Aug 11, 2014

Six Serious Problems with "Value-Based" Purchasing and How to Solve Them

By Harold D. Miller, president and CEO of the Center for Healthcare Quality and Payment Reform.

Both patients and healthcare providers could be harmed by the measures of healthcare spending Medicare plans to use in its new Value-Based Payment Modifier for physicians and in the Value-Based Purchasing Program for hospitals.  Serious problems also exist with the spending measures that many commercial health plans are using to define narrow networks and that both Medicare and commercial health plans are using in various "shared savings" payment contracts with physicians, hospitals, and Accountable Care Organizations.

A new report from the Center for Healthcare Quality and Payment Reform - Measuring and Assigning Accountability for Healthcare Spending - explains how the spending measures used in so-called "value-based purchasing" programs can:

  • Inappropriately assign accountability to physicians and hospitals for services they did not deliver and cannot control, while at the same time failing to hold healthcare providers accountable for many of the services they do deliver. 
  • Financially penalize physicians and hospitals who care for patients with complex health problems and who deliver evidence-based services to their patients;
  • Fail to provide physicians, hospitals, and other providers with the kind of actionable information they need to identify opportunities to control healthcare spending without harming patients; and
  • Give patients misleading information about which providers deliver lower-cost, higher quality care.

The report details multiple, serious weaknesses in the simplistic "attribution" methodologies Medicare and other payers are currently using to retrospectively assign accountability to a single physician, hospital, or other provider for all of the spending on all of the healthcare services received by a patient over a period of time, regardless of which providers actually delivered those services.  For example, under current approaches:

  • Most of the spending that is attributed to a physician usually results from services delivered by other providers.
  • Physicians are assigned responsibility for services new patients receive before the physician first met the patient.  
  • Primary care physicians are assigned responsibility for services delivered by specialists to treat serious illnesses such as cancer; and
  • Specialists and hospitals are assigned responsibility for unrelated healthcare problems their patients experience in the future.

The report also describes how the "risk scores" currently used to adjust spending measures fail to recognize important differences in patient needs and can thereby mislabel physicians and hospitals as "inefficient" if they care for patients who have acute illnesses or complex problems.

In addition to documenting the many serious problems with current approaches, Measuring and Assigning Accountability for Healthcare Spending shows how they can be solved.  A detailed methodology is presented for assigning accountability to providers for the services they actually can control or influence.  The methodology also explicitly identifies which services might be changed in order to achieve the same or better outcomes for patients at a lower cost.  In addition, methods are described for comparing providers' performance in treating patients with similar needs rather than trying to use a single, simplistic risk score to "adjust" spending.  The report shows how these improved methodologies can use existing data to produce more valid, reliable, comprehensive, and actionable measures than those currently being used.

Better ways of measuring and assigning accountability for spending are necessary but not sufficient for achieving a higher-value healthcare system.  Even if they use better spending measures, value-based purchasing, pay for performance, and shared savings payment systems do not remove the fundamental barriers to better care that are created by the current fee-for-service system.  Measuring and Assigning Accountability for Healthcare Spending shows how better ways of measuring spending can help payers and providers move more quickly to true payment reforms such as bundled payments, warranties, condition-based payments, and global payments. 

Both the full report and the 7-page Executive Summary are available at no charge on the CHQPR website (www.CHQPR.org).  Comments on the report are welcome.

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