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One-on-One with Dr. Robert Pearl, The Permanente Medical Group CEO, at World Health Care Congress

May 1, 2017
by Rajiv Leventhal
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At the 2017 World Health Care Congress, notable physician leader discusses healthcare's most pressing issues
In the opening session of this year's World Health Care Congress at the Marriott Wardman Park Hotel in Washington, D.C., Robert Pearl, M.D., executive director and CEO of The Permanente Medical Group and president and CEO of the Mid-Atlantic Permanente Medical Group, was part of an in-depth panel discussion on the elements of the healthcare system that are not working and how they can be fixed. 
A key focus from Dr. Pearl, author of the just-published book Mistreated: Why We Think We’re Getting Good Health Care—And Why We’re Usually Wrong, during the keynote session, was how healthcare needs to become more integrated. He said, per Editor-in Chief Mark Hagland's report, "If you integrate care, horizontally among physicians and vertically among the pieces of the continuum of care, all of a sudden, the physicians start to coordinate and collaborate, and you get the results you need. As soon as you capitate, all of a sudden, prevention, and early care become more significant, and you can see the care gaps." 
Indeed, integration is a key point of emphasis for Kaiser, headquartered in Northern California and composed of the Permanente Medical Groups, Kaiser Foundation Health Plan, Inc., and Kaiser Foundation Hospitals. The specific organizations that Pearl directs are comprised of over 9,000 physicians and 34,000 staff members, and he is responsible for the healthcare that is delivered to more than 4 million Kaiser Permanente members in the states of California, Virginia, Maryland and the District of Columbia. After his morning panel discussion, Pearl caught up with Healthcare Informatics Managing Editor Rajiv Leventhal at the conference to talk about integrated care, health policy, health IT's role, and more. Below are excerpts of that discussion. 
Tell me a little bit about what's new with The Permanente Medical Group and how it continues to evolve. 
Kaiser Permanente provides care to 12 million Americans in eight different states. The biggest technology evolution we have seen has been a rapid increase in telehealth, but that's a term that's utilized in a traditional medical way. To me, "video" is like saying computer and telephone; it's a foundation. How you use it is dependent upon the care delivery system in which you work. In [my book] Mistreated, my observation is that context sets perception, which sets behavior. And that if you you take a tool like telehealth and put it into the a fragmented fee-for-service world, all you see is a lot of communication, but not value created as a result. If you don't have an EHR [electronic health record] underlying it, you can't get comprehensive information, and if you don't have an EHR to enter data into, the next person doesn't know what you did. As soon as you're in that integrated context, that's were you get the power. People now in the right context have the right perception, so how can we use this? How do I provide care at a long distance that's convenient for you and how do I reach out some place and bring expertise? Those are the questions you begin to ask as long as you're in the right context. 
Can you give an example of how this might look in the real world? 
Looking at vertical integration, you have a primary care physician and a specialist working together as one, so if you're seeing a primary care physician and he or she needs specialist expertise, why send a consult rather than immediately link primary care and speciality care? If you're in a fragmented world of care delivery, it's hard to do this since all the doctors are already seeing [their own] patients. But as soon as you have become an integrated care delivery system, that [changes]. I am also the chairman of the Council of Accountable Physician Practices [CAPP], and in these large multi-speciality medical groups, you can assign a doctor to be available on video who has an EHR, and that starts to change the entire set of dynamics where you can lower costs today and higher quality is a consequence. 
How do you feel about healthcare policy right now, in the current moment? When you look at the value-based care road that the industry is on, are you happy with where things are going?
No, that's why I wrote the book Mistreated. I believe the focus has been on MIPS and MACRA, and not that they're bad things, but they are too little and too slow. I see four pillars to what needs to be the evolution: care has to be fully integrated, vertically and horizontally; care has to be capitated so everyone has the right incentive to do the right thing the first time; there should be focus on prevention of medical errors, so [healthcare] must be technology-enabled, via EHRs, mobile and video; and it has to be physician-led. You need all of those pillars and without them, change will be slow and the nation will become a two-tier system of medicine before it evolves into a high-performing one. 
It takes all of these pieces together, and capitation is an essential pillar, but if you all you do is capitate a large number of physicians and there's no leadership to be able to structure it in a way so you have the right physicians in the right specialities at the right time, that's not [good enough]. In my book I talk a lot about the need for more primary care and less speciality care, and how specialists will have primary volumes with better quality outcomes as a consequence of that. The technology is remarkably powerful, but it's in a context with integration, with capitation, and with physician leadership. 
