FEBRUARY 20, 2020

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
the National Medical Home Summit, National MACRA MIPS/APM Summit,
and the National Medicare Advantage Summit

Getting Paid For Performance: How Blockchain Could Make Outcome-Based Pricing A Reality
The market rewards quality. But what if your product is more complicated than a mousetrap? What if it's a groundbreaking new pharmaceutical treatment? Or what if your "invention" is actually a service you provide to firms, with benefits that extend over years? How do you convince buyers to take a chance on your new product when they know the old mousetrap is working well enough? And how do you tie the number of mice your customers catch with the improved mousetrap to what you charge, allowing you to be vested in your customers' success for the benefit of both? A solution that has the potential for changing the game is outcome-based pricing (OBP). Outcome-based pricing is a contractual mechanism in which the amount a buyer pays is based on the performance of the product or service. The advantages of OBP are clear: Buyers are sure they won't pay for a faulty or underperforming product, and producers can more easily enter markets with new solutions without the stigma of an unproven good or service. It also leads to a foundation for some creative pricing models. A number of industries have experimented with outcome-based pricing:

  • Some pharmaceutical companies have signed contracts with insurance companies that anchor payment to a drug's performance.
  • The IT services industry often uses pricing models that tie payments to KPIs like fit for use, software adoption, delivery time, CSAT and uptimes.
  • Manufacturers have used OBP based on KPIs like delivery time and ethical sourcing guarantees.

But while OBP is an exciting model, enforcing the terms has been difficult. Imagine a pharma scenario. A drug manufacturer and the Department of Health of Krakozhia enter into an OBP contract for a new drug. Per the contract, the government will pay a subsidy for the drug only if the drug has a positive outcome for a patient. Of course, the government and the drug manufacturer should not have direct access to patient records, where hospitals include information on the drugs used and their outcomes for the patients. So the drug manufacturer and the government agency join a consortium blockchain with the hospitals, where the hospitals upload patient health records. The contract between the drug manufacturer and the government is implemented as a smart contract, where the patient records that establish positive outcomes for the drug trigger the transfer of subsidy to the drug manufacturer automatically, without the government seeing the underlying health records. (Forbes, February 7, 2020)

How to Make Value Assessment More Relevant to Healthcare Decisions
The Innovation and Value Initiative (IVI) is a collaboration of scientists, patient organizations, payers, life sciences companies, providers and delivery systems dedicated to finding scientifically credible approaches to measuring value in healthcare. Inspired by the open-source software process, IVI established the Open-Source Value Project, a platform for the development of dynamic, transparent and flexible scientific models that allows diverse health care stakeholders to measure value in health care treatments or services. IVI's first two open-source models focus on the value of treatments for moderate to severe rheumatoid arthritis and non-small cell lung cancer. (American Journal of Managed Care, February 7, 2020)

How AI in Healthcare Will Influence The Path to Value
From medical malpractice to single-payer healthcare, there is no shortage of topics to debate in healthcare. Though provision, funding and government involvement in our system continue to be central topics, there is also an emerging consensus on two key themes: the importance of aligning financial and outcome incentives through alternative payment models (APMs), and a critical focus on resolving data interoperability issues between siloed health systems that are directly limiting progress across the industry. Fortunately, this is where emerging technology tools stand to have a significant near-term impact on the health of the American public. Unfortunately, there is also a tremendous amount of institutional inertia pushing against the adoption of solutions that could support alignment through APMs and address data interoperability issues. his pushback comes as no surprise, as it is rooted in what are ultimately humanitarian concerns, such as loss of jobs. AI solutions deployed at scale will eliminate much of the "wasted spend" conservatively estimated at 25% of the $3.8 trillion spent on healthcare in 2019. Efficiency gains realized by AI will come, in part, at the expense of many jobs in the industry, a reality that must be considered as part of any successful deployment strategy. This article provides a brief outline of some opportunities for AI technologies with respect to APMs and interoperability. (Forbes, January 31, 2020)

