NEJM’s Fundamentals of U.S. Health Policy, Part 4: What Will It Take to Improve Quality?

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Continuing on with The New England Journal of Medicine’s Fundamentals of U.S. Health Policy series, we now get a primer on healthcare quality.

I think Dr. McGlynn starts with a great framing of the problem: After nearly two decades of experimentation with several of the best ideas about how to improve quality, there has not been much progress. Sure, new innovations (drugs, devices, procedures, etc.) have increased what we can do, but our overall ability to deliver evidence-based care to Americans is not really improving. She shows a great graph looking at our progress at getting people’s blood pressure under control. The percent of people whose blood pressure is well controlled has not, on average, gone up much in the last 18 years.

In other (blunt) words, we suck at care delivery innovation.

Why? Well, her answer looks at it from the structure-process-outcomes framework, which she describes and then proposes some solutions. My answer is two words: financial incentives. I won’t re-explain it here, but this post is a good start.

The structure-process-outcomes framework is a useful one, so let’s talk about it for a second. Those are the three major dimensions that can help to define quality, according to Avedis Donabedian.

Structure refers to things like clinic personnel (such as after-hours doctor access and care managers to check on high-risk patients), access to records that provide lists of patients with certain needs (like how many uncontrolled diabetics haven’t had an appointment for more than three months), and also basic facilities and management things. Getting the right structure is important because it provides the foundation for the other two dimensions.

Process refers to things we do, such as prescribing beta blockers and ACE/ARBs to patients with systolic heart failure, and ordering age-appropriate cancer screenings.

Outcomes refers to how the patients actually fare. How many have well-controlled blood pressure and diabetes, how often heart failure and COPD patients get hospitalized for exacerbations, etc.

We can measure any of those three things, and often we try to link them to reimbursement. Although, as Dr. McGlynn pointed out at the start, it hasn’t worked.

As a side note, trying to link reimbursement to the outcomes dimension is especially unpopular amongst providers because they can do everything right and prescribe all the right meds and schedule all the necessary follow-up appointments, but they can’t control whether the patient actually takes the medications and follows up, which means providers are often getting penalized for things that they don’t have control over.

Anyway, now you’re familiar with one of the foundational frameworks that has been used to approach quality improvement in healthcare.

Dr. McGlynn’s proposed solutions are very academic: focus more on social determinants of health since they often have a bigger impact on health than do medical treatments, start measuring things differently (stop measuring discrete events because that worsens fragmentation, use the more clinically meaningful EHR data for measurement rather than insurance claims data), and do a better job linking healthcare systems with appropriately resourced public health and community-based services. I believe all of them are important and will be helpful but not transformational like the solutions illuminated by the Healthcare Incentives Framework.

Lastly, I want to push back against one of her conclusions. She talks about how there has been little relationship found thus far between methods of financing and quality, and then she says, “Financial incentives alone cannot fix fragmented and reactive systems or create the operating systems required to enable reliable delivery of high-quality care.” And while I agree that financial incentives alone cannot fix our healthcare quality, I feel like she’s implying that it’s not the core mechanism of change and is instead just another lever we should consider using. I could be misreading that though. But whether I am misreading her or not, thinking of financial incentives as just another lever among many to improve healthcare quality is a generally held sentiment among healthcare experts. It’s another symptom of how healthcare experts misinterpret data and come to incorrect conclusions.

I’ve done the best I can on this blog to show that such a sentiment is incorrect. I’ve tried to explain that financial incentives are the core mechanism we have to induce change in the healthcare system, just as they are the core mechanism that makes every other industry function the way they do. And even though healthcare is different from other industries in many ways, those differences do not fundamentally alter the role of financial incentives in healthcare.

And that is why my answer to the question, “What will it take to improve quality?” is to systematically fix financial incentives first and then watch the quality-improving innovation emerge and expand.