Kaiser has obviously set the pace in terms of how they're doing integrated care. Can this be replicable and scalable for other institutions and what lessons have you learned with this model? 
It's definitely scalable and replicable. So Kaiser Permanente is really three organizations; there is a health plan, the hospitals, and the Permanente Medical Group. They are three coming together as equals. The challenge is that putting together that type of integrated system is difficult. You have to make sure you rightsize your specialities and your number of hospitals, and you need to make sure that you change how you reimburse physicians, with a a need to focus on prevention. So there are a lot of pieces that need to come together and that's the challenge. It's easier to do more in medicine than to do better. That's a problem right now.  
With new federal health leaders placing an emphasis on having health IT make life better for doctors, what impact do you see this having down the road?
We talk about health IT and computers as if it's all the same. It's not at all, though; the machines are the same but the processes are different. I think about it in three phases: the first phase is the doctor sitting in office entering information on the computer, and it's better than handwriting since it's more legible, but the experience has been that it slows them down rather than adding value. It just takes more time entering something electronically. The second level is interoperability. We are failing to understand there that if I have to go into your record and other records to get information of a patient, that's a lot of time [taken up] and is very inefficient. What's needed is a comprehensive EHR where all of the information is available and presented to me as the treating doctor. If this were the case, even though I might  be an ophthalmologist, I would know that you haven't had your colon cancer screening done, so I can take the action to accomplish it. I never would have asked you about it, but when it's right in front of me I can. 
For this to happen, you have to open up the APIs [application program interfaces] and the third-party developers can then come in and extract the data out of the systems and do what's been happening for ATMs—meaning you can go to any machine anywhere in the world and get the money out or deposit money into it, no matter the bank you have. But getting the big vendors to open the APIs will be quite the political challenge. 
A few years ago Kaiser made big news with its $4 billion investment to go digital. What lessons have been learned since that time? 
Well we have a fully comprehensive EHR, both for outpatient and inpatient. I joke about wanting to start a museum at Kaiser because all of the people we now train have seen a paper record or a true X-ray or a lab slip, so they wouldn't know what they would look like. If you look at the National Committee for Quality Assurance [NCQA] ,there are a a thousand programs, and we're No. 1 in the entire country. [The NCQA annual report rates more than 1,000 health plans on quality including Medicare, Medicaid, and commercial on a 0-5 scale with 5 being the best, and Kaiser had 8 of the 23 health plans that were given a 5 out of 5 in 2016]. Why is that? The [comprehensive] EHR first and foremost—without it we never would have accomplished all of this. 
We are able to provide care through almost as many virtual visits as in-person visits. You couldn't do that without the comprehensive set of information. We have a stroke neurologist who is actually available to see the patients the minute they walk through the door, and our door-to-needle time to get the clot-busting drugs is now under 30 minutes, while the rest of the nation is over a year. Four months ago I broke my leg and I went to the local Kaiser facility and the physician there said that there is a doctor who's really good at your operations, located 15 miles away. But then he said, "Let me just link you up with video." Imagine if I needed an ambulance in both directions, and the pain that would come with that. We also look at a lot of patient satisfaction data; we survey over 1 million patients a year and that [revealed] that the satisfaction for a video visit is higher than an in-person visit. 
Finally, what are one or two important takeaways that you would like people to know about your book? 
The first big takeaway is that the legacy players—the big insurance companies, the pharmaceutical companies and the physician speciality groups—will not change since they like the current system too much. A lot of the book is written for patients, not policymakers or physicians. Also, I'd like people to know that any profits will be given to charity. I have spent my entire career committed to transforming American medicine—some of it by how it's structured and a lot of it by technology. I have been the CEO here for 18 years and we have been at the forefront of first implementing EHRs; then we were at the forefront of secure email a decade ago; and after that, we are the the No. 1 provider of video visits in the U.S. So we're always staying at the cutting edge of technology. Bringing together hi-tech and high-touch is key, so the technology outside of the personal; because if in the process of creating the scientific improvement in healthcare we lose the personal and the compassion, we will have lost as part of the bargain. 

