APRIL 9, 2019

Welcome to the Pay for Performance Update eNewsletter
Editor: Philip L. Ronning
This issue is sponsored by the National ACO Summit, the National Bundled Payment Summit,
and the National MACRA MIPS/APM Summit

Full-Risk Models, Not Shared Savings, Let Health Systems Deliver What Patients Really Need
Better health usually isn't the result of higher-quality health care. Factors outside the current health care system, social determinants like income, education, employment, food security, housing, and social inclusion, generally make a bigger difference -- especially in disadvantaged communities. We need to rethink how health care organizations can help their patients stay healthy and out of the hospital by addressing these essential factors. What's needed is a full-risk model, one that holds provider organizations fully accountable for the health outcomes of their patients. In this model, practices are paid a fee for each patient and then cover all the costs of caring for that patient, whether it's an emergency department visit, a hospitalization, a surgery, a medication, or a stay in a skilled nursing facility. Only with this degree of accountability can provider organizations be fully aligned with the interests of their patients and invest in what they truly need. A full-risk model is daunting for most organizations. Alternatives have emerged to pursue value-based care without taking that plunge, though my colleagues and I believe that full risk is the most direct path to achieving high-quality care at a low cost while also creating incentives to invest in the services that patients need. (STAT, March 26,2019)

Bonus Pay for Doctors Can Boost Quality of Care
Large physician bonuses in pay-for-performance reimbursement arrangements are associated with improvement in evidence-based care.


  • Physician pay-for-performance arrangements are among the leading value-based payment models in healthcare.
  • Increased bonus sizes encourage physicians to focus on the quality metrics on which they are measured.
  • Increasing bonuses does not universally lead to higher quality performance.
  • Pay-for-performance arrangements for physicians that feature large bonus payments can have a positive impact on clinical quality, research published today suggests.

(HealthLeaders Media, February 2019)

Can You Get What You Pay for? Pay-for-Performance and The Quality of Healthcare Providers

Despite the popularity of pay-for-performance (P4P) among health policymakers and private insurers as a tool for improving quality of care, there is little empirical basis for its effectiveness. We use data from published performance reports of physician medical groups contracting with a large network HMO to compare clinical quality before and after the implementation of P4P, relative to a control group. We consider the effect of P4P on both rewarded and unrewarded dimensions of quality. In the end, we fail to find evidence that a large P4P initiative either resulted in major improvement in quality or notable disruption in care.

(Research Gate, accessed March 25, 2019)

Hospital Patient Volumes are Sliding as Amazon, CVS And Walgreens Threaten to Make Matters Worse
Hospitals improved their financial performance last year but they continue to struggle to increase their volumes, according to a new report. Healthcare consulting firm Kaufman Hall called 2018 "generally a year of improvement" for hospitals. "Profitability indicators demonstrated growth in operating margin as compared with (2017) of about 5% and outperforming budget by 4.4%, and very little change in EBITDA margin," Kaufman Hall's report said. But hospitals continue to struggle to increase their volumes with many underperforming last year compared to 2017, the analysis shows. "Nationally, all volume indicators demonstrated eroding performance relative to last year," the Kaufman Hall report, which collects data from more than 600 hospitals monthly, said in comparing 2018 to 2017. "Volume trends demonstrated consistent underperformance relative to last year, with a few indicators showing increasing underperformance. Discharges maintained a steady rate of decline, and adjusted discharges and adjusted patient days demonstrated a slowing increase, while ED visits continued a decline relative to last year with an acceleration in unfavorable performance." The report is the latest to show trouble for U.S. hospitals as new competitors emerge like Amazon, CVS Health, Walgreens Boots Alliance and Wal-Mart. These retailers are looking to establish themselves as a destination for low-cost outpatient care and give patients less reason to go to a hospital. Though the Kaufman Hall report didn't mention the retail threats specifically, it's the latest financial report to warn of deteriorating hospital performance in the face of payment shifts to outpatient care and rising government reimbursement that tends to pay hospitals less than commercial insurers. (Forbes, March 25, 2019)

Increased Visibility into Value-Based Performance Results in $2.1M in Additional Pay for Performance
Data-driven decision making is crucial for healthcare organizations looking to constantly improve care in a value-based market. However, a lack of real-time, actionable data leaves many organizations struggling to measure the effectiveness of population health improvements. Data available to the University of Texas Medical Branch (UTMB Health) was often delayed, typically at least six weeks, slowing the improvement process. The available information also did not convey the scope of potential opportunities, meaning chances for improvements sometimes went overlooked. When it came time to improve Delivery System Reform Incentive Payment (DSRIP) performance--an alternative payment reimbursement model based on clinical outcomes for Medicaid and low-income uninsured patients under the Medicaid 1115 Waiver in Texas--it was difficult to ascertain which strategies would, or would not, achieve the desired results to improve DSRIP performance metrics. With the help of data analytics, UTMB Health was able to focus on improvement efforts for these populations and boost reimbursement based on DSRIP performance. (HealthCatalyst, March 21, 2019)

My Friend's Cancer Taught Me About a Hole in Our Health System
Last year, one of my best friends learned he had cancer. In many respects he was lucky. He had great insurance. He had enough money. Partly because one of his friends (me) is well connected in the health care system, he got excellent care. So this is not a story about how the system failed, or how people need insurance or access. He had those. He got the care. This is the United States health care system at its peak performance. But I was utterly floored by how hard it all was. (The New York Times, March 25, 2019)

2017 Health Care Cost and Utilization Report
The 2017 Health Care Cost and Utilization Report shows that spending per privately insured person grew by 4.2 percent, the second year in a row of spending growth over four percent. Price increases were the primary driver. The report covers the period 2013 through 2017 and includes claims data from four national insurance companies: Aetna, Humana, Kaiser Permanente, and UnitedHealthcare.

(Health Care Cost Institute, February, 2019)

Pay for Performance Update e-Newsletter is one of a family of free e-Newsletters providing a complimentary video presentation and regularly updated news and key resources on major health care issues such as ACOs, comparative effectiveness, patient safety, bundled payment, readmissions, and Medicaid. To view and subscribe to other e-Newsletters go to www.HealthCareeNewsletters.com.

CMMI's New Mandatory Downside-Risk Payment Models Presented by ECG

Ken Steele, MHA
Principal, ECG Management Consultants; Former Vice President Managed Care, Catholic Healthcare West (now Dignity Health); Former President, St. Mary's Medical Center, San Francisco, CA