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Health-care policy expert Arnold Milstein weighs in on Medicare’s plan to prioritize “value over volume”

8266476742_4967a82707_zAmerican health-care spending is the highest in the world, yet some question whether that money really leads to improved patient outcomes. But significant reforms taking place within Medicare, the US's biggest healthcare payer, over the next few years aim to quell these concerns and reduce costs while improving quality of care.

Health policy experts explained the context of these changes last week in a webinar hosted by Reporting on Health and supported by the NIH's Health Care Management Foundation. The panel featured Stanford's Arnold Milstein, MD, MPH, director of the Clinical Excellence Research Center, as well as health economist Austin Frakt, PhD, professor at Boston University School of Medicine, and Jordan Rau, a correspondent for Kaiser Health News.

Health-care's dominant "fee for service" (FFS) model has been around "since doctors were getting paid in chickens," said Rau in the webinar, but it has no link whatsoever to quality. Many think this model needs to be changed because it incentivizes physicians to do more (and more expensive) procedures, regardless of the effect they have on patient outcomes. "Better, less expensive care is a national imperative," said Milstein. "The cost to society of inefficiently delivered care is creating enormous opportunity cost."

Starting in 2011, Medicare began to tie payments to quality: Doctors get paid 2 percent more if quality goes up, and 6 percent less when it goes down, based on patient ratings and rates of readmission and infection. In 2014, quality-linked FFS accounted for around 80 percent of care, of which around 20 percent featured some more radical change. The new plan is that 50 percent of payments will be non-FFS by 2018.

Options to reform this model could include bundled fees (a flat rate per "episode" that includes all complications and follow-up care), accountable care organizations (ACOs) that take responsibility for all patient needs and costs, incentives for cross-provider cooperation, and population-based payment in which doctors receive a set fee for any patient (currently being pioneered in Maryland).

How will we know which changes to push? Milstein used a graph to indicate "positive value outliers," institutions with high quality and low cost, whose strategies and techniques will be emulated to see if they can be effective elsewhere. He explained what researchers found makes them different:

[Positive value outliers] tended to have deeper, more personal relationship with their patients; their patients trusted that if they called these doctors on nights and weekends, someone who knew something about them would be rapidly responsive. Doctors' vision of their responsibility to their patients extended far beyond producing a perfect office visit; it really meant being a steward for their patients' best interests as their patients traversed emergency room doctors, hospitalists and medical specialists. And lastly, these doctors were not trying to be solo heroes - they did a wonderful job hiring and training medical assistants and taking advantage of a team… and it was associated with a substantial improvement in value. Our next step is to splice this DNA into average performing primary care practices and verify that this is indeed the right stuff.

Some other ideas for achieving the targets were mentioned, such as sending physicians to homes so patients don't get admitted, or in the longer term, having an intensive-care unit (ICU) "airline control tower" with more perspective than those on the "frontline" of critical care, an idea Milstein said was studied across 56 American ICUs and resulted in a 25 percent mortality reduction.

Milstein said such approaches could lower baseline health-care costs by 30 percent, but moreover could slow the rate at which health-care spending outgrows the economy, which is the real measure of success. Innovators in this area, he said, will need to draw from behavioral and computer science to think about problems differently.

Austin was more skeptical of the changes, voicing a "cautious optimism" that hinges on policy makers doing serious research and not just guessing. "If the past is a guide," he said, "we should be concerned that quality will suffer... and that is why we need to focus on quality as we cut payments." Cuts will be based on economy-wide productivity under the assumption that hospitals will mirror its fluctuations. "We're expecting [hospitals] to do just as much with less money over time," said Austin. Will they be able to? Historically, no. "Hospitals have never kept pace with the economy in terms of their ability to become more productive." But maybe times are different: research from last month showed that although productivity growth for hospitals serving Medicare patients was negative through the early 2000s, by 2010 it was at or above the same growth rate as the economy, and has continued to rise.

Another issue Austin raised is consolidation - hospitals employ more physicians, physicians are joining groups, and insurance is being bundled with delivery. This activity tends to push costs/prices up, sometimes as much as 40 percent. But usually consolidation does not significantly improve quality of care; an analysis of Medicare Advantage plans showed that 70 percent of the premium increase couldn't be accounted for by increased quality.

When an audience member asked why not push a faster, stronger timeline, Austin warned that overnight change is risky and projected reform to take 15-20 years. Considering the size of the industry and numerous stakeholders, he advocated for models to be rigorously tested and then gradually implemented. Otherwise, care could get worse, or hospitals that can't keep up could shut down.

A bigger problem, said Jordan, is that people still tend to equate higher costs with better quality. It's not like shopping for a car; a lot of the time, we defer to our doctor to make decisions.

Previously: Medicare reforms cut costs and improve patient careExperts discuss high costs of healthcare and what it will take to improve the systemAnalysis: the Supreme Court upholds the health reform act (really) and Views on costs and reform from the “dean of American health economists” and New Stanford center to address inefficient health care delivery
Photo by: Chris Potter

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