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Assessing CMS’s Risky Move on Risk: Has Seema Verma Pushed MSSP ACOs Into Uncharted Territory?

August 13, 2018
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Will Seema Verma’s August 9 announcement light a fire under the MSSP program ACOs—or will it cause them to flee?

Though not entirely unexpected, the announcement last Thursday evening (August 9) by Administrator Seema Verma and her fellow senior officials at the federal Centers for Medicare and Medicaid Services (CMS) nonetheless created quite a stir within patient care leaders in U.S. healthcare. As Managing Editor Rajiv Leventhal reported that evening, “The Centers for Medicare & Medicaid Services (CMS) is proposing a new direction for ACOs (accountable care organizations) in the Medicare Shared Savings Program (MSSP), with the goal to push these organizations into two-sided risk models.”

Leventhal went on to note that this new proposal, named “Pathways to Success,” which had been anticipated for months, “looks to redesign the program’s participation options by removing the traditional three tracks in the MSSP model and replacing them with two tracks that eligible ACOs would enter into for an agreement period of no less than five years: the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk; and the ENHANCED track, which is based on the program’s existing Track 3, providing additional tools and flexibility for ACOs that take on the highest level of risk and potential rewards. At the highest level, BASIC ACOs would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program.”

Right now, Leventhal pointed out, “[T]he MSSP model includes three tracks and is structured to allow ACOs to gain experience with the program before transitioning to performance-based risk. The vast majority of Shared Savings Program ACOs have chosen to enter and maximize the allowed time under Track 1, which is an “upside-only” risk model. MSSP Tracks 2 and 3 involve downside risk, but participation in these tracks has been limited thus far.” And that is in this context: “Broadly, CMS is now essentially proposing that the contract agreements of upside-only ACOs be two years, rather than allowing six years (two, three-year agreements) like the government has previously permitted. Overall, there are 561 MSSP ACOs out of 649 total Medicare ACOs, with 82 percent of those 561 MSSP ACOs taking on upside risk only.”

In other words, Verma and her fellow CMS officials are banking on the proposition that they can compel/force hospital, medical group, and health system leaders to move quite quickly from upside risk to upside/downside risk, and not simply drop out of the MSSP program.

So, just how risky (pardon the embedded pun) is that gamble on the part of Verma and CMS? Well, the proposal has elicited quite a range of responses from the industry in the past few days. But, as Leventhal reported on Friday, one very major player in this landscape, NAACOS—the Washington, D.C.-based National Association of ACOs—is pretty much hopping mad, calling the proposal “misguided,” and noting that the changes, if finalized, “will upend the ACO movement by creating havoc with a significant overhaul introducing many untested and troubling policies.” In the policy world, that’s about as close as one gets to tweeting in all capital letters.

As Leventhal wrote on Friday, “Much of the discussion following the rule’s release will likely center around the BASIC track, which essentially limits ACOs to stay in “upside-only” risk models for just two years, compared to the existing allowance of six years. What’s more, those ACOs in an MSSP Track 1 upside-only model would only be able to get 25 percent of any savings they take in, compared to 50 percent, which is the current max.” What’s more, he noted, “When ACOs are in a one-sided risk model, they do not share losses with the government when they overspend past their benchmarks, but they do share in the gains. As such, in these one-sided risk models, CMS is on the hook for any losses all on its own.”

NAACOS issues forceful comments

In its Friday press release condemning the “Pathways to Success” proposal, NAACOS stated that “The downside financial risk for patient care would be on top of the significant financial investments ACOs already make, according to [NAACOS president and CEO Clif] Gaus, jeopardizing years of effort and investment to improve care coordination and slow cost growth.” And the press release quotes Gaus as stating that “CMS discusses creating stability for ACOs by moving to five-year agreements, but they are pulling the rug out from ACOs by redoing the program in a short timeframe with untested and troubling polices.”

Indeed, NAACOS notes in its press release that “CMS predicts fewer ACOs participating in the future, beginning with the 2019 performance year.” And it adds that “NAACOS repeatedly has voiced concerns about forcing ACOs to take downside financial risk before they are ready, advocating instead that ACOs that demonstrate certain cost and quality achievements may remain in the one-sided model. A NAACOS survey earlier this year of ACOs required to move to an ACO model with downside financial risk in 2019 showed that more than 70 percent of responding ACOs are likely to leave the program if forced to assume financial risk. Given the proposals put forth today, 70 percent could be an underestimate, with even more ACOs leaving the program.”

Nor was NAACOS alone in its strong condemnation of the proposal. The Chicago-based American Hospital Association (AHA) also released a statement on Friday, with the nation’s largest hospital association attributing its statement to executive vice president Tom Nickels. Nickels was quoted as stating that, “While we acknowledge CMS’s interest in encouraging providers to more quickly move toward accepting risk, drastically shortening the length of time in which ACOs can participate in an upside-only model ignores the reality that providers are starting at vastly different points and will have vastly different learning curves when moving toward value-based care.”

Indeed, Nickels said in the statement, “The proposed rule fails to account for the fact that building a successful ACO, let alone one that is able to take on financial risk, is no small task; it requires significant investments of time, effort and finances. Hospitals and health systems must build upon their current infrastructure, which entails forming new and different contractual relationships and incentivizes successful strategies. While some have already taken significant steps toward achieving such alignment, others are not as far down this path. A more gradual pathway is critical for hospitals and health systems that are interested in participating in risk-bearing models – particularly those that are exploring such models for the first time.”

Seema Verma stands firm

In her telephonic press conference on Thursday evening at the time of the release, and covered by our Associate Editor Heather Landi, Administrator Verma was quite firm in terms of her insistence that it’s time to force the MSSP program forward. Asked whether she and her fellow CMS officials want to improve the MSSP program, or whether they would consider simply eliminating it, Verma stated that “We’ve taken a lot of time to study the implications of the program, and how it’s performing. We have some concerns about the impact on consolidation in the market; we’ve heard that from a lot of providers that having the ACOs is creating more consolidation and larger health care systems and reducing the number of individual providers, so we have some concerns about that.”

