Designing a Health System for Good Behavior
Medicare’s name change from the Health Care Financing Administration (HCFA) to the Centers for Medicare & Medicaid Services (CMS) was meant to be more than simply a replacement of signage and stationary. It was meant to be a move to a new direction. A change from an organization that focused on writing over a billion dollars worth of checks daily (including weekends) for acute care to an organization that led the way to improved health outcomes. It is said that one gets the results that a system was designed to deliver. Clearly, the old Medicare was not designed to deliver superior health outcomes by virtue of being fragmented and siloed, paying on volume rather than outcomes. So, Medicare has changed the name and focus on quality outcomes.
Of course, it’s not just CMS that is at fault for a system that has failed to achieve the quality results that are being paid for. Providers and patients are also not clear of responsibility. Patients are failing to adhere to their treatment plans while continuing with habits that produce unhealthy results. Physicians and other healthcare providers also have a gap between the knowledge available and what they put into action. Clinical practice guidelines take years before they are implemented. Programs such as those for vaccination fall well short of their targeted rates. Additional preventive care programs that Medicare has recently made available, including diabetes and cholesterol screening, have failed to achieve appropriate utilization levels. So, while the system from CMS fails to be designed to produce quality results, the providers and patients also are failing to apply available information. This is a massive problem with several complex issues that require careful attention.
The Magnitude of the Problem
Our senior population is expected to double from 35 million to 70 million over the next 20 years while annual increases in medical costs continue. The increase in healthcare costs continues to warrant concern, as healthcare trends continue to outpace inflation. As our society ages, there is a natural increase in chronic diseases requiring additional treatments as compared to 10-20 years ago. This increase is due in part to not only the increasing number of seniors, but also an increase in per patient utilization, especially among those suffering from chronic comorbid conditions.
Drs. Thorpe and Howard1 discussed the impact of the rise in treated disease prevalence on the growth in Medicare beneficiaries’ healthcare spending. Virtually all of this spending growth is associated with patients who are under medical management for five or more conditions. This is traced to both a rise in true disease prevalence and changes in clinical treatment thresholds. Using the metabolic syndrome as a case study, we find that the share of patients treated with medications has increased 11.5 percentage points in less than 10 years. This raises important questions about the “fit” of how Medicare pays for and manages services for complex medical management.1
The current cost trend is declining, reinforcing a longer trend pattern of deceleration. A number of short- and long-term factors influence the deceleration in the medical cost trend. For 2008, PricewaterhouseCoopers research has identified those factors as:
• Slower spending growth for prescription drugs
• Increased transparency and cost sharing with employees
• Total-health-management approach to benefits
• Broadening of the digital backbone in healthcare2
All stakeholders bear responsibility for our failure in the areas of quality, access, and costs. Employers faced with an aging workforce and growing retiree healthcare burdens instead of developing systems are increasing burden to governments or unions. Managed care organizations have yet to realize the benefits inherent in a focus on improved health through increased preventive care as well as adherence and compliance. Providers have failed to utilize electronic systems such as health records and prescribing, while also lacking in the implementation of best practices. Pharmaceutical manufacturers are stuck competing in a market of commodities rather than highlighting the value of their products. And finally, consumers still have issues with regard to health literacy and personal health habits, failing to follow treatment protocols or follow healthy lifestyles.
These failures result in increased morbidity and mortality. The Centers for Disease Control and Prevention estimates that patients develop 1.7 million infections in hospitals each year, and it says that those infections cause or contribute to the deaths of 99,000 people a year—about 270 a day. Much of this morbidity and mortality could be prevented through improved vaccinations. Failures also contribute to increased hospitalizations from adverse drug events (ADEs). For example, why not cite that 36% of all hospital admissions for ADEs are for seniors, who comprise only 12% of the population, or that 28% of all hospital admissions of seniors are due to ADEs?
