Critical Care Plus: Re-Engineering Reimbursement Would Improve Outcomes, Experts Say
September 1, 2002 6 minutes read
Lack of economic component seen as dysfunctional
By Julie Crawshaw, CRC Plus Editor
Physicians and hospitals are not receiving an economic incentive to produce outstanding patient health outcomes, according to Mark A. Cwiek, J.D., MHA, FACHE, associate professor in the School of Health Sciences, College of Health Professions at Central Michigan University in Mount Pleasant.
Not only are current reimbursement practices flawed, they’re downright dysfunctional when viewed from a policy perspective, Cwiek says. "There is now no particular economic incentive for doing the right thing," Cwiek says. "You could go to three doctors with the same condition—one could be brilliant, one average and one below average—and they will all receive the same reimbursement."
Cwiek and fellow researcher Gerald R. Ledlow recommend that the American Medicare and Medicaid insurance programs take a page from the incentive-based German national system, a move they say would improve outcomes and achieve U.S. national health goals. "Providers cannot stay in business long when they aren’t being reimbursed for the cost of services," says Cwiek. "What we propose is actually paying more in the short-term to providers and to be able to negotiate their reimbursement rates."
Cwiek isn’t talking about cutting back on existing payments, but about building additional financial incentives. For example, he points out that state administrators could decide to bring down the rate of a particular illness, use a base reimbursement rate, and pay incrementally more for increased success, all of which would be negotiated on the front end. "We need to be on the very positive side of the spectrum, improving systems and rewarding excellent outcomes," Cwiek says.
Time for a Macro Approach
Such re-engineering requires both a macro approach and a certain degree of involvement and cooperative spirit to make it work, Cwiek acknowledges. However, the concept applies equally to a comparatively small system like an HMO and to the huge Medicare system. It’s about setting goals and figuring out how to provide positive incentives for providers to do the right thing, Cwiek says, then measuring it and developing a report card to let people know how they’re doing.
"You have to go to where payment comes from and then look at what stimulates policy," Cwiek says. "If the mandate comes from on high, wonderful things could start happening. Wouldn’t it be wonderful to get the policy wonks in Washington to look at this?"
Testing how well the German system could work here could be as simple as policy-makers choosing three things to accomplish over the next three-to-five years, Cwiek says, and finding a way to pay providers for accomplishing them. He points out that this doesn’t have to be as dramatic as demonstrating that one hospital’s patients are 20% better off than patients at other facilities. "We could even pay providers just for developing new internal systems," Cwiek says, such as linking information from urgent care facilities to local hospitals so that when a patient enters the ICU a week after being seen in an urgent care facility, ICU clinicians have immediate access to the urgent care records. "Develop those kinds of concepts at a macro level," Cwiek advises. "It can be done. The Germans are doing it now."
Community Agencies, Volunteer Spirit not Enough
Though well-defined national health care goals exist, implementing them is left to community health agencies and the volunteer spirit, Cwiek says, and this isn’t getting the job done. "We’re not purposely incentivizing physicians and hospitals to do better," Cwiek says, adding that the federal government must take a leading role. "If I could do just one thing, it would be to sit down with Tommy Thompson [secretary of the Department of Health and Human Services] and explain these principles."
A former hospital CEO, Cwiek worked in administration for 15 years before entering academia. He points to the success of the German system, in which providers, insurers, and government negotiate base rates for health services in 2-4 year cycles. Each coded’ health care service has a base rate set and agreed upon by all parties. Base rates are published along with the weighted average (1.0 through 9.0) that the provider can charge. For example, with a base rate of 1.0 the provider can charge 2.5 or higher if the patient has private insurance, has documented/justified higher acuity, or is more time consuming.
Judging only by the percentage of gross domestic product paid for health care, the US medical system is the most expensive in the world, Cwiek says. A large part of the reason health care is so expensive here is that the U.S. leads the world in technology development, pharmaceuticals and surgical procedures. "That usually gets to the tertiary level of care, not primary care or wellness," Cwiek says.
In dollars that go for the kinds of public health initiatives that could reduce the eventual number of critical care patients, the U.S. is at the low end of the spectrum. "We pay more but our mortality and morbidity or death and quality of life are not as good as many other countries."
Cwiek and Ledlow say the new Medicare and Medicaid Incentive Payment Model they advocate1 would:
- Be parsimonious;
- Be systematic and rational;
- Offer incentives for targeted areas based on economic, health measures, and forecasted dimensions;
- Allow for regional fluctuation using existing health referral regions and health service areas;
- Be inclusive. Providers, insurers, accrediting bodies, employers, patients, and the government should collaborate and problem solve in a systematic way to reach national healthcare and health related goals;
- Be measurable, forecastable,’ and trendable.’In other words, measures must achieve a strong level of validity and reliability and must be anchored in simple yet reality-based terms;
- Be mutually beneficial to the patient, provider, insurer, and taxpayer;
- Assure a method to budget forecast and plan well into the future; and
- Be sensitive to state/regional jurisdictional issues and political pressures.
Cwiek and Ledlow say that what they propose can be done anywhere. Cwiek notes that a physician-hospital organization could easily discover an HMO’s most important goals and negotiate for incentives to accomplish them beyond a capitated payment or discounted fee for service. "Doctors and hospitals are getting beaten up with discounting," he says. "Turn it around—what positive incentives can be built in when aspirations and goals are met?"
Cwiek and Ledlow suggest that stakeholders involved in negotiating base rates of payment and reimbursement every two or three years would be:
- Providers (including but not limited to representatives from the American Medical Association, American Osteopathic Association, American Hospital Association, long-term care, home care, medical laboratory, pharmaceuticals, etc. . .);
- Insurers (including but not limited to representatives from the Health Insurance Association of America);
- Employers (perhaps comprised of rotating membership from the top [non-self insured] 100 US employers where 7-9 member panel serves on rotating basis) and the National Chamber of Commerce;
- Patients (7- 9 member panel representing patients from advocacy groups, academia, etc. appointed by the President, approved by House of Representatives);
- Accreditation bodies (including but not limited to representatives from the National Committee for Quality Assurance, the Joint Commission on Accreditation of Healthcare Organizations and the Utilization Review Accreditation Committee); and
- Government (including but not limited to representatives from the National Institutes of Health, the U.S. Department of Health and Human Services, Medicare, the National Association of Insurance Commissioners, and the National Association of Attorneys General).
- For any incentive re-engineering to succeed, Cwiek notes, physicians must apply pressure to the powers that keep the current system in place. "Physicians think primarily as advocates for their patients," he says. "Unfortunately, in this world of managed care they are being forced to think in terms of social justice, which is a different ethical model. Now, it’s represent your patients and the system." (Contact Information: Mark Cwiek [989] 774-1338.)
Reference
1. Ledlow, G, Cwiek, M. Medicare & Medicaid Reimbursement: Systematic Alignment of Incentives to Support National Health Goals. Global Business and Technology Association, Annual Conference Proceeding, Istambul, Turkey, July 2001.
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