What’s more, she told the press, “What we’ve learned from reviewing the six years of data from the program is that there are successes, and there are successes when providers are willing to take on two sided risk, and when they are willing to be responsible for achieving sharing as well as losses, they actually save dollars while also improving quality. We’re trying to build upon the successes but also address the shortcomings of the program. And, those shortcomings are, allowing providers to continue without taking on any risk. And when we have that situation what we’re seeing is that we’re actually losing dollars, losing money. And we feel that given where the Medicare program is, we need to always focus on delivering value for patients and fort taxpayers. When we developed this program, we wanted to move the entire program towards providers taking more risk because we know that works. We want to work with ACOs that are serious about participating in the program and investing in the type of changes that are going to deliver value to patients.”

Varying responses—some positive

Not all associations involved in ACO development have responded as negatively as NAACOS and the AHA have. Indeed, the Los Angeles-based America’s Physician Groups, or APG, released a statement attributed to Valinda Rutledge, its vice president, federal affairs, which said, “Overall, APG considers the proposed rule a very balanced approach to various stakeholders’ concerns as well as a positive step forward in the movement from volume to value.  It also acknowledges what we already know—two-sided, physician-led Accountable Care Organizations (ACOs) not only provide superior quality care at a lower cost, they provide significant savings to the Medicare program—and more importantly, the American taxpayer.”

Further, APG’s Rutledge said, “In this proposed rule, a smooth pathway is provided for physician groups seeking to move into risk, which allows them to tap into other Medicare quality programs including the Quality Payment Program (QPP) and the incentive payments it provides.  Moreover, it allows physicians engaged in two-sided models access to additional tools to better coordinate care and provide the type of services patients need, and in the most appropriate setting, including the patient’s home.”

And, Rutledge added, “We know that many of today’s ACOs have experience in upside risk only.  The proposed rule acknowledges this and provides for a transition period instead of forcing groups into downside risk right away. We believe that no group should be forced into risk; however, when groups decide to accept the opportunity for shared savings, we also believe that they then should take on the responsibility of saving money for our healthcare system and the people and communities they serve.”

Where do we go from here?

There are many ways in which one could look at this situation; indeed, the landscape of reaction to the “Pathways to Success” proposal is practically a policy-focused Rorschach inkblot test, with those who believe that ACO development needs to be compelled forward towards acceleration, cheering Verma’s announcement, and those who believe that the success of the ACO phenomenon depends on a gradual ramp-up, criticizing it. But the real question is this: what practical effect will the announcement, and the proposal, have, on the ACO movement?

The reality is that Seema Verma and her fellow senior CMS officials are taking a huge risk in trying to push provider organizations very forcefully into downside risk, at a time when early ACO development work has revealed just how difficult that proposition really is. Among the major challenges that have been experienced by pioneering organizations: the ability to obtain, analyze, and use timely clinical and claims data to manage care and to vastly improve clinical, operational, and financial performance; the ability to align incentives between individual physicians, both primary care physicians and specialists, and patient care organizations, within ACO contracts; the core challenge of engaging patients in participating in actively improving their own health status; and the intensive fundamental IT and data analytics development needed to turbocharge all of this.

All of this is daunting even to the most advanced provider organizations. This past week, at our Health IT Summit in Boston, I had the privilege and pleasure of interviewing onstage Barbara Spivak, M.D., the president and CEO of the Mt. Auburn Cambridge Independent Practice Association, or MACIPA. Dr. Spivak noted that one of the very major challenges in succeeding in the MSSP program involves the effort and complexity involved in physician documentation around its quality measures. “One of key factors in physician burnout, particularly in primary care, is the documentation required for all of the quality metrics,” she told me. What’s more, she noted, even though MACIPA is a small organization, its physicians are still held accountable for hundreds of quality metrics that differ across various health plans; the only successful way of resolving that challenge is to narrow the broad range of measures demanded by the various payers in the various programs, down to a small number of more generalized measures. Dr. Spivak also cited an example of a potential future problem around CMS’s proposed fall risk documentation measure. Originally, she explained, physicians had to simply ask at-risk patients if they had two or more falls in the past six months and if they were injured. But a new CMS proposal may make things more complicated than that, Spivak noted. If the proposal passes, starting in 2019, physicians will have to ask these patients many more questions, including finding out details about stairs in the patients’ home as well as their vision. Our onstage interview took place on Wednesday morning, and the “Pathways to Success” proposal was announced Thursday evening. It will be interesting to see how physician leaders like Dr. Spivak react to it, given everything they already face.

