Time to Rethink Cost Reduction Strategies Focused on the Highest-Cost Patients? | Mark Hagland | Healthcare Blogs Skip to content Skip to navigation

Time to Rethink Cost Reduction Strategies Focused on the Highest-Cost Patients?

March 7, 2017
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Medical researchers look at what’s really fueling over-utilization of unnecessary healthcare services

I read with great interest a careful analysis by researchers at Harvard Medical School and Brigham and Women’s Hospital, in Boston, that appeared in the March 2 issue of The New England Journal of Medicine. In their article, “Focusing on High-Cost Patients—The Key to Addressing High Costs?” J. Michael McWilliams, M.D, Ph.D., and Aaron L. Schwartz, Ph.D., offer a fascinating thesis: what if the focus on high-cost, high-utilization patients, as a core focus in the context of work to lower overall costs and improve outcomes of populations, is not correct? Instead, what if an overall focus on eliminating unnecessary, wasteful utilization for all patients, might work better?

“Given the rampant waste in the U.S. healthcare system, evidence that a large proportion of healthcare spending is concentrated among a small proportion of patients has galvanized a focus on high-cost patients,” the authors write. “On the surface, this response may seem sensible: in terms of clinical outcomes, the system fails the highest-need patients the most, and insofar as its failures can be addressed through better care coordination and management, devoting resources to high-risk patients could enhance these efforts’ cost-effectiveness.”

And yet, the researchers argue, “If the objective is to reduce wasteful spending, however, that logic may not hold. For providers participating in payment models rewarding lower spending, such as accountable care organizations (ACOs), interventions focused on specific patients might facilitate spending reductions for patients covered by the models without eroding fee-for service- revenue for other patients. Beyond this appeal, however, viewing the cost problem through a patient-centered lens may not offer clear resolution, for three related reasons. Targeting patients with high spending may not effectively target the spending that should be reduced. Longitudinal patient-specific investments that are important for coordinating care and improving quality may be less important for curbing wasteful spending. And potentially more effective system changes that reduce wasteful care for all patients have different cost structures that may not require patient target to maximize savings.”

In other words, Drs. McWilliams and Schwartz say, “In considering ways to reduce wasteful utilization, it’s instructive to contrast patient-focused strategies targeting high-cost patients with systems-focused strategies intended to reduce low-value services for everyone.” They’ve done a detailed analysis looking at these two approaches. One key element in their findings: “Intensive case management for high-cost patients… requires predicting which patients will generate high spending,” and, perforce, “Such predictions are fraught with error because healthcare needs fluctuate randomly.” So, for example, their analysis found that 75 percent of Medicare spending was concentrated among 17 percent of beneficiaries in 2013, but that those patients determined to be high-risk ended up accounting for only 42 percent of Medicare spending. Meanwhile, in 2013, 17 percent of the highest-risk Medicare patients received nearly twice as many services deemed to be “low-value” services, as did lower-risk patients, but those low-value services accounted for only 27 percent of the 11 million low-value services provided to Medicare patients, and 13 percent of spending on those services. As the researchers write, “On the basis of these figures, if a provider organization could reduce low-value service use by 20 percent through system changes affecting all its patients, it would have to achieve a 74-percent (20 percent divided by 0.27) reduction in the high-risk group to achieve an equal reduction in the total number provided. Targeting a smaller high-risk group would necessitate an even greater reduction.”

In other words, put very simply, the amount of cost savings that could be achieved simply by reducing low-value services to all patients far outweighs the value of attempting to reduce such services to high-risk patients.

And what are the “low-value services” that the authors are referring to in their article? “Low-value services,” they w rite, “could include unnecessary procedures, tests, hospitalizations, and referrals, and care that could be provided in lower-cost settings without worsening quality.”

What’s interesting about this is that these unnecessary procedures, tests, hospitalizations, and referrals are phenomena that have long been documented and are very familiar to the leaders of patient care organizations. Many, in fact, have been working for many months, if not years, to reduce unnecessary utilization across the board. The core point that Drs. McWilliams and Schwartz make is that reducing utilization on the part of high-risk patients has been perceived as being of relatively higher value than this—broad, general over-utilization of services that should be reduced in volume to begin with.