How to Make a Big Impact with Small Data: The Role of Machine Intelligence in Value-Based Care
In the United States, healthcare expenditures far outpace the rest of the industrialized world, without an improvement in outcomes that matter. Moreover, within the United States, there is wide variation in the performance of providers in caring for complex patients. The best providers are able to use nuanced decision making to help prevent patient deterioration, reducing emergency department visits and hospitalizations while curbing total costs of care. Often, this involves minimizing the use of "low-value care" --- unnecessary, ineffective or inadequate imaging, diagnostic testing, use of branded drugs and other care decisions sub-optimal for the unique needs of individual patients. Low-value care decreases the resources available for high-value care. It also increases the risk to patients while delivering little benefit. At the Becker's 8th Annual CEO & CFO Roundtable in Chicago, HEALTH[at]SCALE Technologies, a Silicon Valley company founded by leading machine learning and clinical faculty with ties to MIT, Harvard, Stanford and U-Michigan, hosted a workshop to explore how machine intelligence can drive value-based care in two ways. First, by matching patients to the providers who are most likely to provide high value-based care based on a patient's unique medical characteristics and needs. Second, by identifying patients at greatest risk of deterioration based on their individual multi-factorial health trajectories, with information about modifiable risk factors and care pathways to reduce this risk. (Becker's Health IT & CIO Report, February 5, 2020)

Clinician-Directed Performance Improvement is the best way to improve quality...why won't payers use it?
Goitein (2020) argues that Clinician-Directed Performance Improvement is the best way to improve quality. I agree. This approach empowers physicians and other health care professionals to identify areas for improvement and work on those.

Clinician Directed Performance Improvement (CDPI)...had its origins in 2013, when a group of physicians requested support for a physician-led quality program and the administration agreed to pilot one in the intensive care unit (ICU). There were rapid improvements in ICU clinical outcomes and lowered costs during the pilot program, and in 2015--with the leadership of a new chief medical officer and a start-up grant from a community nonprofit organization now called Anchorum St. Vincent (half-owner of Christus St. Vincent)-- the program was expanded to the rest of the hospital.

What is CDPI? There are a few key components to consider:

  • Clinicians need paid dedicated time for quality improvement. If the organization does not dedicate resources, it will be considered an afterthought.
  • Give clinicians training. While clinicians are medically trained, they may not be trained in performance improvement or health services research protocols. Additionally, data entry or other types of administrative support is key.
  • Let clinicians pick their quality program. Giving clinicians autonomy to pick their quality project increases clinician buy-in and investment in the outcomes or the quality initiative.
  • Link quality to financial benefits. Quality must lead to better financial outcomes for the health system either through lower costs, bonus payments from payers, or increased market share/reputation.
  • Development management structures to operationalize. Pilot studies/initiatives are useful, but there must be a mechanism to implement successful quality initiatives into the organization broadly.

CPI has a number of advantages over the current system of payer-driven quality-improvement where pay-for-reporting and gaming are rampant. (Health Economist, February 5, 2020)

Tip of the Week: In Pay-For-Performance, Make Sure the Right Indicators Are Used
There is growing emphasis on measuring performance quality in health care, and this is more thoroughly making its way into pharmacy. There are a number of performance ratings systems, such as the CMS Star Ratings program, and various indicators within each of those programs. This Tip of the Week focuses on a study conducted in North Carolina to evaluate pharmacy in the context of true patient outcomes, rather than on the structure and process measures often employed in such ratings programs. In the Journal of Managed Care & Specialty Pharmacy, Urick et al detail the lessons learned from attempting to evaluate these outcomes from a group of pharmacies providing advanced services. The participating pharmacies were part of a community pharmacy enhanced services network (CPESN) in a demonstration project that could loosely be called a practice-based research network (PBRN) for providing comprehensive medication therapy management (MTM). The project examined adherence (through proportion of days covered) for oral diabetes medications, statins, and renin-angiotensin system antagonists, along with per member per month (PMPM) to yield a cost of medical care score, hospitalization score, and emergency department (ED) score. It compared the CPESN pharmacies' performance with those of other pharmacies in North Carolina. (Pharmacy Times, February 1, 2020)

Using Value-Based Healthcare to Improve Patient Outcomes

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.

The Physician Perspective on Value-based Care

Barbara L. McAneny, MD, FASCO, MACP
Board-Certified Medical Oncologist/Hematologist; President, American Medical Association; Co-founder and Managing Partner, New Mexico Oncology Hematology Consultants Ltd., Albuquerque, NM