So the key question is this: will provider organization leaders, and most especially the leaders of physician groups, respond with enthusiasm to this new CMS proposal, or will they recoil from it, and begin to flee the MSSP program? One of the most difficult challenges for CMS officials lies in how to most precisely calibrate their pressing down on the levers of reimbursement in order to compel providers forward. If they push down too lightly, the pace of change will be sluggish; but if they push down too hard, it could send provider organizations fleeing. Seema Verma and her fellow CMS officials have taken a calculated risk with this new move, and, from the reactions so far, they could face an uphill battle in their quest to push physician groups and hospitals forward faster without causing them to jump ship altogether and flee the MSSP program. Only time will tell; but the economic imperatives facing the administration are clear, as the Medicare actuaries predict a 70-percent increase in overall U.S. healthcare spending over next several years. But for an administration that is ostensibly committed both to healthcare system solutions that are as free market-based as possible, and also committed to doing everything possible to curb accelerating healthcare system costs, the built-in contradictions are already forcing awkward policy and payment moves. Without question, CMS, and all of us, are clearly already in uncharted territory. And only time will tell how skillful the agency’s navigation across that territory will have proven; so—stay tuned.


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Pondering the Psychology of Incentives in Bundled-Payment Contracts

July 27, 2018
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Healthcare policy researchers, in an op-ed piece in the Health Affairs Blog, ponder the differences between prospectively and retrospectively based bundled payment incentives

A fascinating analysis of the trade-offs involved in different forms of incentivization appeared late this spring in the Health Affairs Blog, concerning prospective and retrospective financial incentives. Could the difference between the two make a real difference in how the payers and purchasers of healthcare stimulate the best behavioral outcomes from the providers of healthcare? The question is a very complex and nuanced one, and ultimately, the blog’s authors reach no firm conclusions either way. But pondering the different elements and possibilities is certainly a worthwhile exercise.

Under the headline, “When Designing Bundled Payments, Don’t Ignore the Lessons of Behavioral Economics,” Jeroen Struijs, Arthur Hayen, and Koen van der Swaluw, begin their analysis by stating that “In health care, all bundled payment models shift financial and clinical accountability to a single provider-led entity that then is responsible for a budget and the quality of care delivered for any given episode. The entity receiving the bundled payment earns a higher margin if a patient has fewer expenditures but also bears the financial risk of (re)admissions and complications. This payment model therefore produces an incentive for providers to coordinate care across settings and not to stint on needed care. When implementing bundled payment models, payers and providers can choose two main strategies regarding the payment flow, namely a prospective payment (which is made before services are rendered) or a retrospective payment (which is made after all services are rendered).”

Continuing on, they write, “Currently, there is ongoing debate about which payment strategy to follow. In a June 2017 Health Affairs Blog post, François de Brantes and Suzanne F. Delbanco stated that the difference between retrospective and prospective payments is not significant in practice. Paraphrasing their line of reasoning, the difference between the two is believed to vanish as retrospective payments are often based on upfront, negotiated benchmarks as well. The authors continue by saying that people’s “aversion to losses” would make a case for including downside risk to retrospective bundled payments, as a way of mimicking the incentives that follow from prospective bundled payments.”

But, these authors beg to differ on that point. “The universal lessons of behavioral economics have taught us otherwise, namely that people’s aversion to losses is precisely the reason why an upfront, negotiated benchmark is not the same as a prospective payment,” they write. “What is more, assuming downside risk in a retrospective payment arrangement will lead to different physician behaviors than when these physicians would assume full financial accountability for managing a prospective bundled payment. Understanding the difference in reference points under different payment strategies and their expected consequences for provider behavior is crucial in this discussion. As we will show, behavioral economics can be a useful paradigm for thinking about the behavioral implications of different payment strategies.”

For evidence to support their contentions, the authors dip into “prospect theory,” noting that prospect theory is “a descriptive model of decision making, which acknowledges, in contrast to conventional economics, that people respond to changes in wealth, instead of expected final assets. These changes are evaluated in relation to a neutral reference point (the status quo). Therefore, the same level of wealth can feel like poverty to a previously rich person and feel like riches to a previously poor person. In prospect theory, the status quo serves as the zero point of the value scale. Outcomes that are better than the status quo are perceived as gains. Worse than the reference point, they are losses.”

So how might prospect theory apply with regard to stimulating the “correct” behaviors and actions among providers, in bundled payment systems? Here’s an experiment with implications for healthcare payment. “Losses are more painful than forgone gains, and whether something feels like a loss or a gain depends on our point of reference,” the authors write. “As a consequence, people systematically assign higher value to things they own than to things they can acquire: the endowment effect. The primary effect of endowment is not the increased appeal of money in our pockets but merely the pain of giving it up. The endowment effect and accompanied loss aversion have been leveraged by behavioral economists to bolster the impact of incentives. For example, in one experiment, Mitesh S. Patel and colleagues paid a group of employees $1.40 each day they achieved the goal of walking 7,000 steps. Another group of employees was instead allocated upfront the maximum attainable monthly amount ($42) as a prospective payment; the researchers then took back $1.40 each day that the goal was not achieved. While the incentive was identical in economic terms, only participants in the loss-incentive group outperformed the control group and also had a 10 percent higher chance of achieving their daily step goal than participants in the gain-incentive group.”