An Example of How Evidence Can Be Misleading (Bundled Payments Version)

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Bundled payments are a proven strategy in non-healthcare industries, only we call them by different names. We say we’re paying for a “hotel room” when really we’re paying for the use of the room, the cleaning of the room, the “free” wifi, the “free” continental breakfast, access to the concierge, etc. We say we’re paying for a “cruise” when really we’re paying for the cabin, the unlimited food, the port fees, the access to the shows, use of the onboard pools, etc. These terms (“hotel room” and “cruise” are just two examples) are shorthand terms that refer to the bundle of goods and services you get when you pay that single price. That’s how it works in every industry.

Except healthcare. When we get a bill for a knee replacement, it only contains the surgeon’s cost (okay okay, including the hardware). But there’s also a bill for the anesthesiologist. And for the operating room. And for the hospitalization if you need to stay.

Why would all those things be listed individually if you know you will need a surgeon, an anesthesiologist, and an operating room every single time you get a knee replacement?

Enter bundled payments. They finally turn healthcare a little bit more into a normal industry by allowing patients to pay a single price for the bundle of services that should always be included in that one upfront price.

Sidenote: yes, healthcare is and should always be different from other industries in many important ways. For more details on that, read Arrow’s seminal article on the topic. None of this is incompatible with those insights.

But apparently bundled payments are not very helpful according to this Health Affairs review of the evidence. What gives?

When I see a paper like that, I appreciate the effort to summarize the evidence, but I cringe thinking about all the headlines and misinterpretations and misconceptions that it will perpetuate. People are going to start saying that our large-scale efforts to implement bundled payments are a waste of money . . . and they have evidence to back them up!

But that’s totally the wrong conclusion. This is how I interpret this study: I first think about the overall purpose of bundled payments. When you put their role into the context of the Healthcare Incentives Framework, their purpose is to allow patients to know up front the full price for accomplishing the job they have (get their knee functional again). This enables the patient to compare the price of different options. If they also have quality information of those options, now patients have the ability to shop for the best value (Value = Quality / Price). And when patients start choosing which provider to do their knee replacement based on value, market share starts to shift to the higher-value providers, thus forcing the lower-value providers to change in ways that either raise their quality, lower their price, or (hopefully) both! This is the potential benefit of bundled payments–it is an essential component in stimulating a newfound evolution toward higher quality and lower prices in the market for that specific service.

Compare that to how these studies evaluated the utility of bundled payments: They implemented them for a single procedure and usually with just one of many insurers a provider contracts with. Thus, in most cases the providers were still reimbursed the old fashioned way by all their other insurers. And I would guess that very few competitors in any given region were participating in the same bundled payment program. Therefore, there was no way providers were going to completely shift how they deliver the service because of the narrow scope, a lack of uniform incentives, and a lack of any strong financial imperative to do so (their biggest risk was only of losing a percentage of revenue on small portion of their patients–enough to motivate them to try to do some things a little differently but not to completely redesign how they deliver care–and the risk of losing market share to their competitors due to low value was almost nil). In short, these studies did not get even close to creating the environment for an evolution toward higher value.

With this as context, it’s a surprise to me that any of these bundled payment studies found any benefit at all!

Now, if I could perform my dream study (the design details here and here), that would make a splash. It would get us much closer to the true estimation of how impactful bundled payments could be in healthcare. And until a study like that is done, remember the importance of context, and take any evidence on the impacts of bundled payments with a large grain of salt.

Next week I’ll start looking at Joe Biden’s healthcare plans, so look forward to that!

Building a Healthcare System from Scratch, Part 3: Getting the Incentives Right

carrotIn Part 1, I enumerated the jobs we want a healthcare system to do for us. In Part 2, I explained which parties in the healthcare system (providers or insurers) have incentives to perform each job. The next part of the Healthcare Incentives Framework is the biggest challenge: how do we shape those incentives so that they don’t just reward parties for merely performing those jobs, but so they also encourage them to perform their jobs in the best way possible? (“Best way possible” will be more precisely defined below.)

To understand this discussion, two key definitions must be absolutely clear.

First, the definition of value.

Value = Quality / Price

High value can be found at any price point. For example, it could be reasonable quality for a super low price, or it could be the absolute best quality for a not-crazy-high price. It just depends on how much money is available to be spent.