They write, “So why has the cost problem been reframed as one of high-cost patients rather than low-value decisions? If new payment models reward providers for reducing wasteful spending through any means, why has managing high-risk patients’ care so dominated responses to these incentives? Clinicians are drawn to patient-focused solutions because they routinely manage patient care, not the systems shaping clinical decisions,” they state. “But high-risk care management is also appealing because reduce wasteful care for all patient can cause substantial fee-for-service losses. Even if all providers enter risk-sharing contracts with all payers for their primary care patients, large multi-specialty organizations—particularly those with hospitals—would continue to serve many patients covered by the contrasts of competitors who provide the patients’ primary care.”

So, what to do? The researchers see three fundamental paths forward: either move away from ACO-like global budgets, and towards “more piecemeal models such as bundled payments that place episodes of care under budgets,” which they concede could weaken incentives to eliminate wasteful episodes of care outside bundles; or allow provider consolidation to the point that a single organization provides the bulk of care in each market; or ensure that smaller provider greats “get a fair shot.”

That third approach, the authors say, holds promise, but, they add, “[I]t could be quashed in its infancy by advancement of the first two.”

Part of the fundamental problem with ACO-like structures, they argue, is that building accountable care structures inevitably “encourages acceptance of expansive organizational structures that halt providers who are hesitant, with one foot dipped in payment reform and the other planted on the fee-for-service dock. Perhaps,” they conclude, “smaller provider groups with stronger incentives to eliminate waste could emerge as a competitive force under new payment models. Until somebody jumps into the water,” they write, “high-cost patients may continue to be high-cost.”

I found the authors’ arguments to be fascinating, and worth considering. Fundamentally, they are saying that, rather than pushing ahead with ACO contracts that involve very large, consolidated patient care organizations and superstructures, focused primarily on the highest-risk patients they can identify, a much broader set of efforts around eliminating wasteful utilization across the board in healthcare, especially at the level of smaller physician organizations.

The challenge embedded there is that it is precisely the smaller physician practices that are the least efficient right now, operationally and informationally. They have fewer risk contracts, lower operational efficiency, a lack of IT infrastructure, and a lack of staff who are skilled at deploying and using analytics on an ongoing basis, to improve efficiency and intervene effectively across the board to reduce unnecessary utilization. Indeed, in the fee-for-service system that still provides the bulk of the income on which practicing physicians rely, there are still powerful incentives to resist engaging in these optimizing activities.

In addition, few physicians in clinic practice have any experience with Lean management and other continuous performance improvement strategies and tools. One could even say that physician practice is the “Wild West” of utilization management in this context. But could that change?

Inevitably, I think it would or will require tremendous literal and energy investment in clinical performance improvement efforts on the part of the leaders of the integrated systems with which physicians in practice are affiliated, or by whom they are hired, to make this concept work in practice. And what motivation would there be for the leaders of integrated health systems to do this? Inevitably, business relationships involving shared risk would have to be present.

In addition, there is a huge IT/data element here. Indeed, none of this can possibly work without the intensive leveraging of data and data analytics to power the clinical performance improvement that could make all of this function effectively. In that, CIOs, CMIOs, and other healthcare IT leaders could be true heroes in this narrative, as they would be the people who could figure out exactly what kinds of data, data analytics, and other tools would be needed here, and how to bring them in and implement them.

I certainly agree with Drs. McWilliams and Schwartz that the closer we can get to the choices that physicians make in their office-based practices that impact these utilization patterns, the better. But to do that, we’ll need for everyone to be rowing in the same direction, under the more or less the same incentives, and with matched sets of tools. Then perhaps this idea could work. In the meantime, I salute these researchers for their trenchant analysis of some of the more granular issues facing us as healthcare system right now, around utilization and utilization management. We continue to need analyses like this one; they will definitely be helpful for the road.




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NCQA Moves Into the Population Health Sphere With Two New Programs

December 10, 2018
by Mark Hagland, Editor-in-Chief
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The NCQA announced on Monday that it was expanding its reach to encompass the measurement of population health management programs

The NCQA (National Committee for Quality Assurance), the Washington, D.C.-based not-for-profit organization best known for its managed health plan quality measurement work, announced on Dec. 10 that it was expanding its reach to encompass the population health movement, through two new programs. In a press release released on Monday afternoon, the NCQA announced that, “As part of its mission to improve the quality of health care, the National Committee for Quality Assurance (NCQA) is launching two new programs. Population Health Program Accreditation assesses how an organization applies population health concepts to programs for a defined population. Population Health Management Prevalidation reviews health IT solutions to determine their ability to support population health management functions.”