Looking at the upsides and downsides of both types of systems, the authors write that, “While the financial risks may be equivalent for providers in a prospective or a retrospective model, we reason that these different responses ultimately will result in different strategies and polices to achieve value, for the good or the bad. For example, providers under prospective payment systems could adopt more risky strategies targeted at expected high-cost outliers or risk selection of patients. The ongoing debate about whether to implement retrospective or prospective payment models is a multifaceted issue, depending on many factors, but, conceptually, it comes down to a trade-off between implementation efforts on one hand (in favor of retrospective payments) and incentive strength (in favor of the prospective payment) on the other hand. The strength of an incentive and, consequently, the resulting value for patients, could be a function of the timing of the actual payment.”

It’s hard to know how this might play out in actual systems among physicians in practice, of course, given the high level of complexity of the processes around healthcare delivery and payment. I suspect that one very big barrier to implementing more aggressive prospective systems might developing the experience over time to know precisely how much to weight prospective incentive payments, and around what elements or factors. And that process would be complicated by the question of the extent to which individual physicians in practice would be aware of minute elements in care delivery and management processes, and be able to control or change decision-making in the moment.

And all of this presupposes some level of consistency of processes among the multidisciplinary care teams that are responsible for delivering and managing care under bundled payment-based contracts—and right now, there really is none.

And, not surprisingly, Francois de Brantes had something to say about all of this. In the comments section following the article’s text, he praises the authors for some elements of the blog. “The authors…bring up several important points related to the behavioral effects of prospective payments against which payments are debited, and there’s good evidence on those effects,” De Brantes wrote. “But,” he quickly adds, “the authors also make a central assertion that is far more debatable. They claim that the reference point in a model in which actual spend is reconciled against a target budget are the individual services paid. That’s untrue. The reference point is the target budget or price. Much like has been done in the Medicare Bundled Payment for Care Improvement (BPCI), these prices are negotiated up front and are the true reference point. Any claims incurred are simply debited against the target price and, once the episode of care closes, the net result is either a debit or a credit. If it’s a credit, then the provider is owed money. If it’s a debit, the provider owes money.”

And that’s exactly where the problem around this is, de Brantes notes. “As such, an episode of care payment model with downside risk and a prospectively set target price is an endowment of sorts even though it technically doesn’t function as such since the provider doesn’t simply get to keep the difference between the endowment and the total cost of the services rendered,” he notes. “And there are several reasons why such a model is preferable. First, as the authors point out, a true endowment model could lead providers to cherry-pick patients or skimp on needed services. Second, there are many operational issues that provide a counterweight for the potentially greater effect of a true endowment. Third, field experience has shown that when providers receive timely and frequent (e.g. once a quarter and within 45 days of the end of a quarter) reports showing, by patient, the total actual costs incurred against the target prices for the episodes, the behavioral effect is very similar, if not identical. Fourth, back end reconciliations also allow for some flexibility in how to account for quality scores, for example by mitigating losses when quality is higher than expected or vice versa.”

In short, de Brantes says, “We agree with the authors that, at some point, a natural experiment that would compare the effects over time of the two models would help clarify the differential effect of one over the other. The evidence to-date, however, doesn’t seem to indicate that there would be much.”

In short, we are very early along in this journey, and evidence based on practical experience, of which types of levers work best in bundled payments, remains lacking. It will be fascinating to see what the evidence of the next couple of years offers us. Until then, everything remains fundamentally experimental in nature.


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Could Last Week’s Proposed-Rule Release Represent an Inflection Point for CMS and for Value-Based Federal Payment?

July 18, 2018
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Industry leaders’ responses to the release of CMS’s proposed rule reveals a fascinating policy landscape

The release last Thursday of a proposed rule involving the Physician Fee Schedule and the Quality Payment Program under the Medicare program, by senior officials at the Centers for Medicare and Medicaid Services, was a very important development for physicians, hospitals, healthcare IT leaders, and others. As Managing Editor Rajiv Leventhal wrote in his breaking-news report on Thursday evening, “The Centers for Medicare & Medicaid Services (CMS) today proposed changes that the agency believes will ‘fundamentally improve the nation’s healthcare system and help restore the doctor-patient relationship by empowering clinicians to use their electronic health records (EHRs) to document clinically meaningful information.’ These changes, according to CMS, would increase the amount of time that doctors and other clinicians can spend with their patients by reducing the burden of paperwork that clinicians face when billing Medicare. The proposals, part of the Physician Fee Schedule (PFS) and the Quality Payment Program (QPP), would also modernize Medicare payment policies to promote access to virtual care, CMS said in a July 12 announcement.”

