JANUARY 17, 2019

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National Pay for Performance Summit, the National HIPAA Summit,
and the National Population Health Colloquium

Opportunities for Value Creation in Healthcare
In October 2005, General Motors and the United Auto Workers reached a compromise to reduce GM cash outlays on healthcare benefits for active and retired personnel by an estimated $1 billion. The agreement was hailed as a victory for both parties because it would lower the company's costs while preserving jobs. But the seeds of GM's demise had already been sown. In that same year, its annual report had warned investors that escalating healthcare costs were an existential threat:

Healthcare in the United States is one of our biggest competitive challenges, and if we do not make progress on structurally fixing this issue, it could be a long-term threat to our company. In 2005, GM was challenged with the compound impact of escalating healthcare cost rates and falling discount rates used to determine future healthcare liabilities. As a result of these factors, in 2005, GM's U.S. other post-retirement employee benefits (OPEB) expense, consisting of retiree healthcare and life insurance, increased to $5.3 billion, an increase of more than $1 billion from 2004.

Four years later, on June 1, 2009, General Motors filed for bankruptcy in the U.S., Canada and Ontario. In hindsight, it is clear that the structural issue of escalating healthcare costs had indeed set the foundation for failure. As The Economist explained, "Every year, the cost of retired workers' healthcare diverted billions of dollars from developing innovative new models and added $1,400 to the cost of each car compared with those made in Asian and European plants." In other words, the company's past success created obligations that eventually took it down. GM's problems are not unique. Over the years, escalating healthcare costs have been cited in the bankruptcies of Kodak, Xerox and Data General, among others. Of course, healthcare expenditures and issues have both positive and negative implications for firms: Healthcare benefits help to attract and retain talent, drive productivity and reinforce a company's values and image of being socially responsible. However, as the cost of providing healthcare escalates, the achievement of competitive advantage through each of these mechanisms becomes more difficult. (Forbes, January 7, 2019)

Value-Based Care: Making Health Plans Work Better
When companies who are interested in value-based care decide on health plans for their employees, they should first ask their health plan some important questions. Health care is costly. That's nothing new. Consider this: The average annual cost of health care has increased from $146 per person in 1960 to more than $10,000 per person in 2016, and care costs are expected to increase by six percent in 2019. So, while offering high-quality health care is a great way to take care of your employees, it's becoming increasingly difficult to juggle the cost of their care with your company's bottom line. An option that's become more available in recent years is the value-based health plan. In value-based health plans, payors share data and analysis to help providers improve their patient care outcomes. Through enhanced reporting and collaboration, doctors can identify areas to gain efficiencies, reduce unnecessary care, and most importantly, improve patient satisfaction and health. (Workforce, January 4, 2019)

Pay-for-Performance Reduces Healthcare Spending and Improves Quality of Care: Analysis of Target and Non-Target Obstetrics and Gynecology Surgeries

Objective: In Korea, the Value Incentive Program (VIP) was first applied to selected clinical conditions in 2007 to evaluate the performance of medical institutes. We examined whether the condition-specific performance of the VIP resulted in measurable improvement in quality of care and in reduced medical costs. Design: Population-based retrospective observational study. Setting: We used two data set including the results of quality assessment and hospitalization data from National Health Claim data from 2011 to 2014. Participants: Participants who were admitted to the hospital for obstetrics and gynecology were included. A total of 535 289 hospitalizations were included in our analysis. Methods: We used a generalized estimating equation (GEE) model to identify associations between the quality assessment and length of stay (LOS). A GEE model based on a gamma distribution was used to evaluate medical cost. The Poisson regression analysis was used to evaluate readmission. Main outcome measures: The outcome variables included LOS, medical costs and readmission within 30 days. Results: Higher condition-specific performance by VIP participants was associated with shorter LOSs, decreases in medical cost, and lower within 30-day readmission rates for target and non-target surgeries. LOS and readmission within 30 days were different by change in quality assessment at each medical institute. Conclusions: Our findings contribute to the body of evidence used by policy-makers for expansion and development of the VIP. The study revealed the positive effects of quality assessment on quality of care. To reduce the between-institute quality gap, alternative strategies are needed for medical institutes that had low performance.

