One “Pay for Performance” Wheel Has Been Invented
No New Cash Required to Grease Its Axle
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One “Pay-For-Performance” Wheel has Been Invented
No New Cash Required to Grease its Axle
In 2007, MedPAC submitted a report to Congress entitled “Promoting Greater
Efficiency in Medicare”. A common theme throughout the report was the need
to reform the payment system in ways that will improve patient care quality
while also reducing Medicare’s expenses. Exactly the right issue was addressed,
and not a minute too soon. The Pay-for-Service model is widely credited with
driving significant Medicare expense growth without rewarding providers for
superior patient outcomes. But during the five years since MedPAC’s report on
the subject, little progress has been made in creating a better payment system.
During this same period, hospital inpatient claims per patient discharged
increased by 13.6% to about $9797!
Part of the problem with initiating a Pay-for-Performance system is developing a
way to pay for it without driving Medicare costs still higher in the near term. The
money has to come from somewhere so initial attention has been focused on
the hospital system which receives most of Medicare’s payments. But the idea
has morphed from “Pay-for-Good-Performance” to “Penalty-for-PoorPerformance”. Rather than reward better performance, hospitals in the highest
quartile of readmissions will find their Medicare reimbursements trimmed back.
There are some inherent disadvantages to this approach. The most obvious
problem is that most hospitals are not threatened by Medicare reimbursement
cuts and therefore have no incentive to improve rehospitalization rates.
Secondly, hospitals have little or no control over patients once they have been
discharged from their care. As patients return home, hospital influence is sharply
diminished.
This is a big thorny problem. Many hospitals can do a better job of educating
patients about their condition and medications prior to discharge. This would
help. But people in hospitals are in a weakened condition which does not
enhance memory. They haven’t slept well or eaten well and they are likely to be
somewhat depressed. These are not conditions that create fertile ground for
patient education. It is likely that only a small percentage of information
provided under such circumstances will be retained. Should hospitals follow up
with patients after their discharge or keep patients on service an extra day to
reinforce knowledge of their condition and to gain more strength? Without
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One “Pay for Performance” Wheel Has Been Invented
additional reimbursement (where does that money come from?) the extra day
would eat into, if not through, hospitals’ already thin margins.
There is an even more important argument against suggesting that hospitals
extend most patients’ length of stay as a solution to preventable readmissions.
The first day after discharge is not when large numbers of readmissions occur.
Based on CareCycle Solutions’ data, the greatest risk of hospital readmission
takes place during days two through nine following discharge. And, if following
their discharge, patients are experiencing some form of distress when receiving
a hospital follow up call, how is the caller likely to respond? Probably by
readmitting the patient to a hospital.
A big part of the answer is hiding in plain sight, and at no cost to Medicare, not
even systems programming costs. Simply inform the Home Healthcare Industry
how meeting specified targets will produce additional revenues for them under
the PRESENT reimbursement system. How can this be? Well, about 12% of
Medicare patients discharged from a hospital are referred to a home
healthcare agency because they require ongoing skilled care, just not hospital
care. Medicare agencies should be charged with reducing their thirty day
hospital readmission rate by at least 50% of the industry’s average base year
rate, based on results already achieved by some agencies. Those not reaching
interim targets should expect to see their reimbursements cut significantly. And
setting reasonable goals is not that tricky if based on regional differences and
established by type of chronic illness.
So, if agencies have achievable targets to shoot for and they reach these
targets, how are they financially rewarded for doing so? Let’s start with the fact
that Medicare uses a sixty day “episodic payment” to compensate homecare
agencies for serving each patient’s skilled homecare needs. However, when
patients for any reason leave the service of an agency before having been
provided at least five home visits, Medicare pays the agency for each visit
made, not for the entire episode. Surveys show that an average 10% to 13% of
home care admissions fall into this Low Utilization Payment Adjustment (LUPA)
category and agencies lose money on every one of these patients. LUPA
payments totaling a few hundred dollars do not cover the cost of managing a
patient from the hospital to the homecare service, completing required
documentation, the initial assessment visit, billing, and accounting, on and on.
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One “Pay for Performance” Wheel Has Been Invented
Remember the large readmissions that occur during days 2 through 9? Many of
these are homecare LUPAs.
As rehospitalizations are reduced, LUPA payments are replaced with full
episodic payments. CareCycle Solutions (CCS) has proved this to be the case.
The 7.3% rehospitalization rate of its Medicare TeleHealth patients is about 63%
below the national average while the 4.5% LUPA rate for these patients is
approximately 60% below the national average. That means that between 5%
and 8% of all admissions will NOT become money losing LUPAs. Instead of
returning to a hospital, patients remain on the CCS TeleHealth service where
they generate full episodic reimbursement, likely for more than one episode
because those saved from readmission are typically among the sickest of all
patients. Yes, the homecare agency receives more reimbursement than
otherwise would have been the case, but Medicare saves significant dollars that
would have been paid to much higher cost hospitals or skilled nursing facilities.
CCS is financially rewarded for doing a good job for its patients and more
patients continue in their homes, the safest place for them to be.
There are several barriers to this solution. First, many health care providers view
patients as “profit centers” and resist working with home health agencies whose
patients require less than average hospital and physician care. Overcoming this
barrier is pivotal to reducing health care costs. Second, about 20% of CCS’s
hospitalization percentage reduction is achieved by providing Falls Prevention
Therapy services. The 2011 Senate Finance Committee’s negative review of
home care’s use of therapy services has made it less likely that patient needs for
this form of care will be met. Regulatory pressure on therapy services may well
result in higher rehospitalizations rates and therefore more, not less, money paid
by Medicare for patient care. Third, it is not inexpensive to develop new
program procedures to the point of effectiveness. CCS required more than two
years developing its service before operating economies were sufficient to offset
program costs. Home Healthcare Industry operating margins, now trending
sharply lower, do not encourage the development of new programs.
All three of the above barriers to creating services of the type offered by CCS
can be largely overcome by aligning agency objectives with those of hospitals;
reducing 30 day rehospitalizations. If an agency’s rehospitalization percentage
is well below regional averages, the number of therapy visits provided its
patients may be viewed with less concern. High performing agencies might also
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One “Pay for Performance” Wheel Has Been Invented
be excluded from “rebasing” now scheduled for 2014. And they could be
excluded from following regulations requiring higher than necessary nursing visits
so that operating expenses can be reduced. In short, key metrics should be tied
to patient outcomes that can be developed from CMS claims data. Not the
largely subjective and unverified data provided by Home Health Compare.
In spite of the barriers to developing programs that reduce rehospitalizations, the
present payment system will reward those agencies that effectively implement
such programs. Medicare can “Grease the Pay-For-Performance Wheel” by
providing information, guidance, benchmarking data and by publishing patient
values resulting from successful programs. Patients saved from multiple
hospitalizations will be quite happy with the provider and government program
that makes this possible. In the process, Medicare, and therefore the tax payer,
will benefit financially.
Wayne Bazzle, CEO
3406 Main Street • Dallas, TX • 75226
www.CareCycleSolutions.net
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