Leventhal further noted that “Such changes would establish Medicare payment for when beneficiaries connect with their doctor virtually using telemedicine to determine whether they need an in-person visit. Additionally, the QPP proposal, set to take place in year three of the program, in 2019, would make changes to quality reporting requirements to focus on measures that most significantly impact health outcomes, CMS said.”

Among other elements, “The proposed changes would also encourage information sharing among healthcare providers electronically. And, the QPP proposal would make changes to the Merit-based Incentive Payment System (MIPS) “Promoting Interoperability” performance category to support greater EHR interoperability and patient access to their health information, as well as to align this clinician program with the proposed new “Promoting Interoperability” program for hospitals, according to the announcement,” Leventhal noted. And he quoted CMS Administrator Seema Verma’s statement upon the release of the proposed rule that “Today’s proposals deliver on the pledge to put patients over paperwork by enabling doctors to spend more time with their patients. Physicians tell us they continue to struggle with excessive regulatory requirements and unnecessary paperwork that steal time from patient care. This Administration has listened and is taking action. The proposed changes to the Physician Fee Schedule and Quality Payment Program address those problems head-on, by streamlining documentation requirements to focus on patient care and by modernizing payment policies so seniors and others covered by Medicare can take advantage of the latest technologies to get the quality care they need,” Verma said last week.

Some key changes in the proposed rule include:

> Adjustments to the MIPS program such as the removal of 34 low-value measures, a proposal to add 10 new measures, an increase of the cost component calculation weight from 10 to 15 percent, and the doubling of the performance threshold to 30 points

> Major reforms to Evaluation and Management (E/M) payments including single blended payment rates for both new and established patients for office/outpatient E/M level 2 through 5 visits and a series of add-on codes to reflect resources involved in providing complex primary care and non-procedural services.

> Streamlining documentation requirements including eliminating the requirement to justify the medical necessity of a home visit in lieu of an office visit.

> Reduction of quality measures from 31 to 24 in the Medicare Shared Savings Program (MSSP) and additional focus on the measure set on more outcome-based measures, including patient experience of care. And

> Expansions to telehealth and virtual care reimbursement, including payment for virtual check-ins and evaluation of patient-submitted photos or recorded video and Medicare-covered telehealth services for prolonged preventative care.


Reactions from the field

Industry leaders have been quick to react. As Associate Editor Heather Landi reported in her article published this morning, “Many health IT industry groups, policy experts and other industry stakeholders continue to delve into the 1,473-page proposed rule released by the Centers for Medicare and Medicaid Services (CMS) on July 12 that provides updates to the Physician Fee Schedule and Quality Payment Program (QPP), which encapsulates the Medicare Incentive-based Payment Program (MIPS) and Advanced Payment Models.”

Reactions to different elements have gone in different directions, depending on the healthcare sector and leaders involved. As Landi noted, “The Ann Arbor, Mich.-based College of Healthcare Information Management Executives (CHIME) expressed support for CMS’s proposed rule. In a statement, Liz Johnson, R.N., CIO, acute hospitals and applied clinical informatics at Tenet Healthcare, who serves as the CHIME Public Policy Steering Committee Chair, said, ‘CMS is certainly heeding calls from the provider community to reduce administrative burdens. We support efforts to reduce these burdens on clinicians, whether they were created by paper or electronic processes, and to give physicians more time to care for patients. We also applaud the discussion of expanded telehealth reimbursement, something that has been a priority for CIOs, and we commend efforts to incent use of PDMPs (prescription drug monitoring programs) as we seek ways to leverage technology in our ongoing efforts to combat the nation’s opioid crisis.’”

Also, Don Crane, president of America’s Physician Groups (APG), said APG staff are still reviewing the proposed rules; but Crane stated that they are “cautiously optimistic that CMS has taken real action here to advance the value movement.” “Importantly, these rules include a re-affirmation of the recently announced Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) Demonstration.”

But not everyone is feeling sanguine.  Chet Speed, vice president of public policy, at the Alexandra, Va.-based trade group AMGA (formerly the American Medical Group Association) said in a statement that, “In its proposed rule for the third year of the Quality Payment Program, CMS again is proposing policies that do not further the program’s intent and potential. Based on initial review of the proposal, AMGA is particularly disappointed that CMS kept a high low-volume threshold that will continue to reduce the payment adjustments for providers that are invested in value-based care.”

The proposed rule, Landi noted, maintains the low-volume threshold at $90,000 in Part B allowed charges or less than 200 Medicare patients. In year 1 of the QPP, CMS set clinicians’ low-volume threshold at $30,000 or less in Medicare Part B allowed charges or less than 100 Medicare patients and the agency increased the threshold in year 2. For the 2018 performance year, CMS estimated that about 60 percent of otherwise eligible clinicians were excluded from MIPS, although some clinicians are not subject to MIPS requirements due to participation in advanced APMs.

