Reform Update: IOM won't back geographically based value index

Congress should not adopt a geographically based value index for Medicare because healthcare decisions are not made at the regional level, but rather at the physician or organizational level, an Institute of Medicine committee concluded in a report released Wednesday.

The findings in the 178-page study reiterate the committee's preliminary observations in an interim report this year: Because individual physician performance varies, an index that is based on regions is not likely to encourage more efficient behavior among providers and is unlikely to improve the overall value of care.

The report also confirmed the committee's earlier observation that a geographic value index would reward low-value providers for practicing in areas that are on average high-value, and punish high-value providers in low-value regions.

The IOM committee was convened to study the issue under a provision of the Patient Protection and Affordable Care Act. Work by Dartmouth University researchers and others showing troubling disparities in what Medicare pays across different areas—often paying significantly more for worse outcomes—has fueled intense debate about the factors at play and how to address them. The answers are seen by many as crucial to controlling the growth of Medicare expenditures.

Committee members found that variation in Medicare spending across geographic areas is driven primarily by differences in the use of post-acute care, which includes home health, skilled nursing, rehabilitation, long-term care and hospice services. According to the report, if there were no variation in post-acute spending, the variation in total Medicare spending across hospital referral regions would fall by 73%, and it would fall by 89% if there were no variation in both acute and post-acute care.

But an overall explanation for the wide variations remains “elusive,” according to an IOM news release announcing the findings. “The statistical analyses that the committee examined accounted for factors such as beneficiary health status and demographics, insurance plans and factors related to healthcare markets, but much of the variation could not be explained by such factors.”

Meanwhile, the committee noted in the report that the CMS should continue to test payment reforms to incentivize the clinical and financial integration of healthcare delivery systems. Achieving clinical integration requires a “minimum level of coordination and alignment of goals” among physicians, hospitals and other providers in caring for a population, the report said. And while the committee noted that financial integration—in which systems have the ability to receive payments and distribute them to individual care providers—often spurs clinical integration, the two need to work hand in hand.

“Historically, financially integrated healthcare organizations lacking management, infrastructure, and processes for coordinating care (i.e., clinical integration) generally have not succeeded in substantially lowering costs or improving quality,” the report said.

While the Dartmouth research has strongly suggested that variations in clinical practice and waste deserve much of the blame for higher costs in some areas, recent studies by James Reschovsky of the Center for Studying Health System Change present an alternative explanation: that patients are generally sicker in areas where Medicare spends more.

Doctors asked to assess options for reducing healthcare costs were not exactly gung ho about replacing the system that pays them based on the volume of tests, exams and procedures they perform.

Granted, cuts to Medicare physician pay proved even less popular among the nearly 3,000 doctors surveyed on their opinions for strategies to blunt the nation's high and rising healthcare costs. Just 1% of the polled physicians described their attitude toward this option as “very enthusiastic.”

The survey results were published in the Journal of the American Medical Association.

Just 7% held a similar opinion of a proposal to do away with fee-for-service, or the payment of doctors, hospitals and other healthcare providers based on the volume of their services. Their objections are at odds with policymakers, who often cite fee-for-service as a significant culprit behind rising premiums and public spending for healthcare.

Doctors also showed little love for one popular proposed alternative to fee-for-service, described as “paying a network of practice a fixed, bundled price for managing all care for a defined population,” or capitation. Six percent of physicians said they were very enthusiastic about such an arrangement.

Doctors were more quick to embrace efforts to promote continuity of care and chronic disease-care coordination (75% and 69%, respectively, were very enthusiastic.) Efforts to tackle fraud and abuse also ranked highly (70%).

Physicians were nearly evenly split on their enthusiasm for efforts to reduce healthcare costs that would limit access to costly care with limited benefits (51% were very enthusiastic); compare competing treatments (50%); and the use of cost-effectiveness to decide treatment (47%).

Half the physicians rejected (“strongly disagreed”) the statement that healthcare prices matter only when patients must pay the bill themselves. One-quarter said they were aware of their recommended treatment costs (24% “strongly agreed” with that statement.)

Although 42% agreed strongly with the statement that doctors could be more prominent in efforts to reduce unnecessary medical tests, most of the surveyed physicians said other participants in the healthcare business are more to blame.

Roughly one out of three (36%) said doctors have a major responsibility to reduce cost. That's compared with 60% that said trial lawyers have a major role. Other culprits included health insurers (cited by 59%), hospitals and health systems (56%) and pharmaceutical and medical devicemakers (56%).

Healthcare's increased interest in population health has helped to forge new, loose partnerships, Modern Healthcare's Beth Kutscher reports.

Payment models promoted by the Patient Protection and Affordable Care Act, such as accountable care, are creating new incentives for hospitals and medical groups to more broadly manage patients' health and well-being, known as population health, in an effort to prevent costly care for chronic conditions. Two separate health system alliances in Georgia and Pennsylvania are seeking to gain an edge without losing their independence, she reported.

The newly created Stratus Healthcare is a limited liability corporation that will bring together 23 Georgia hospitals to swap ideas, cut costs, coordinate information technology and work jointly on population health efforts. In Pennsylvania, Abington Health, Aria Health and Einstein Healthcare Network joined forces on population health initiatives under a separate limited liability corporation.

Follow Jessica Zigmond on Twitter: @MHjzigmond

Follow Melanie Evans on Twitter: @MHmevans