“The Population Health Management Programs suite moves us into greater alignment with the focus on person-centered population health management,” said Margaret E. O’Kane, NCQA’s president, in a statement in the press release. “Not only does it add value to existing quality improvement efforts, it also demonstrates an organization’s highest level of commitment to improving the quality of care that meets people’s needs.”

As the press release noted, “The Population Health Program Accreditation standards provide a framework for organizations to align with evidence-based care, become more efficient and better at managing complex needs. This helps keep individuals healthier by controlling risks and preventing unnecessary costs. The program evaluates organizations in: data integration; population assessment; population segmentation; targeted interventions; practitioner support; measurement and quality improvement.”

Further, the press release notes that organizations that apply for accreditation can “improve person-centered care… improve operational efficiency… support contracting needs… [and] provide added value.”

Meanwhile, “Population Health Management Prevalidation evaluates health IT systems and identifies functionality that supports or meets NCQA standards for population health management. Prevalidation increases a program’s value to NCQA-Accredited organizations and assures current and potential customers that health IT solutions support their goals. The program evaluates solutions on up to four areas: data integration; population assessment; segmentation; case management systems.”



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At the D.C. Department of Health Care Finance, Digging into Data Issues to Collaborate Across Healthcare

November 22, 2018
by Mark Hagland, Editor-in-Chief
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The D.C. Department of Health Care of Finance’s Kerda DeHaan shares her perspectives on data management for healthcare collaboration

Collaboration is taking place more and more across different types of healthcare entities these days—not only between hospitals and health insurers, for example, but also very much between local government entities on the one hand, and both providers (hospitals and physicians) and managed Medicaid plans, as well.

Among those government agencies moving forward to engage more fully with providers and provider organizations is the District of Columbia Department of Health Care Finance (DHCF), which is working across numerous lines in order to improve both the care management and cost profiles of care delivery for Medicaid recipients in Washington, D.C.

The work that Kerda DeHaan, a management analyst with the D.C. Department of Health Care, is helping to lead with colleagues in her area is ongoing, and involves multiple elements, including data management, project management, and health information exchange. DeHaan spoke recently with Healthcare Informatics Editor-in-Chief Mark Hagland regarding this ongoing work. Below are excerpts from that interview.

You’re involved in a number of data management-related types of work right now, correct?

Yes. Among other things, we’re in the midst of building our Medicaid data warehouse; we’ve been going through the independent validation and verification (IVV) process with CMS [the federal Centers for Medicare and Medicaid Services]. We’ve been working with HealthEC, incorporating all of our Medicaid claims data into their platform. So we are creating endless reports.


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Kerda DeHaan

We track utilization, cost, we track on the managed health plan side the capitation payments we pay them versus MLR [medical loss ratio data]; our fraud and abuse team has been making great use of it. They’ve identified $8 million in costs from beneficiaries no longer in the District of Columbia, but who’ve remained on our rolls. And for the reconciliation of our payments, we can use the data warehouse for our payments. Previously, we’d have to get a report from the MMIS [Medicaid management information system] vendor, in order to [match and verify data]. With HealthEC, we’ve got a 3D analytics platform that we’re using, and we’ve saved money in identifying the beneficiaries who should not be on the rolls, and improved the time it takes for us to process payments, and we can now more closely track MCO [managed care organization] payments—the capitation payments.

That involves a very high volume of healthcare payments, correct?

Yes. For every beneficiary, we pay the managed care organizations a certain amount of money every month to handle the care for that beneficiary. We’ve got 190,000 people covered. And the MCOs report to us what the provider payments were, on a monthly basis. Now we can track better what the MCOs are spending to pay the providers. The dashboard makes it much easier to track those payments. It’s improved our overall functioning.

We have over 250,000 between managed care and FFS. Managed care 190,000, FFS, around 60,000. We also manage the Alliance population—that’s another program that the district has for individuals who are legal non-citizen residents.

What are the underlying functional challenges in this area of data management?

Before we’d implemented the data warehouse, we had to rely on our data analysis and research division to run all the reports for us. We’d have to put in a data request and hope for results within a week. This allows anyone in the agency to run their own reports and get access to data. And they’re really backed up: they do both internal and external data reports. And so you could be waiting for a while, especially during the time of the year when we have budget questions; and anything the director might want would be their top priority.

So now, the concern is, having everyone understand what they’re seeing, and looking at the data in the same way, and standardizing what they’re meaning; before, we couldn’t even get access.

Has budget been an issue?

So far, budget has not been an issue; I know the warehouse cost more than originally anticipated; but we haven’t had any constraints so far.

