A new measure of healthcare efficiency, Medicare spending per beneficiary, is another pain point for healthcare leaders, but it aims to incentivize higher-quality, less-costly care.
This article appears in the March 2014 issue of HealthLeaders magazine.
The federal government's new efficiency measure, the latest effort to incentivize higher-quality, less-costly care, is one that has surprised, confused, and frustrated many hospital leaders whose payments will soon be impacted by the new rule.
One of the questions they ask in their letters of protest: How can hospitals be held accountable for services their patients receive after they're discharged or even before they're admitted? Another question: How is it fair to financially penalize them without first adjusting for socioeconomic factors, which this controversial measure does not do?
But despite these and other concerns surrounding Medicare's new spending per beneficiary equation, or MSPB, some hospital leaders say they embrace the new measure because they know the healthcare system's mosaic of providers ultimately must work much more efficiently, together, in the interest of the patient.
"This measure has now been placed on us, and we as hospitals have to own this and accept this responsibility," says Jeffrey DiLisi, MD, vice president and chief medical officer of 342-licensed-bed Virginia Hospital Center in Arlington, whose MSPB in December 2013 was 0.95, lower than the national average.
Hospital leaders' complaints that the rule is unfair because they have no control over this spending "sounds like an excuse," he says, because they actually do have control.
With this measure, CMS encourages hospitals to exert influence—perhaps through their powers of referral—over community physicians, skilled nursing facilities, home health agencies, durable medical equipment providers, and hospices to ensure that they improve the quality of care delivered and not provide unnecessary care.
Keeping readmissions low
Because his organization saw this measure coming, DiLisi says Virginia Hospital Center has been working with provider partners to keep readmissions low.
"Over the past three years, we've had multiple meetings with the executive teams at our skilled nursing homes and home health agencies, telling them 'We don't want you sending someone back to the ER in the middle of the night for something that you could have taken care of safely at the facility,' " he says.
"We're fortunate that we have some good home health providers here," DiLisi says. "However, there is certainly variability, and now our case managers make decisions based on which agencies provide the best care for the patients they are servicing."
"For hospitals that look at this metric seriously," he says, "they will find their providers who are not causing unnecessary readmissions. Those are the better-value providers that we should be sending our patients to."
The measure is not just about preventing readmissions of patients with conditions such as heart failure, heart attack, and pneumonia—for which Medicare already has a separate penalty—although that is clearly one of the agency's intents, DiLisi points out. With MSPB, overly inefficient care to any patient, including a 30-day readmission of patients with any diagnosis, is captured and potentially penalized.
Redesigning care
The CMS officials would seem to agree. In its final rule on the matter in August 2013, the agency said the MSPB measure "incentivizes hospitals to work on redesigning care systems and coordinating with other providers of care, which can have a significant impact on the quality and efficiency of services."
The regulators acknowledged the many letters of objection and requests to delay the measure. But they emphasized they "continue to believe that hospitals have a significant influence on Medicare spending during the episode surrounding a hospitalization, through the provision of appropriate, high-quality care before and during inpatient hospitalization and through proper hospital discharge planning, care coordination, and care transitions."
Language in the measure, which received the National Quality Forum's endorsement in December 2013, makes clear the measure will encourage hospitals to work on "shifting postacute care from more expensive services (e.g., skilled nursing facilities) to less expensive services (e.g., home health) in cases that would not affect patient outcomes."
The language of the measure points to the much higher increase in long-term care costs over home health costs. It says "hospitals can identify individuals at high risk of permanent nursing facility placement at the time of hospital discharge. Improved discharge planning may improve the chances that these patients can return home."
But one part of the new measure's implementation that makes some industry leaders nervous is this: In addition to posting each hospital's MSPB score on Hospital Compare, CMS is also publicly posting spreadsheets on data.medicare.gov showing detailed average beneficiary spending for each of seven care settings for the three time periods in the MSPB equation, or 21 categories, for every one of 3,320 hospitals affected by the rule.
This enables anyone—including payers, employers, and competitors—to compare, for example, Medicare's skilled nursing home payments during the 30-day postdischarge period. These numbers show national cost variations of more than six-fold, despite being price-standardized for geographic payment differences and risk-adjusted for patient health status.
Avoiding the unnecessary
At 352-licensed-bed Heartland Regional Medical Center in St. Joseph, Mo., Stacey Counts, process leader for Heartland's quality, risk, and safety division, says the MSPB is "an excellent measure."
"Although I can appreciate other stakeholders' opinions, and by all means it's not perfect, the reality is if you're coordinating care appropriately and you represent the largest portion of that spending for that particular episode of care, it only makes sense that you would ultimately be responsible—I think particularly for care that happens after discharge," Counts says.
Heartland's employed physicians are also patient-centered medical home doctors, Counts says, and as such are "trying to forgo the unnecessary avoidable ED visit and unnecessary diagnostic testing such as advanced imaging."
One focused effort is a pilot Hospital at Home program for heart failure patients who receive multiple home visits from midlevel practitioners after their acute care discharge. This is important for a segment of Heartland's patients who Counts says have "poor health literacy and don't have a good understanding about their disease processes.
