How will health care reform affect hospitals, quality, and payment?

Prospective models pull hospitals and other providers together

Quality and utilization are going to be inextricably linked as the health care industry moves forward with the health care reform legislation. How the legislation will shake out is a matter of speculation at this point. But hardly anyone denies that a new payment model for health care services, moving away from the current fee-for-service type payment model, is necessary for improved quality and the economic health of hospitals. The legislation hints at some models such as accountable care organizations and health savings accounts.

"There seems to be a real thrust in this health reform toward quality improvement and quality and efficiency being tied together," says Stuart Guterman, MA, PhD, assistant vice president for The Commonwealth Fund's program on payment system reform. "And there's been a lot of discussion about the health care reform legislation in terms of whether it bends the curve enough. It's clear that in order for all of these health care reforms and coverage and those kinds of policies to be sustainable over time, there needs to be attention paid to the amount we spend and what we get for the amount we spend, and quality is a big component of that."

Harold Miller, executive director for the Center for Healthcare Quality & Payment Reform and president and CEO of the Network for Regional Healthcare Improvement, agrees: "I think there's going to be a lot more focus on quality improvement that reduces utilization. I think the focus is on how do we reduce cost without rationing." And just how does he see that being accomplished?

One way is keeping people healthy so that they don't have chronic conditions in the first place. Secondly, if they develop a chronic condition "you keep them out of the hospital so you reduce preventable admissions, and then when they do end up in the hospital that you eliminate infections, you eliminate complications, you eliminate readmissions, and you deliver that in the most efficient fashion possible."

The law allows the Centers for Medicare & Medicaid Services (CMS) to begin cutting reimbursement for preventable hospital readmissions. Guterman says there will be more moves in this direction but also points out that "there's specifically a lot of space in the law devoted to describing a shared savings pilot that's supposed to focus on the accountable care organization."

The accountable care organization (ACO) model is not new. In 2006, lead author Elliott S. Fisher, MD, PhD, director for The Center for Health Policy Research, professor of medicine and community and family medicine, Dartmouth Medical School, published an article in Health Affairs titled "Creating Accountable Care Organizations: The Extended Hospital Medical Staff."1 An ACO is a local health care organization and set of providers (at least, primary care physicians, specialists, and hospitals) that can be held accountable for the cost and quality of care.

The experts Hospital Peer Review spoke with all pointed to models such as the Mayo Clinic, Kaiser, and Geisinger Health System. The last, praised even by President Obama, is a physician-led health care system in Pennsylvania, which offers its own health insurance plan and has been using electronic health records for more than 10 years. The system's ProvenCare model focuses on using evidence-based practices, a fixed price for certain procedures such as open-heart surgery, and patient engagement. Accompanying the fixed prices is a guarantee: If a patient has complications or needs to be readmitted, the health system eats the cost. Most employed physicians are salaried and share in incentives when the system does well. And it has.

President and CEO Glenn D. Steele Jr., MD, PhD, in an address to the Senate committee on finance on April 21, 2009, said: "The innovations we have instituted at Geisinger that bundle payments for acute care procedures, enhance support for primary care physicians and their care teams, better manage chronic disease and the transitions of care for patients from caregiver to caregiver, have produced significant cost savings and improved quality. Admissions for our patients with multiple chronic diseases have been reduced by as much as 25%, and readmissions following discharges decreased by as much as 50% in community sites." Incentives for staff are built into the system, and staff are rewarded for reaching certain quality measures.

Jugna Shah, MPH, president and founder of Nimitt Consulting in Washington, DC, says the idea behind Geisinger is "analogous" to and draws from the ACO model in that it crosses sites of care and types of providers. With models such as Geisinger, Mayo, the Cleveland Clinic, and Intermountain, she says, "the doctors are working differently with nurses. They're working differently with home health services or after the patient is discharged with follow-up care.

"This is now really what we're talking about with continuity of care, and everybody's incentives are the same. 'Let's make sure this patient does not get readmitted. Let's make sure this patient has no further complications' because they internally allocated how much this case ought to cost. And if they come in under that, whatever money is 'saved,' I think these profits are shared among all the caregivers."

She says that's where health care should be heading and where it may be beginning to go. The common thread about the aforementioned health systems, she says, "is that the physician and the hospital reimbursement is aligned in the sense that there in one payment that is made out of which comes the hospital part and the physician part."

Guterman says the definition of an ACO is rather flexible but that there's "going to be more and more pressure and incentives to move in that direction. To be able to work together, to be able to take more of a team approach to health care, and to understand providers should be more mutually accountable for the outcomes of the health care that they provide."