(International Journal for Quality in Health Care, April 2017)

About 1 In 5 Healthcare Payments is Tied to Value-Based Model

Dive Brief:

  • Value-based care and other healthcare quality initiatives have made inroads, with an estimated 4% annual growth in value-based payments and 7% average annual increase in hospitals and clinicians participating in major clinical registries, a new Q-Centrix report shows.
  • The consultancy's report looks at participation in quality programs and resource needs in three key quality reporting areas: regulatory, infection prevention and clinical registries.
  • The report estimates value-based payments make up about 22% of all care delivery payments as of the start of this year, up from 18% at the beginning of 2018. Meanwhile, the share of hospitals submitting data to the top 20 inpatient clinical registries is expected to climb from 18,432 in 2017 to 23,773 in 2021

(Healthcare Dive, January 11, 2019)

First Steps Toward Pay-for-Performance in Behavioral Health in the Netherlands
The Dutch health insurance company Menzis, one of the four largest insurance companies operating in the Netherlands, has decided to move away from fee-for-service for selected behavioral health conditions. Starting in 2019, it will no longer pay providers for depression and anxiety lasting less than one year, based on the number of treatment sessions. Instead, remuneration will depend on the level of improvement in symptoms and quality of life of the patient as indicated by patient questionnaires and other data sources. The Dutch Association of Psychiatrists disagreed with the move, arguing that the recovery path for behavioral health is highly unpredictable and not necessarily linked to treatment. (The Commonwealth Fund, January 4, 2019)

Pharmaceutical Companies Have Pay-for-Performance Deals with Health Care Authority
In the two months since Oklahoma got the right to negotiate pay-for-performance deals with drug makers, operators of the state's Medicaid program have signed off on four, including one where the state will pay less if patients stay on the same drug. The first deal, for an anti-seizure drug named Fycompa, was unveiled in October. Since then, the state has made agreements for an antibiotic called Orbactiv and three antipsychotic drugs: Aristada, Invega Sustenna and Invga Trinza. Sustenna and Trinza are different formulations of the same drug, given monthly or every three months. The Oklahoma Health Care Authority, which oversees the state's Medicaid program, declined to outline any financial expectations it has for the deals, and the pharmaceutical companies said they didn't want to tip off competitors about the terms they negotiated. (Tulsa World, January 2, 2019)

How to Conduct Safety Huddles that Stick

MCOL's Value Based Care Learning Kit is the single e-learning resource to raise your value based care IQ, packed with critical information that separately would retail almost $4,000. The Learning Kit is priced at $475. Click here to review sample pages from the kit.

Modules include:

  • Value Based Care Primer Video: a five minute video discussing value based care concepts in a whiteboard drawing format.

  • Value Based Care Infographic: providing a pictorial snapshot primer with current selected value based care data.

  • Webinar Video Library: with 16 selected value based webinar videos covering 14 hours of instruction, plus accompanying slides and overview information for each session. The sample pages include a menu listing each of the 16 webinar videos.

  • Newsletter Library: with archive of 46 full semi-monthly editions of Value Based Payment News, providing 184 pages of articles, industry news, interviews and more. The sample pages include a menu listing the specific content covered in each issue.

  • Support: providing information to assist you in use of the learning kit and accessing the webinar videos. The sample pages include all support and licensing information.

Click here to order your copy online, or get additional detailed information. You can also place your order by calling 209.577.4888 from 8AM - 5PM Pacific time, or feel free to download a flyer with an order form if you wish to process an order by mail.

Pay for Performance Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, comparative effectiveness, patient safety, bundled payment, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

Keynote: Payment Reform from a National Perspective -- A View from the CMS/CMMI Health Care Payment Learning and Action Network (LAN)

Mark D. Smith, MD, MBA
Clinical Faculty, University of California, San Francisco; Attending Physician, Positive Health Program for AIDS Care, San Francisco General Hospital; Co-Chair, Guiding Committee, Health Care Payment Learning and Action Network; Founding President and Chief Executive Officer, California Health Care Foundation, San Francisco, CA