"It used to be about getting the patient well and sending her on her way. Now, we're not just sending her on her way. We're saying, 'We're still here. We're still holding your hand and will hold your hand the whole way through.' "
So far, Heartland's efforts appear to be working. Its MSPB score for eight months in 2011 was 0.98. For calendar year 2012, it was down to 0.95.
DiLisi says that in a DRG environment, where hospitals get paid a flat rate for each inpatient stay based on the diagnosis, the new measure discourages game-playing in a few ways.
First, he says, "It's kind of a check on hospitals that might discharge someone too quickly. If the patient gets readmitted, now that's not going to help your metric."
Second, he and other hospital officials say the measure is designed to thwart some hospitals' practice of moving care that rightfully should be done during the DRG-covered inpatient stay to an outpatient setting. For example, certain tests or procedures might be ordered prior to an elective inpatient stay.
"Historically, maybe some hospitals have suggested that patients get a CT or MRI as an outpatient. Now that MRI that you scheduled for the patient as an outpatient three weeks after discharge is going to show up in your MSPB score. So if you don't do it in the hospital, you're going to get dinged," DiLisi says.
Targeting variation
James LaBelle, MD, chief medical officer and senior vice president of five-hospital-campus, 1,409-bed Scripps Health in San Diego, acknowledges that he's heard "a lot of whining" from hospital officials questioning why they should be responsible for efficiency of care beyond the discharge or before the admission.
"Honestly, I think that's abdicating the responsibility and trust that communities have in their hospital," LaBelle says, adding that with this efficiency measure, CMS should "bring it on."
He says Scripps itself has some work to do. With one Scripps hospital showing significantly lower than expected spending, but three showing significantly higher, there's unexplained variation and the potential for loss of incentive payments come this October.
"I can guarantee you my chief financial officer is not going to be happy when he has to give up dollars, and he'll be having a conversation with me about that and it won't feel good. But this gives me the power to talk with our leadership team and the rest of the organization on how we organize care," LaBelle says.
He emphasizes that the new efficiency measure is not about chasing a number, but using the data CMS now provides to "engineer care."
One strategy, LaBelle says, is an experiment underway at two Scripps hospitals in which software programs are used to categorize patients by comorbidities and disease states to better understand what's an appropriate length of stay, and to determine if the patient is better off going to home with home health assistance or to a skilled nursing facility.
So far they're employing the strategy for patients with congestive heart failure, but plan to work with other diseases in which "you need a lot more resources to appropriately manage those patients."
"This is powerful stuff. It's another indication that the bright line that has divided inpatient and outpatient, hospitalized and ambulatory care, just needs to go away. Completely."
Designing decision rules
Another hospital that began taking the MSPB measure concept seriously a long time ago, first for its commercial plans, is Seattle-based 336-licensed-bed Virginia Mason Hospital, which launched a project in 2005 to reduce inappropriate imaging, says Robert Mecklenburg, MD, medical director for the organization's Center for Health Care Solutions. Over the years, he says, they've instituted hard-stop policies that prohibited doctors from ordering unnecessary MRIs and other high-end imaging tests without good reason, and dropped unnecessary scans by more than 23%.
Because of its success, the integrated healthcare delivery system is now designing decision rules for elective surgery, such as joint replacement or spine surgery.
Gary S. Kaplan, MD, Virginia Mason's chairman and CEO, says that the imaging reductions and other measures have improved quality and improved patient safety, and that reduces costs all around.
"Our doctors can do great procedures and have great outcomes with a great patient experience, and we do it efficiently with no waste. But if the patient didn't need it to begin with, there's no quality there," he says.
Mecklenburg says leaders at Virginia Mason were happy to see CMS establish a pay-for performance efficiency measure. "We would say it's about time," he says.
With a score of 0.94 in December 2013, the healthcare system's efficiency was considerably better than the national average ratio of 0.98, although below the state's average of 0.91.
According to CMS data, for example, Virginia Mason's Medicare average spending per beneficiary of $2,343 is much lower for skilled nursing facilities during the period 30 days postdischarge than the state ($2,764) and national Medicare averages ($2,924), perhaps sending more patients home and utilizing home health agencies.
The ability to see with such detail where costs are is key to streamlining the system, Mecklenburg says.
"It's true that medical centers around the country are not accustomed to this, and I think it will take some good analytics and good understanding of how quickly medical centers can improve," Mecklenburg says. Historically, he says, healthcare systems "have spent more than we should have on the wrong stuff, and this will help doctors make good choices about what care is appropriate."
Leora Horwitz, MD, assistant professor of internal medicine at Yale University School of Medicine, acknowledges that hospitals don't think many of these cost and quality issues outside of hospital walls are under hospitals' control.
"CMS is taking the long view, trying to change the underlying incentive structure that enables these changes to take place," she says.
"Remember," she adds, "there was never a business case to be made for reducing readmissions. You could talk until you're blue in the face about how it's the right thing to call the patient up, get their meds right, educate them better, and get discharge summaries to the doctors faster. People said, 'Yes, yes, we know you're right. We should do that.' "
With the 30-day readmissions penalty now in place affecting up to 2% of a hospital's Medicare revenue in fiscal year 2014, "magically, people are working on that and readmissions are dropping. CMS is creating a reason for hospitals to focus on this where they didn't have a reason to before."
Reprint HLR0314-8
This article appears in the March 2014 issue of HealthLeaders magazine.