BACKGROUND ON LOCAL AND NATIONAL EFFORTS RELATED TO PROVIDER PEER GROUPING

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1 BACKGROUND ON LOCAL AND NATIONAL EFFORTS RELATED TO PROVIDER PEER GROUPING Issue Paper Prepared for the Provider Peer Grouping Advisory Group By Minnesota Department of Health Staff June 11, 2009 INTRODUCTION In 2008, Minnesota Governor Tim Pawlenty signed a comprehensive health care reform bill into law. One primary goal of the law is to promote health care payment system reforms that will slow the growth of health care costs and improve quality and value. Another priority is making better information on health care costs and quality available for more informed decision-making by health care consumers. One of several initiatives in the law to make progress toward these goals is the development of a system of publicly comparing provider performance on cost and quality, referred to as provider peer grouping. As required by law, this system will include a combined measure that incorporates both provider risk-adjusted cost and quality of care, in total and for select specific health conditions. In developing the provider peer grouping methodology, the Advisory Group will need to consider the following issues: What is the appropriate provider level for analysis for example, individual physicians, clinics/hospitals, medical groups, or health systems? Which types of health care services and medical conditions should be included? Which provider(s) is primarily responsible for coordinating an individual patient s care? How should information on cost and quality be combined into a composite measure? How should adjustments for variations in clinical risk across the patient populations of different providers be made? How should adjustments for outlier or catastrophic cases be made? What adjustments may be necessary to address variation in payment rates? How should adjustments for payer mix (variation across providers in the percentage of revenue received from commercial vs public payers) be made? CURRENT RELATED ACTIVITIES IN MINNESOTA Many of these issues have been considered in the context of similar efforts underway in Minnesota. Several payer organizations (primarily health plans and the state employee group insurance program) in Minnesota have developed their own systems to compare providers. The growth of these analytical efforts in recent years is indicative of a high level of interest in provider comparisons. Some of these organizations shared information about their approaches to comparing providers with MDH through their responses to a formal Request for Information and through individual interviews. As illustrated by the variations in current methodologies, there are multiple ways of approaching this task.

2 Although the outputs of these analyses aren t necessarily publicly reported or transparent about how calculations are made, these provider comparisons are evolving as tools for health insurance benefit design, provider network selection, and evaluation of health plan performance. Similar systems are emerging within some provider organizations in order to better negotiate with health plans, profile member providers performance, develop new clinical products, and participate in national clinical quality improvement initiatives. It is important to note that the peer grouping system is being developed for a different purpose compared to methodologies already in use at health plans and different results may emerge from the peer grouping initiative. Peer grouping, for example, will not result directly in tiered insurance products. In addition, the peer grouping system will have characteristics that are markedly different from existing health plan methodologies. For example, the peer grouping system must include a composite measure of cost and quality, and will include analysis of public programs as well as commercial populations. Using a transparent methodology, the peer grouping system will rely on cost data aggregated across multiple payers, thus allowing a community-wide view of performance and variations among providers. While the underlying purpose and key characteristics of the provider peer grouping system differ from health plan tiering practices, the experiences of those engaged in similar analytical work can significantly inform the development of the peer grouping methodology. The discussion that follows provides high-level examples of some of the activities currently under way. Health Plans Minnesota s health plans have been stratifying health care providers on the basis of cost for several years. Methods for performing this type of analysis are much more welldeveloped than methods that compare providers on both cost and quality. Although the methods used by different health plans have a great deal in common, there are significant differences in both methodology and results across plans. For example, there is substantial variation among Minnesota health plans in the way provider tiers are constructed. Tiering is done at the care system level for some products, or the primary care and multi-specialty clinic level for others. For primary care providers, analysis can be either at the person level (all care provided to a patient, by all providers, during the year) or at an episode level (primary care episodes only). Risk adjustment is frequently done using one of two patient classification systems: Adjusted Clinical Groups (ACGs), or the Episode Risk Group method within the Episode Treatment Groups (ETGs) product, both briefly described in the text box on the next page. In the past few years, health plans have begun to incorporate quality of care measures into their stratification processes, although the specific measures used and the ways in which the analysis is done vary significantly across plans. Many of the quality measures that are currently being used for this purpose are drawn from publicly available sources, such as MN Community Measurement or Hospital Compare. Minnesota health plans integrate quality measures into their tiering process in different ways. For example, one plan combines cost and quality scores to determine an overall score, while another places only providers that are better than average on both cost and quality into its preferred tier. Other details related to key methodological issues are summarized in Table 1. 2

