InterQuality WP 1 – Incentives and Payment Models

1. InterQuality WP 1 – Incentives and Payment Models Robert Berenson, M.D. The Urban Institute Warsaw, 18-19 January 2011

2. Proposal Objectives • Comprehensive literature review on impact of incentives on clinical issues (quality), economic issues (costs), and equity in the areas of hospital care, outpatient care, integrated care and pharmaceutical care. • Develop criteria for desirable payment models in these areas • Support the development of generic and country-specific payment models

3. Proposal Specification of Tasks 1 -- Literature and methodology review, definition development 2 -- Input from collaborative partners 3 -- Comparative analysis of incentives and payment models 4 -- Criteria development

4. Some Definitional/Scope Issues • The proposal equates the sectors identified (hosp., pharm., etc.) with “different patient groups.” Shouldn’t this be provider groups? • Incentives tend to focus on financial incentives but we have suggested review of non-financial incentives as well. Very broad scope.

5. Definitional Issues (cont.) • Assume “outpatient care” refers both to institutions and professionals/clinicians. Whereas hospital care refers just to the institution. Can be confusing because some payment schemes combine professional and institutional payments • What do we mean by integrated care? In US tends to refer to care across health care sectors but in Europe can mean integration with social services, e.g. housing.

6. Definitional Issues (cont.) • A common conceptual issue/error is thinking that financial incentives refers to marginal incentives – rewards and penalties – associated with performance against specific quality or other metrics while ignoring the incentives inherent in the basic payment scheme. • The plan is to review the incentives in the basic payment schemes and consider P4P as supplemental incentives whose impact can vary in relation to the underlying payment scheme.

7. Financial Incentives, Healthcare Providers and Quality Improvement From The Health Foundation, London. Authors -- Jon Christianson, U of Minnesota; Sheila Leatherman, U of North Carolina and London School of Economics; and Kim Sutherland, U of Cambridge, 2007 and updated

8. From the Report “Financial incentives… can be described as the influence that payments to organisations and individuals have on the health care services they deliver to consumers… In this review, we focus on explicit financial rewards or sanctions that are directed towards improving the quality of care delivered by organisations or practitioners to patients. However, these rewards or sanctions often are layered on top of or blended with payment approaches designed to affect service delivery in other ways.”

9. Putting the Cart Before the Horse? In my view the underlying payment approach provide the stronger incentives that influence provider behavior (organizational and individual) rather than the marginal incentives and should be the primary focus of analysis. (see accompanying paper provided)

10. To Accomplish the Objectives (and Meet the Commitments) I suggest some additional and revised steps and potentially additional useful products. 1 – Create a categorization of the alternative payment methods in the four sectors 2 – Identify attributes (theoretical incentives) of each payment method 3 – Perform required literature review 4 – Identify gaps in the measures used in the lit review to help WP2 5 – Develop the criteria for payment methods, which will mostly be presented as pros and cons

11. 1.Categorization of Payment Methods I am not sure at this time whether there are accepted typologies of payment models for each of our sectors. Probably for hospitals and physicians but not sure about outpatient facility and pharmaceuticals, and probably not for integrated care Also, there is greater need to describe hybrid payment schemes that mixes and matches Will be an early step based on review of literature syntheses and then review by consortium members for accuracy and completeness

12. 2. Attributes of Each Payment Method It is useful to develop theoretical delineation of pros and cons of payment methods and then test empirically because there will be large data gaps in literature and yet payment methods need to be adopted and revised continually. Also this analysis should inform the fine-tuning of payment methods, how to guard against provider “misbehavior” and where to emphasize performance metrics. These attributes also involve considerations such as feasibility, potential for “gaming,” etc. and can be informed and modified as evidence comes in.

