Baylor Health Care System began more than one year ago to create a health plan option for employees modeled after one health reform proposal to tie insurance payments to quality and cost control.
The Dallas-based system has since proposed quality measures and protocols; drafted plans for the company to help doctors with information technology needed to coordinate care and track performance; and submitted to lawyers contracts that executives hope to present to roughly 3,000 doctors on Baylor’s medical staff, said Gary Brock, chief operating officer for the 10-hospital system.
But how Baylor will make payments based on quality and cost savings remains unsettled. Baylor is not alone. It’s one of a growing number of health systems and medical groups grappling with legal and logistical questions about how to calculate and distribute bonuses for quality and cost control under emerging networks known as accountable care organizations.
Under health reform, Medicare will begin paying bonuses based on quality and cost control to accountable networks in 2010, but the agency must first draft regulations for how to award such payments. The CMS is scheduled to hold a forum on the new payment model on June 24 (For more on provider risk, see special report, p. 34).
But multiple efforts among private insurers, hospitals and medical groups have moved ahead of the agency, including Catholic Healthcare West, San Francisco, and five pilots led by health policy experts at Dartmouth University and the Brookings Institution (May 17, p. 6).
Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform, said primary-care physicians, considered by policy experts to be best positioned to manage care of the chronically ill, cannot afford the upfront cost of time or technology believed necessary to keep patients out of the hospital and curb spending growth. Proposals to pay bonuses contingent on performance “don’t pay anybody for anything up front,” he said. Miller said he is also wary of methods that award bonuses by using an analysis of patients’ clinic visits to determine the patients and medical costs for which medical groups are responsible. Miller argued that such a model leaves medical groups vulnerable to upfront costs for an uncertain future payment.
He contends lump-sum payments, not tied to specific procedures, for a clearly defined group of patients could be a more viable alternative, if adjusted to shelter providers from risk that the lump sum will fall short of patients’ costs. To do so would give providers necessary flexibility to spend payments on prevention and care management, but to be successful would require an accurate appraisal of patients’ medical needs and projected healthcare costs and methods to cap providers’ financial losses.
Miller cited a payment system developed by a three-year test of medical homes in Washington and a Massachusetts insurer as a potentially effective starting point as medical groups tentatively create accountable care networks. Richard Onizuka, healthcare policy director for the Washington State Health Care Authority, said the agency and the Puget Sound Health Alliance, which jointly developed the payment model, considered but rejected lump sum payments as too complex and risky for small medical groups.
Instead, the test, scheduled to begin in January with eight commercial payers and Medicaid, would offer providers two options: a bonus paid once quality and savings targets are met or bonuses with an additional monthly payout for each member, tied to targets for reduced emergency room and hospital visits. But the latter would require providers to pay back up to 50% of per member, per month payouts ($2.50 in the first year and $2 for the next two years) should providers fail to curb avoidable emergency room and hospital visits, he said. Onizuka said insurers expect to recoup the additional spending should avoidable emergency room visits drop by 17%, or an overall decline of 10%, he said.
In Massachusetts, roughly 1 out of 5 doctors in Blue Cross and Blue Shield of Massachusetts managed-care plans have signed on to accept a global budget for patients with bonuses tied to quality and the insurer is considering its expansion beyond its HMO, said Deborah Devaux, senior vice president of community transformation. Physicians share in the savings or losses depending on how successfully they manage care within the global budget, she said. Results from the first year of the experiment are not yet available, but preliminary findings show quality gains and providers have remained within budget.
Lump-sum payments must also be tied to quality, Miller said, without which patients will likely balk at the notion of doctors paid to control costs. “What’s everybody going to suspect?” he asked, then swiftly followed with an answer: rationing.
And health systems and medical groups with efforts under way to develop accountable care networks say lump-sum payments are too risky. Two California medical groups, HealthCare Partners, Torrance, and Monarch Healthcare, Irvine, are the latest to join a test of the care networks led by the Dartmouth Institute for Health Policy & Clinical Practice and the Brookings Institution’s Engelberg Center for Health Care Reform.
William Chin, executive medical director at HealthCare Partners, stressed the model has yet to be proven. “A word of caution: it’s an experiment,” he said. One that has not yet developed enough to persuade HealthCare Partners, which includes 1,200 primary-care providers and 3,000 specialists, to assume the financial risk of a lump sum to care for a group of patients, he said. But Chin said the medical group is willing to absorb upfront costs for a future bonus contingent on cost savings and quality—and the potential that its network could make it more competitive in the market.
Chin said Dartmouth and Brookings can identify patients who typically seek care from HealthCare Partners, but can’t yet estimate patients’ medical needs and the cost to care for them. “Am I getting a 25-year-old patient with no problems or am I getting a 50-year-old patient with diabetes” or other chronic conditions? he asked.