3 Patient Case-Mix Methods In Minnesota, two primary methods of classifying patients by their clinical complexity, or burden of illness, are in use by private payers. These are: Adjusted Clinical Groups, or ACGs, are a population-based tool for describing the clinical case mix of a patient population developed by Johns Hopkins University. Using insurance claims data, the ACG system classifies patients into 93 homogenous health status categories defined by age, gender, and morbidity. Episode Treatment Groups, or ETGs, are an episode-based classification system developed by Ingenix Symmety. The ETG systems group patient health care claims from various types of providers into 574 clinically homogenous categories. Table 1: How Key Methodological Issues Are Currently Being Addressed in Minnesota Issue Adjustments for the variations in clinical risk across the patient populations of different providers Methods ACGs Episode Risk Groups within ETGs One plan uses ACGs within ETGs for some products Adjustments for outlier or catastrophic cases Exclude trauma Limit costs to a certain dollar threshold. Determining which providers are primarily responsible for an individual s care Specific types of providers that should be included in the calculation Specific types of health care services to be included or excluded in the calculation Appropriately adjusting for variation in payment rates The level for analysis clinic and/or hospital, medical group, or health system. Depending on scope of analysis, care is attributed to one or more providers who coordinates more than a given percentage of care. Primary care Select specialties, such as obstetrics, cardiology, and orthopedics. Primary care: all care for provider s patient population Specialty care: episode-based analysis Not addressed, because no multi-payer analyses to date. Care systems Medical groups Hospitals. Adjustments for payer mix Not addressed, as plans use only commercial data to develop tiered products for the commercial market. 3

4 State Employee Group Insurance Program The Minnesota Advantage Health Plan is a tiered provider network plan for Minnesota state employees and their dependents. It is based on a care system model that requires state employees to select a primary care clinic within a care system, with the expectation that most care will be coordinated through the clinic. The costs of all health services utilized by a member are attributed back to the primary care clinic selected. The plan places clinics into four tiers based on cost. Quality measures are not explicitly incorporated into the tiering process. Risk adjustment occurs at the provider group level using Adjusted Clinical Groups (ACGs). Average cost efficiency is the expected value utilized in comparing a clinic to others for inclusion in a tier. The analysis deals with outlier cases by capping costs for an individual enrollee at $200,000 for purposes of the tiering analysis. RELATED NATIONAL EFFORTS While no national organization has developed or implemented a system of provider peer grouping similar to the one envisioned in Minnesota, the Centers for Medicare and Medicaid Services (CMS) has some projects are aimed at rewarding higher quality, more cost-efficient providers. Examples include: Medicare Value-Based Purchasing CMS is currently developing the concept of valuebased purchasing for hospital services, with the goal of linking payment more directly to quality of care. In this context, value is defined as quality relative to the cost of care in other words, value is determined by a combination of quality and cost. One proposed way of accomplishing this goal would be to first rank hospitals by quality, and then to establish differential payment levels based on hospitals relative cost efficiency. Physician Group Practice (PGP) Demonstration Medicare s PGP Demonstration project is another effort to move toward value-based payment strategies in Medicare. The PGP Demonstration project is a pay-for-performance program that separately rewards improvements in quality and cost efficiency. The project is focused on cost and quality of care for four clinical conditions: diabetes, congestive heart failure, coronary artery disease, and preventive care. Ten physician groups, including Park Nicollet Health Services in Minnesota, were selected to participate in this four-year project. INITIATIVES IN OTHER STATES In many other states, there are efforts under way to compare health care providers based on cost and quality. Some of these efforts compare providers on cost alone, while others compare providers just on measures of quality. The scope of analysis also varies - some include primary care and specialty care providers, while others are limited to hospitals. A much smaller number of these comparative initiatives evaluate all providers on both cost and quality of services. Within this smaller group, the most common method of comparing quality and cost is to assess them separately, then present the results simultaneously. Users of the information need to scan the quality and cost measures at the same time to select health care providers that deliver higher 4

5 quality care at lower cost. Another popular approach is to plot cost against quality in scatter plots, allowing low-cost, high-quality providers to be readily identified. While we did not identify any comprehensive initiatives that use a composite measure of cost and quality, two examples of transparent measurement and reporting of provider cost and quality originate in Massachusetts and California: The Massachusetts Health Care Quality and Cost Council, created by Massachusetts 2006 health reform law, is charged with establishing goals for health care cost and quality improvement, and with measuring and reporting on progress toward achieving these goals. It publishes a website, MyHealthCareOptions, 1 that provides information to consumers on quality and cost of hospital care for a range of health conditions. Quality and cost information are presented separately, and are presented in three categories as below average, average, or above average. Hospital quality is assessed using several measures of patient safety, mortality, best practice, and patient experience ratings, and the hospital cost analysis is risk-adjusted. The Pacific Business Group on Health (PBGH), based in California, has been engaged in provider performance comparisons for many years. Through its partnership with the California Cooperative Healthcare Reporting Initiative and the California Physician Performance Initiative, PBGH has become a national leader in developing and reporting provider quality and efficiency measures, although most of these initiatives are still in the development stage. Developing Minnesota s provider peer grouping system will present many challenges, but it is also a unique opportunity to build on the strong foundations of techniques for comparing health care providers on cost and quality that have been under development in Minnesota and nationally for many years. For example, the combined measure of cost and quality that is required under the law has little precedent. In addition, very few analyses to date have needed to develop methods to accommodate the unique issues that arise when using data from multiple payers