“When we think about MACRA (the Medicare Access and CHIP Reauthorization Act), when it was first passed, as a statute, it essentially represented Congress’ view about moving Medicare to value, and they essentially did that by putting payments at risk. If you look at the statute in 2017, your reimbursements were at risk plus-or-minus 4 percent, depending on how you did, and it goes all the way up to plus-or-minus 9 percent by 2023,” Speed emphasized.

Meanwhile, in an excellent podcast interview with Leventhal that took place shortly after the release of the proposed rule, Jeff Smith, vice president of public policy at the Bethesda, Md.-based American Medical Informatics Association (AMIA), said, “I think the most obvious takeaway” from the proposed rule “is that generally, it looks like CMS has made good on threats to harmonize meaningful use, now known as the Promoting Interoperability program, across hospitals and physicians, and I think this is an incredibly important and positive development. For the last several years, there has been a divergence in program requirements for hospitals and physicians, and just given the marketplace, in terms of how many hospitals have administrative purview over physician groups, this will be an incredibly welcome set of changes for promoting interoperability."

Smith continued, "You also mentioned telehealth, and again, telehealth advocates have been fighting for years to get CMS to jump into the game, and start reimbursing for telehealth services. This is important, because when CMS reimburses something, it clears the path in a big way for private insurers to do the same. And for years, while you’ve seen various private insurers toying with reimbursement, Medicare’s the big one, and this is really going to pave the way for that.”

When Leventhal asked about the Quality Payment Program and the harmonization now being created with the Promoting Interoperability program (until recently known as the Meaningful Use Program), and he asked how the industry might react to the 365-day reporting period, versus a 90-day reporting period that some have asked for, Smith said, “CMS has often been caught between a rock and a hard place when it comes to the quality measure requirements, in terms of the reporting period. I think the issue is more acute, pardon the pun, for the ambulatory side, because they have so many more quality measures. Certain specialty groups have made the case that they need to report on quality for 365 days, or it’s not an accurate measure of the quality they’re providing. I really don’t know how CMS will shake out on the reporting period, but if the last few days of events are any indication, CMS is more than likely going to move forward with what they’ve proposed here, by and large. I say that because just a few days ago, CMS said they were finished reviewing comments on the IPPS rule, which is a lightning-speed time for review of a rule of that size, and so what that tells me is that CMS is just making proposals and moving forward with what they think is reasonable. And this is counter to what the previous administration would do, which was to propose something, knowing there would be pushback, so they would actually propose higher thresholds and longer reporting periods, knowing they would end up more or less where they wanted to be in the first place. So it will be interesting to see where they end up around the reporting period; that’s likely the area where the loudest gripes will be focused.”

Looking at the landscape through different lenses

All of this really adds up to quite a fascinating situation. Administrator Verma and other senior CMS officials have stated publicly now many times their determination to lessen administrative burdens on practicing physicians; at the same time, they are determined to push ahead into value-based purchasing and measurement, a highly understandable stance, given that our U.S. healthcare system, according to the Medicare actuaries, is actively heading over a cost cliff, with total U.S. healthcare expenditures expected to increase 70 percent in the next several years.

How can senior federal healthcare officials find just the right levers to push, and push them just at the right levels of intensity, to move physicians, physician groups, hospitals, and hospital systems forward into value, without so alienating them that they end up becoming alienated, and resisting change? That really is the underlying fundamental question here.

I’m predicting ongoing struggles over quality measurement reporting periods especially, and secondarily, over the level of rigor involved in pushing the advancement and acceleration of value-based reimbursement participation. In particular, I think that AMGA’s Chet Speed has made some very valid and challenging points around the fact that some of the levers involved may not be rigorous enough to compel less-advanced physicians and physician groups to move forward with alacrity. Of course, Speed is reacting as the senior policy advocate at the association representing the largest and most advanced medical groups in the country. Inevitably, AMGA’s member group leaders are feeling frustrated by the fact that their advances, in their view, are implicitly being penalized by payment rates and modifications that, from their standpoint, don’t move the industry forward fast enough. At the same time, the onesie-twosie physician groups in less advanced healthcare markets are complaining—sometimes quite loudly—that change is moving too fast, not too slowly.

So we are at what seems like an inflection point right now in the shift from volume to value in U.S. healthcare. And it will take considerable skill—technical, political, and persuasive—for CMS’s leaders, especially Administrator Verma—to make this all work. It makes me think of a large family out bicycling. Can the seven-year-old daughter pedal as fast as her 19-year-old brother? How about the aging aunt? It might seem like a bit of a farfetched visual metaphor, but when you think about it—it feels more apt than not.

So—stay tuned, because we’re heading into real realness now on all of this—and things are only going to get realer and realer going forward.





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