Future Payment Mechanisms:

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Loreen Gilmore
5 years ago
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1 Future Payment Mechanisms: International experience with alternatives to casepayment for acute care Loraine Hawkins Visiting Senior Fellow The King s Fund November 19,

2 Simple alternatives to case payment : global budgets A number of countries use some form of global budget for most emergency acute care and DRG only for elective care and/or cross-boundary flows

3 Innovations in HCHS payment methods in EU, USA, Australia Pay-for-performance Combining clinical and financial accountability, integrating services Bundled payments for pathways Extended episode payments Year-of-care payments Sophisticated capitation of provider networks, with risk/gain sharing

4 Bundled payment in the US Payment is usually a linked bundle of costed activity-based payments acute care DRG, doctor fees, rehabiliation DRGs, home care packages with gain/risk-sharing and Pay-for-Performance Payment is adjusted for comorbidities, assessed care needs, other patient and provider characteristics, some actual interventions NHS cannot implement bundled payment the US way because we lack CHS currencies and costing based on nationally standard care needs assessment tools

5 Tendering for year-of-care contracts Dutch experience Nationally specified care standards for selected chronic diseases (diabetes, COPD, CVD risk management), based on individual care plans, specify treatments, not disciplines Hospital admission is outside the bundle considered too risky Health insurance funds purchase by competitive tender from integrated care groups mostly GP-led; hospitals excluded Performance indicators are part of the contract

6 Preliminary results Better guideline adherence Substitution from secondary to primary care but could not extract costs from hospitals Double payment issues not solved Large variation between groups and practices in service intensity and cost for the same condition Higher costs in the short term

7 Bundled payment is in its infancy and poses many challenges Only suitable for some conditions & patient groups Difficult unless you have building-blocks of standard metrics & costing for whole pathway procurement route may not drive value (variation and market-dominant prime contractors) Overlaps with other payments Single disease bundles are barriers to integration for multi-morbidity patients Incentives for cherry-picking, under-treatment, low uptake of cost-increasing new technologies have to be managed by risk adjustment, P4P Governance and accountability across virtually integrated providers has to be assured or regulated Higher financial risk to providers Needs up-front investment in integrated patient records across settings Chicken and egg problem in driving service redesign

8 Sophisticated global capitation Provider network is contracted to provide comprehensive care for enrolled or assigned patients Network typically includes all levels of care, all specialties Payment is usually a blend of: weighted capitation sets a target budget activity-based payments to share risk/gain, allocate budget between providers in the network and pay for outof-network care pay-for-performance based mostly on known quality processes and patient experience measures; some examples of using clinical outcome measures

9 Could the NHS implement capitated integrated systems with risk/gain sharing? 1. NHS has smaller payers & larger providers than most countries acute trusts are better able to take risk than most CCGs unlike US, Netherlands, Australia so likely to be optimal for large trusts to take all or almost risk, though could share risk with NHSE 2. NHS is unusual in having single budget constraint for payers & public providers applied to local health economies this attenuates incentives and undermines any rule-based payment (capitation or activity-based) in financially stressed health economies most systems have more safety valves for managing local variation in demand and service delivery costs and pool risk over much wider areas 3. The NHS does not have the regulation needed to manage the risk of allowing integrated systems to share gains with doctors practices or commercial providers and suppliers the professional and public debate about the acceptability of this has yet to happen in the UK

10 Evaluations find modest impact Alternative Quality Contract & Medicare evaluations of capitation found: Quality improvements Very little savings Apart from integrated payer-provider organizations (like Kaiser or Geisinger Health Systems), provider networks - lack incentives to pursue efficiencies that will reduce income for some providers in the network (some providers lack incentive to join networks if they have the option to stick with activity based payment), lack the operational infrastructure to manage risk and coordinate payment across the continuum of care, may increase their market power vis-à-vis payers as a result of the incentives for integration created by these contracts

11 Capitation makes providers accountable for outcomes and resources across the care continuum. It delegates commissioning to the lead provider or network management subject to budget, service specification, outcome targets. HSCA 2013 tries to achieve the same objective by making primary care provider organizations the principal commissioners. HSCA 2013 is turned on its head if CCGs capitate acute Trusts or private companies as lead providers.

12 Different payment methods for different services and patient categories: overlap & high complexity (1) Planned episodic (2) Unplanned episodic (3) Chronic illness (4) Chronic illness - manageable comorbidities - Multiple comorbidities/ complex need Meets criteria for bundled payment Extended episode payment Not applicable (except where covered by (3)) Year-of-care Not applicable Doesn t yet meet criteria for bundled payment Case-based Global budget informed by need analysis, case-mix, utilization benchmarks + P4P Outcomeoriented gainsharing tenders to pilot care models Sophisticated global capitation, OR pay for coordination service

13 Is there a more incremental way to incentivize optimization along pathways? Align incentives along care pathway by joint design of e.g. quality premium, QOF, & CQUIN and LES for chronic conditions Use consistent & complementary performance measures across settings Design contracts and incentives to reward use of appropriate setting & efficient care transitions Apply volume caps where you need to mute PbR incentives that undermine pathway optimization; set/adjust caps based on better demographic & epidemiological methods and benchmarking data (similar methods to setting capitation) Accelerate development of CHS metrics base currencies, costing and metrics on needs assessment related groups

14 Transition issues Building constituency for vision & direction for future of payment methods National metrics not yet ready for needs assessment for chronic care or end of life, or CHS activity Information systems readiness for managing multiple overlapping payments absent in many providers Rise in localism in design of new payments & multi-year contracting in the absence of standard building blocks in the absence of national tools but this complicates & extends any transition path to new currencies/methods Any major adjustment in currency and pricing likely to need new adjustment path from historic to new payment method as for PbR Multi-year sophisticated capitation or global budget contracts will require provider-specific regulatory agreements, perhaps with national design methodologies and metrics

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