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The Connection Between Quality and Payment Reform- Why Should I Care?

There is a lot of information circulating through various channels these days about healthcare reform, Obamacare, quality improvement, and reducing the cost of care.  Unfortunately, most of those are filled with acronyms and are written in a way that can only be understood by people in the healthcare profession.  In order to help identify why consumers of healthcare should be interested in healthcare quality and payment programs, let’s first provide some background and definition around the Quality Payment Program.

Historically and still prevalent today, hospitals and physicians are paid based upon the number of services they provide and the number of patients that they see.  Despite these facilities and individuals being comprised of truly caring personalities, they are fundamentally incented based upon volume; the more patients they see the more they get paid.  That does not always promote quality services, but instead inadvertently promotes services that can be delivered to the highest number of patients in the shortest period of time.  Remember, this is a generalized statement describing behavior across a large industry and does not indicate that hospitals and physicians are inherently bad and uncaring institutions and people; they are generally quite the opposite.

In January 2015, the department of Health and Human Services (HHS) announced new goals and value-based payments and Alternate
Payment Models (APMs) for Medicare.  This announcement identified goals, and models to achieve the goals, that would result in payments made to hospitals and physicians for providing “quality” services, not just number of services.  This announcement also invited private payers,  insurance companies such as Aetna, BCBS, Cigna, and United, to match or exceed these goals.  A logical question at this time may be, “how is quality being defined?”.  This is best answered by providing a couple of quality measure examples:

  • Reduced hospital readmissions – this measure focuses on readmissions for patients who are readmitted to the hospital following historically proven high-cost procedures and conditions such as hip/knee replacement, coronary bypass, heart attack, and pneumonia. Readmission to the hospital within a certain period of time, typically 30 days, is an indicator that the clinical process may not have been as high-quality as it should have been.
  • Hospital acquired conditions – this is a measure focused on subsequent conditions acquired during a hospital stay such as sepsis, staph infection, or injury from a fall. Such acquired conditions are indicators of poor quality and lack of controls in process and procedure.

The next question typically is, “doesn’t higher quality imply higher cost?”.  When looked at across the entire delivery of care, the answer is “not necessarily”.  Take readmission examples:

Hospital Readmissions:  following are some statistics on the cost of readmission compared to the cost for the initial procedure:

  1. 1. Congestive heart failure (“Statistical Brief #142,” 2009 data) — The mean cost per CHF readmission is $13,000, with a 25.1 percent readmission rate. This is 118 percent the cost of an initial admission for CHF, which costs $11,000 on average
  2. 2. All-cause readmissions (“Statistical Brief #142,” 2009 data) The average cost of a readmission for any given cause is $11,200, with a 21.2 percent readmission rate
  3. 3. Heart attack (“Statistical Brief #140, 2009 data) — The average cost for a readmission after a heart attack is $13,200, with a 17.1 percent readmission rate. Costs vary with cause, ranging from an average of $7,600 (heart failure or shock, 13.4 percent) to $23,400 (scheduled angioplasty or bypass surgery, 11.8 percent). The average cost of a heart attack readmission is 64 percent the cost of an initial heart attack admission, which is $20,800 on average
  4. 4. Pneumonia (“Statistical Brief #142,” 2009 data) —The average cost of a pneumonia readmission is $13,000, with a 15.3 percent readmission rate. This is 135 percent the cost of an initial pneumonia admission, which averages $9,600
  5. 5. Joint Replacement (“Statistical Brief 142,” 2009 data) — The cost of a total hip replacement readmission averages $12,300, with an 8.2 percent readmission rate. An initial hip replacement admission averages $18,500. The cost of a total knee replacement readmission averages $10,200, with a 5.1 readmission rate. An initial knee replacement readmission averages $16,500

As demonstrated, the cost of the readmission in most cases is greater than the original admission cost and, minimally, doubles the overall cost of the case.  Therefore, logic indicates that getting it right the first time through improved quality does in fact reduce cost in most cases.

So, why should I care about these programs?  Making an informed decision about where to get care and from who, can very much be improved by identifying both an institution’s or physician’s engagement in these programs, and their quality and efficiency.  More and more sources are available to help with this research.  One such source is Medicare.gov Hospital Compare at, https://www.medicare.gov/hospitalcompare/search.html.  In addition, you can get insights by just asking your doctor about his or her  participation and performance relative to new quality measures.  Minimally, they will likely be impressed and more willing to share information since you have indicated to them that you are aware of such programs. These quality programs are important to you in terms of making informed decisions about where and from who you want to receive your healthcare services.

The HHS is continuing to demand proof of quality with increasingly greater impact to hospital and physician payments with a goal to have all payments value-based by 2022, with continued pressure on private payers to meet and exceed these same goals and timelines.  As is true in other industries, the value of these quality payment programs will be realized by the most informed consumers.

Source: (Becker’s, Infection Control and Clinical Quality)

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For more information, contact Alan Taylor at alan.taylor@infoworks-tn.com.