As cost is cut to the bone, payers reward quality, patient satisfaction

Emphasis shifts as prices equalize

The pervading sentiment in health care may be that, despite the rhetoric, costs are what payers really care about. But what happens when costs are cut to the point that they are nearly equalized regionally or across the country? When that happens — though it hasn’t happened yet — payers will be forced to examine quality and patient satisfaction issues.

In the meantime, in competitive health care markets such as Cleveland; St. Louis; Albany, NY; and Birmingham, AL, payers already are shifting their emphasis to quality and patient satisfaction scores, as the pivotal points on which they base contract decisions. Score high, and you increase your chances of stealing market share from the competition. Fail to make the cut and, well . . . .

While cost has been the major determining factor in contracting in the past, many experts say quality is catching up in importance. Nowhere is this truer than in the highly competitive Cleveland market. Since 1993, when the Cleveland Health Quality Choice Program started publishing semiannual patient satisfaction and quality reports on the area’s 27 hospitals, payers and employers have been using these data as a major factor in determining which hospitals get contracts and which don’t.

"We have seen payers switch providers based on our results," says Dwain Harper, DO, executive director of the Cleveland program. "It’s a pretty pioneering program that is not without a lot of anxiety and teeth gnashing on the part of some providers. Clearly there are some providers out there who wish we would just go away. But I don’t see that happening."

The Health Quality Choice Reports have two main components that together are referred to as quality. One component of the risk-adjusted data looks at clinical outcomes, and the other focuses on patient satisfaction. While the rate at which hospitals return patients to good health will always be a closely watched factor, "what we’re finding is that the patient satisfaction component is gaining in prominence. It’s to the point now where I’d say it’s a major factor in contracting decisions," Harper says.

To give credence to this statement, one has to look no further than the contracting dynamics taking place in the Cleveland market. Consider that:

• In late 1994, Anthem Blue Cross/Blue Shield used the program’s quality and patient satisfaction reports during a reassessment of Cleveland area hospitals and most recently used the reports to help select hospitals for a new cardiac care network, says Kimberly Byrwa, manager of provider quality programs at Cincinnati-based Anthem.

"From where I sit, I think more payers will be using this type of information in the future when they put together networks," Byrwa says. "I know it’s expensive to do these types of programs, but I think that is offset in the long run by lower [treatment] costs that are the result of high-quality care."

Anthem places such high importance on quality that it has started paying premiums for outstanding performance. In Anthem’s coronary services network, bonuses above the standard DRG rate went to the providers scoring in the top 30% for outcomes and patient satisfaction, Byrwa says. "From our standpoint, we want to keep our customers and patients happy and satisfied with the care they receive," Byrwa says. "This is one way for us to accomplish that. What we’re saying is, ‘If you give our customers high-quality care, you will be rewarded financially.’"

• The Health Action Council of Northeast Ohio in Cleveland, a group of about 180 human resources and employee benefits executives, began an initiative in 1995 to find better health care alternatives for selected carve-out services. Instead of first looking at prices different providers charged, they started by looking at quality. "It was a rather unique twist," Harper says. "Their first cut was on quality. They used our data to cut the field from 34 hospitals down to about 20. What they essentially said was, ‘You 14 hospitals have a quality problem, and you haven’t fixed it.’ Only after they made this cut did they come out with an RFP [request for proposal] and begin negotiating price."

Shape up or ship out

In many respects, the program has given several Cleveland area hospitals what amounts to a swift kick in the pants. It’s either shape up or ship out. "In a sense, the program was designed to identify some of the losers," Harper says matter-of-factly. "Obviously, if you are losing market share because of the performance measurements we are publishing, you would probably like to see the program disappear in a hurry. But that is part of the design."

For other hospitals, the program has served as a wake-up call. "We’ve seen some miraculous turnarounds of institutions that had less-than-satisfactory patient satisfaction scores in the past. Anytime performance data is made available to the public, that is a pretty strong incentive to fix things." And many hospitals have. "We’ve seen tremendous improvements in aggregate performance since we started this program," Harper adds.

Each hospital in the program is responsible for collecting and reporting its scores to the program. All of the hospitals that started reporting data to the program in 1989 are still involved, but signs of dissension are starting to grow. "We’re starting to see some hospitals lose market share as a result of participating in the program," Harper says. "At some point, I suspect some of these hospitals are going to cut their loses and drop out."

Trend expected to gain strength

As health care — and managed care in particular — continues to grow and evolve, so will the pressures to pay closer attention to patient satisfaction, agrees David Furse, PhD, founder and chief consultant for Solution Point/NCG, an outcomes measurement and decision support company in Nashville, TN. One of the driving reasons for this is that "patients are increasingly voting with their feet," Furse says. "If they aren’t satisfied with the care they are getting, they will go elsewhere, and once they leave, it is very, very hard to get them back."

Another reason is that, over time, cost differences are expected to become more uniform. "I don’t think we are there yet," says Harper. "Price is still the most important factor. But once that playing field levels out, my guess is that most contracting decisions will be made on quality." Harper adds that he’s hearing the same thing from employers. "They all think it’s coming, but whether it will be here in three years, five years, or 10 years, no one knows," Harper says. [Editor’s note: For more information contact: Dwain Harper, Executive Director, Cleveland Health Quality Choice Program, 1621 Euclid Ave., Cleveland, OH 44115. Telephone: (216) 696-7999. David Furse, Chief Consultant, Solution Point/NCG, 1321 Murfreesboro Road, Suite 210, Nashville, TN 37217. Telephone: (615) 399-0408.]