Knowledge is Power
A report from the Institute of Medicine (IOM) more than six years ago made an urgent call for fundamental change to close the quality gap. The IOM recommended a redesign of the American healthcare system, and provided overarching principles for specific direction for policymakers, healthcare leaders, clinicians, regulators, and purchasers, as well as patients and their caregivers.3
The report offered a set of performance expectations for the 21st century healthcare system, a set of 10 new rules to guide patient–clinician relationships, a suggested organizing framework to better align incentives inherent in payment and accountability with improvement in quality, and key steps to promote evidence-based practice and strengthen clinical information systems.
A basis of the recommendations is that knowledge needs to be disseminated and utilized by all stakeholders. As was noted, the broadening of the digital backbone in healthcare through the use of electronic health records, ePrescribing, telemedicine, and the Internet, which have already resulted in some improvements in our system, hold promise for additional benefits.
Albert Einstein defined insanity as “doing the same thing over and over again and expecting different results.” Currently, we are caught in a cycle of doing the same thing while expecting ever-improving results. Clearly, our system is in need of change.
From the CMS perspective, a movement to pay-for-performance from simply paying for volume-based acute care is in the works. The start was the Physician Quality Reporting Initiative, but additional programs are in the works, such as episodic case rates. Episodic case rate is a risk-sharing model that more appropriately creates goal alignment between the payer, the physician, and the patient. A global episodic case rate is a single price that covers the entire spectrum of costs, including technical and professional, associated with a given treatment over a defined period of time from a trigger event that starts it to a conclusion event. The episodic case rate also includes the cost of potential complications. So, if there are no complications or fewer complications, there are, in turn, savings. By creating a system that delivers efficient care with emphasis on decreased morbidity and complication, goal alignment exists between the patient, the physician, and the insurer. It is in all parties’ interest to efficiently treat patients and, most importantly, for them to do well.
In the same light, CMS is also looking to apply a similar payment model to hospitals. The Hospital Readmission Penalty would penalize hospitals for readmissions that occur within 30 days for the same diagnosis or complication. This type of system will motivate hospitals to more appropriately plan discharges, or rather transitions, from the acute care setting.
According to a New York Times article:
Starting on October 1, 2008, Medicare will no longer pay extra for eight specific conditions that could generally be avoided if the hospital followed proven preventive procedures or common-sense precautions. Medicare will no longer pay hospitals to retrieve surgical tools or sponges left in a patient after the initial operation. Nor will it reimburse for extra care given patients harmed by incompatible blood or air embolisms, for treating bedsores developed in the hospital, injuries caused by falls in the hospital, infections caused by prolonged use of catheters in the bladder or blood vessels, or a surgical site infection after coronary artery bypass surgery.4
But again, paying for quality and getting it are not always the same; other barriers need to be addressed. Our healthcare system is complex, making it very difficult for patients and providers to navigate, especially for seniors who have multiple providers and experience concurrent chronic illnesses. Clearly, when few of the eligible seniors enroll in the low-income subsidy, there is a need for education and greater physician involvement. Narrowing the knowledge gap from what is known and what is actually applied must be addressed in order to achieve improved health outcomes. Knowledge is power, but, unfortunately, this true knowledge in healthcare seems to be in need of someone to unlock it.
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Dr. Stefanacci served as a CMS Healthy Policy Scholar for 2003-2004. He is Founding Executive Director, Health Policy Institute, University of the Sciences, Philadelphia, PA.
1. Thorpe KE, Howard DH. The rise in spending among Medicare beneficiaries: The role of chronic disease prevalence and changes in treatment intensity. Health Aff (Millwood) 2006;25(5):w378-w388. Epub 2006 Aug 22.
2. PricewaterhouseCoopers’ Health Research Institute. Behind the numbers: Healthcare cost trends for 2008. Available at: http://pwchealth.com/cgi-local/hcregister.cgi?link=reg/numbers2008.pdf. Accessed September 6, 2007.
3. Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. Washington, DC: National Academy Press; March 2001.
4. Not paying for medical errors. The New York Times. August 21, 2007. Available at: www.nytimes.com/2007/08/21/opinion/21tue1.html. Accessed September 6, 2007.