13. Examples for Clinician Payment Methods

14. FFS Attributes • Advantages • Rewards activity, industriousness • Theoretically can target to encourage desired behavior • Implicitly does case-mix adjustment • Commonly used by payers and physicians • Disadvantages • Can produce too much activity, physician-induced demand • Maintains fragmented care provided in silos • High administrative and transaction costs • What is not defined as reimbursable is marginalized • Complexity makes it susceptible to gaming and to fraud

15. PPPM (Comprehensive or Global Payment) • Advantages • Internalizes allocation of activity and costs to meet needs • Direct incentive to restrain spending • Predictable and capped spending • Administratively simple (until address some of the problems) • Low transaction costs • Disadvantages • May lead to stinting on care • Susceptible to cream-skimming • Incentive to cost shift to services outside the PPPM • Can’t specifically promote desired activity • May resist innovation/ new services

16. Episode/Condition/Bundle/Case • Advantages − internalizes incentives for efficiency within the episode − potentially aligns incentives across siloed providers − arguably, is an intermediate step on the way to real integration • Disadvantages − does not fundamentally alter incentive to generate units of service − be careful about what you wish for, e.g. physician-hospital alignment without determination of appropriateness in a FFS environment − currently, political challenges in bundling among providers − technically challenging (esp. for ambulatory care) – vagaries of diagnosis (more episodes in Miami than Minnesota), bias to performance of a procedure in a case rate, sorting out where particular claims are assigned to

17. Public Reporting and Pay-for-Performance (P4P) • Advantages • provides a hybrid payment to mitigate disadvantages of pure models; some natural blends – PPPM and under-service measures • can start to actually reward desired performance, instead of rewarding volume of services produced • can include measures of patient experience, which have been generally ignored in considerations of reformed payment approaches • Disadvantages • underdeveloped measure set – especially for physicians • what gets measured gets done? • marginal incentives may be insufficient to counter basic incentives in whatever base model it is superimposed over • contributes more administrative complexity

18. 2. Attributes of Each Payment Method (cont.) Will be performed concurrently with the literature review and updated throughout the project -- and will need to be reviewed by the consortium, as these attributes are based not only on results from literature review but also from expert opinion to address gaps in evidence and to consider practical issues that are outside of impact on quality, costs and equity.

19. 3. Perform Literature Review Method of Christianson et al. above “Electronic searches were performed by the Centre fir Reviews and Dissemination at the University of York, with supplementary searches undertaken by the research team. Electronic searches of MEDLINE, EMBASE, Cochrane, DARE, EconLit. Also, AHRQ, OECD, WHO Search strategy had 2 parts – 1st, retrieve systematic reviews using a wide range of search terms; 2nd, more limited # of search terms but a wider range of research designs

20. Christianson, et al. method (cont.) Define period of study, i.e., Jan 88 – Aug 06 and then extended through June 07. Then very detailed process of retrieving and reviewing full articles and in every case writing an article summary using a standard abstract format. Reviewed by 2 team members Majority of articles retrieved through this search process were from the US.

21. 3. Perform Literature Review (cont.) Issues: Do we need this kind of thorough primary source review across 4 (really 5) sectors and with need for much greater review of international, not just US, experience? Can we rely more on secondary sources/ others’ reviews, including OECD, WHO and European Observatory? Who here can provide advice on conducting formal lit reviews?

22. 4 – Identify gaps in the measures used in the literature review to help WP2 WP1 needs to work closely with WP2 because the literature on impact of payment incentives on quality, cost, and equity inherently requires identification of what metrics are used for the assessment. From literature review, will identify methodological issues with use of various performance metrics and provide that separately to WP2.

23. 5 – Develop the criteria for payment methods We proposed a set of criteria through a consensus process among the consortium members to be used in evaluation current and proposed payment schemes. These included considerations of feasibility, program integrity (i.e. gaming and fraud) as well as the primary end points of quality, cost and equity. The assumption is that there is no “best” method because specific adoption will vary across health systems based on nature of health system, political culture, strategic considerations, etc.

24. 5 – Develop the criteria for payment methods (cont.) Accordingly, there needs to be a consensus process across consortium members informed by the work on attributes and literature review, but including considerations of values and balancing objectives (quality, cost, equity, feasibility, etc.) These might be better laid out as advantages and disadvantages rather than a ranking Criteria can also be informed by health system experts in our countries and be updated throughout the three year process Need feedback loop as WPs 3-6 evolve

25. Time Line Categorization of payment schemes in Feb-March – with need for consortium review and comment – by email Develop first pass at “attributes”, literature review, and identification of measures for use by WP2 Feb – May, with distribution before meeting in Seattle in June Finalize literature review, June – October Initiate criteria development process June and probably need a dedicated process for late summer/early fall, ideally in person (first draft due at 8 months – may lapse a little?)