What are the lessons learned so far in going through a process like this?

One big lesson was that, in the beginning, we didn’t really understand the scope of what really needed to happen. So it was underfunded initially just because there wasn’t a clear understanding of how to accomplish this project. So the first lesson would be, to do more analysis upfront, to really understand the requirements. But in a lot of cases, we feel the pressure to move ahead.

Second, you really need strong project management from the outset. There was a time when we didn’t have the appropriate resources applied to this. And, just as when you’re building a house, one thing needs to happen before another, we were trying to do too many things simultaneously at the time.

Ultimately, where is this going for your organization in the next few years?

What we’re hoping is that this would be incorporated into our health information exchange. We have a separate project for that, utilizing the claims data in our warehouse to share it with providers. We’d like to improve on that, so there’s sharing between what’s in the electronic health record, and claims. So there’s an effort to access the EHR [electronic health record] data, especially from the FQHCs [federally qualified health centers] that we work closely with, and expanding out from there. The data warehouse is quite capable of ingesting that information. Some paperwork has to be worked through, to facilitate that. And then, ultimately, helping providers see their own performance. So as we move towards more value-based arrangements—and we already have P4P with some of the MCOs, FQHCs, and nursing homes—they’ll be able to track their own performance, and see what we’re seeing, all in real time. So that’s the long-term goal.

With regard to pulling EHR information from the FQHCs, have there been some process issues involved?

Yes, absolutely. There have been quite a few process issues in general, and sometimes, it comes down to other organizations requiring us to help them procure whatever systems they might need to connect to us, which we’re not against doing, but those things take time. And then there’s the ownership piece: can we trust the data? But for the most part, especially with the FHQCs and some of our sister agencies, we’re getting to the point where everyone sees it as a win-wing, and there’s enough of a consensus in order to move forward.

What might CIOs and CMIOs think about, around all this, especially around the potential for collaboration with government agencies like yours?

Ideally, we’d like for hospitals to partner with us and our managed care organizations in solving some of these issues in healthcare, including the cost of emergency department care, and so on. That would be the biggest thing. Right now, and this is not a secret, a couple of our hospital systems in the District are hoping to hold out for better contracts with our managed care organizations, and 80 percent of our beneficiaries are served by those MCOs. So we’d like to understand that we’re trying to help folks who need care, and not focus so much on the revenues involved. We’re over 96-percent insured now in the District. So there’s probably enough to go around, so we’d love for them to move forward with us collaboratively. And we have to ponder whether we should encourage the development and participation in ACOs, including among our FQHCs. Things have to be seen as helping our beneficiaries.

What does the future of data management for population health and care management, look like to you, in the next several years?

For us in the District, the future is going to be not only a robust warehouse that includes claims information, vital records information, and EHR data, but also, more connectivity with our community partners, and forming more of a robust referral network, so that if one agency sees someone who has a problem, say, with housing, they can immediately send the referral, seamlessly through the system, to get care. We’re looking at it as very inter-connected. You can develop a pretty good snapshot, based on a variety of sources.

The social determinants of health are clearly a big element in all this; and you’re already focused on those, obviously.

Yes, we are very focused on those; we’re just very limited in terms of our access to that data. We’re working with our human services and public health agencies, to improve access. And I should mention a big initiative within the Department of Health Care Finance: we have two health home programs, one for people with serious mental illness issues, the other with chronic conditions. The Department of Behavioral Health manages the first, and the Department of Health Care Finance, my agency, DC Medicaid, manages the second. You have to have three or more chronic conditions in order to qualify.

We have partnerships with 12 providers, in those, mostly FQHCs, a few community providers, and a couple of hospital systems. We’ve been using another module from HealthEC for those programs. We need to get permission to have external users to come in; but at that point, they’d be able to capture a lot of the social determinants as well. We feel we’re a bit closer to the providers, in that sense, since they work closely with the beneficiaries. And we’ve got a technical assistance grant to help them understand how to incorporate this kind of care management into their practice, to move into a value-based planning mode. That’s a big effort. We’re just now developing our performance measures on that, to see how we’ve been doing. It’s been live for about a year. It’s called MyHealth GPS, Guiding Patients to Services. And we’re using the HealthEC Care Manager Module, which we call the Care Coordination Navigation Program; it’s a case management system. Also, we do plan to expand that to incorporate medication therapy management. We have a pharmacist on board who will be using part of that care management module to manage his side of things.



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