Miller and Shah acknowledge that the moves toward value-based purchasing, such as no reimbursement for hospital-acquired infections, have so far been just a "drop in the bucket" financially for hospitals. Shah characterizes the measures thus far as "pay for performance lite" and says it will be interesting to see what this year's OPPS brings. She says there will always have to be a "delicate balance" by not penalizing providers for the natural variability that occurs in health care. "I think the reason we're slow with coming out with some of these health care-associated infections and the never events is the same tricky balance. You want to be really careful not to penalize hospitals for what could be truly patient-specific complications. I appreciate that [CMS is] moving very methodically and not penalizing hospitals for what's not in their control."

She says the "train really left the station" with the American Recovery and Reinvestment Act (ARRA) and the move toward more universal health information technology and electronic records. "There's a lot happening with money already being spent and allocated to promote the implementation of an electronic medical record. That legislation has teeth in it and then the regulations that have come out this year related to quality indicators, EHRs, all the incentive payments to hospitals and physician practices — all of that is on the pathway. There's no way we're going to promote, essentially pay for all this, if not trying to get toward value-based health." Once CMS is able to abstract data more easily through electronic transmission, it's going use it, she says.

As far as more standards from regulatory agencies, Miller says, "I think it's actually an interesting question for the future in terms of how much focus there should be on accreditation standards vs. outcomes across all of health care. Because that's I think a key issue as we move away from process measures to more outcome measures. Do accreditation standards impede that?"

An example he gives is the "whole medical home movement." He says "NCQA jumped in immediately with very elaborate accreditation standards, which then a lot of payers immediately adopted as being the requirements for primary care practices to get medical home payments, and now the bloom is sort of off the rose on that. A lot of people who've been trying to work with medical home practices have found that a) a lot of those standards are very difficult for particularly small primary care practices to meet, and b) it's not clear that those things, a lot of those standards, are the kinds of things that are really necessary or even desirable in some cases for them to actually improve performance in terms of keeping patients out of the hospital, keeping patients well, etc.

"I think there's sort of — I'm not sure I want to call it obsession — in health care with evidence. And we shouldn't do anything unless there's evidence. Well, how do you get evidence unless you actually do something?"

There is a risk, he believes, in setting standards and penalizing hospitals for not complying. What if a hospital found a better method than what the standard calls for? "So if CMS puts into place, as Congress has mandated, some kind of penalties for readmission reduction, that's what the hospital is really being held accountable for now is not having readmissions. So what's the best method of achieving that outcome, and if [hospitals] can find a better way to do it you shouldn't end up putting them between a rock and a hard place. 'Oh, no, you can't implement the program that reduces readmissions because that's not the standard that we've said there's evidence for even though it ends up working for you.'"

If hospitals focus only on 30-day readmissions and after that period patients "are on their own," then we may be only pushing the problems into the 31- to 90- to 180-day period, he says, "as opposed to saying, 'What can we do to strengthen primary care in the community? What can we do to make sure those people are actually linked to their primary care provider? What can we do to make sure patients can afford their medications when they come out?'"

Miller says the "hospital ends up being the convenient entity to point the finger at, but that doesn't necessarily mean that it's right or that what they will do to respond to that is the best long-term solution." Having a hospital-driven system, he says, is not the answer.

But the health care reform legislation, particularly the ARRA, appropriated funds to governmental agencies to look into evidence-based practices and establish hospital standards. The ARRA, according to the Association of American Medical Colleges web site, "set aside $1.1 billion for comparative effectiveness research [CER] in the next decade. The Agency for Healthcare Research and Quality and the National Institutes of Health will receive $700 million for CER, and the Department of Health and Human Services will receive $400 million to accelerate the development and dissemination of CER data."

Miller thinks hospitals are going to begin to see a new patient population, "potentially fewer patients than they did before" and higher-acuity patients, which in turn may change hospitals' "internal quality improvement initiatives."

"I think what is working better and has a long way to go are the regional health improvement collaboratives that are actually developing quality information and cost information locally with the engagement of providers and then having mechanisms for sharing information amongst them about why is somebody better than another one and what did they do differently as opposed to simply having a national site that nobody can understand," Miller says.


  1. Elliott Fisher ES, Staiger DO, Bynum JP, Gottlieb DJ. "Creating accountable care organizations: the extended hospital medical staff" Health Aff. 2007 Jan-Feb;26(1):w44-57. Epub 2006 Dec 5.