And just as a brief sidenote, I’ll mention that “quality” has many facets, and it’s the patient who–as the person consuming the service–ultimately gets to decide what constitutes quality. And “price” denotes the actual total amount of money paid for the service.

Second, the definition of a financial incentive. A financial incentive is something that rewards behavior with increased profit. Profit is the key here. Companies (or, the people who run them) don’t take huge risks and expend great effort that won’t result in more money for them. (This also applies to non-profit organizations, only they call it “surplus.”) So a project that is projected to increase revenues but also increase costs just as much is a waste of effort from a company’s standpoint.

With those two definitions in mind, here is the principle: Our goal is to create financial incentives that reward value for patients. In other words, a provider or insurer needs to make more profit when they provide higher value for patients. This would motivate them to out-compete and out-innovate their competitors. And the form of that competition wouldn’t be destructive corner-cutting and responsibility-avoiding–it would be to actually provide higher value for patients.

Instead of hospitals spending fortunes on beautiful lobbies, they would be competing on how to make care cheaper, faster, and more convenient. Because that’s how they would make more profit.

Instead of insurers climbing over each other to find ways to cream skim the healthiest patients and creatively design networks to get sick patients to avoid them, they would be competing on how to most efficiently provide cost-saving prevention and how to have the best customer experience. Because that’s how they would make more profit.

Some say financial incentives have no place in healthcare. What they don’t understand is that there will always be financial incentives in any industry where people get paid for their work. We can’t ignore the inescapable presence of financial incentives in healthcare. But we can shape them in a way that motivates providers and insurers to maximize the value delivered to patients.

valuewithprofit

In Part 4, I’ll enumerate the four levers that affect profit, which will then lead to an explanation of the barriers healthcare systems commonly have to those levers being used to reward value with profit.

Can We Please Use the Proper Definition of Value?

I went to the AcademyHealth Annual Research Meeting over the weekend (it’s probably the biggest health policy conference of the year), and then this morning I went to the annual report for one of the regions participating in RWJF’s Aligning Forces for Quality, and I can’t stand the abuse of the word “value” any longer. The picture on the right is part of the cover of the program I came home with from the meeting this morning. Does the text strike anyone else as . . . ineffective? Shortening the path is great, but shortening it to “high-quality, high-value health care”?

Let’s do a refresher on what the word “value” means. This has a precise definition in the professional and academic world, and I guess anyone can choose to define a word however they want, but this is the widely accepted (and most useful) definition:

Value = Quality / Price

Quality can be defined differently as well, but it generally includes outcomes, patient experience, and everything a patient wants. It doesn’t just include quantitative metrics, but it also includes all the softer metrics that are important to patients. For example, the softer metrics related to a physician would include bedside manner, friendly office staff, convenience, length of relationship, and so forth.

Price is the amount of money paid to get the quality. PRICE IS NOT THE SAME AS COST, NOR IS IT THE SAME AS TOTAL SPENDING. I’ve never done all caps for a sentence before, but this is the first time I felt like a sentence needed it. Cost would be the actual costs that were incurred to provide the service, but patients don’t care about cost. They care about the price, the thing they actually have to pay. And, in healthcare, beware of the word “charge” as well, which generally refers to the price a provider is asking for even if the insurer pays him something completely different. Confused? I explain provider pricing in an earlier post.

Now that the more appropriate meaning of the word “value” is understood, look back at the text on the cover picture. “Shortening the Path to High-quality, Low-cost Health Care” would work. “Shortening the Path to High-value Health Care” would also work, but I guess it would not be as explicit as it would be to anyone who hasn’t read this blog post. But not Hooper Humperdink. Not him.

So, next time you hear someone say, “We need to improve the value of healthcare delivered in the U.S.,” you should think, “Ah. This person wants to improve the quality and/or decrease the prices of healthcare in the U.S.” And FYI, the only way we can substantially decrease prices is to decrease COSTS first. Yes, I would say that our new absolutely most important goal in the health policy world (now that the ACA stands; for the time being at least) is to help providers decrease costs and then make sure prices follow.

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