall costs of diabetes care.
Additionally, the researchers say, the relative severity of a patient's condition has a significant impact on the base episode cost, making it important to modify base costs according to the severity of illness as well as demographic factors.
The report says evidence-informed case rates would create incentives for providers to improve care and avoid complications. The authors say a transition model is necessary to move the health care delivery system from the fee-for-service payment system to the kind of completely transparent pricing system that Pennsylvania's Geisinger Health System has experimented with since mid-2007. (Geisinger provides a 90-day warranty for any complications that occur as a result of elective cardiac bypass surgeries. Under the program, a single bypass surgery price covers any preoperative and operative expenses as well as postoperative expenses incurred up to 90 days after the surgery.)
Mr. De Brantes says ECRs have the potential to facilitate such a transition by combining payment for a core set of evidence-informed services, adjusted for severity, with an explicit profit margin and an allowance for potentially avoidable complications.
Incentive for doctors and hospitals
The allowance, based on currently observed rates of such complications, would create an incentive for doctors and hospitals to work together to reduce the rate of potentially avoidable complications, he says.
For payment reform to work, Mr. De Brantes says, providers need to first acknowledge that the current health care delivery process results in unacceptably high levels of potentially avoidable complications. They also must take steps to make care safer and more reliable. And health care purchasers must acknowledge that fee-for-service payments are paying for errors that hurt the plan members they cover.
"Evidence-informed case rates offer a solid foundation on which to build payment reform," he says. "Such reform will encounter resistance, because every potentially avoidable complication is a revenue stream for someone in the health care industry. Still, this payment model would encourage delivery of care based on the best clinical evidence; reduce the misuse, overuse, and underuse of services; and offer incentives for providers to focus on making care safe, reliable, and effective for all patients."
Download the modeling report at http://www.commonwealthfund.org/publications/publications_show.htm?doc_id=689893. Contact Mr. De Brantes by e-mailing [email protected].
An experimental payment system modeled for heart attack and diabetes demonstrates potentially avoidable complications are significantly inflating health care costs.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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