PROJECT PART ONE: HEALTH CARE REIMBURSEMENT - UNIT 3 The first part of the cours

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PROJECT PART ONE: HEALTH CARE REIMBURSEMENT - UNIT 3

The first part of the course project is an analysis of current health care reimbursement policies and their effect on financial management decisions. Your paper should be mainly an evaluation of health care reimbursement and payment methods for a specific type of health care site, such as a surgery center or an acute care hospital. The payment methods should include government and non-government. Your paper should also evaluate how these methods affect revenue-cycle management and financial responses at the type of site.

Content: A payments assessment covering the project objectives for a chosen health care site. The project description link is located in the Resources. Review the scoring guide before submitting your work.

References: A minimum of 10 references, all cited in the body of the text.

Length: A minimum of 10 pages, excluding title page, table of contents, and references list.

Formatting: Follow APA (6th ed.) guidelines for citations, references, and references list.

Explanation / Answer

The healthcare reimbursement system is an extremely complex framework of obtaining payment for services. One of the most problematic issues is that the “rules” governing healthcare reimbursement change frequently, with government payers sometimes changing on a day-to-day basis.

Health insurance payers have a variety of healthcare reimbursement plans, and carry contracts with individual practices and health systems (contracts that are periodically renegotiated, which is just one source of change within the system). This means that there can be one price for services that occur within a health care system that’s contracted with a payer and another price for services that occur outside that system.

In addition, the price for the service is not the “retail” price that the provider charges for it. Payers have a “maximum allowed payment” for every CPT code, which is the beginning point (not the end point) of determining what they will pay. The payer then adjusts the maximum allowed payment with “claim edits,” which they use to disqualify payment for some services, and “payment rules,” which usually reduce payments for some services. The American Medical Association (AMA) describes how payments are affected by these two rules:

Examples include the application of a “claim edit” that eliminates payment for the administration of a vaccine when the physician bills for the vaccine itself or a “payment rule” that reduces the payment when the physician performs more than on procedure during the same visit. The payer then pays the physician the difference between this payer-calculated “total allowed amount” for the medical services and procedures and the amount owned by the patient.

Analysis of Current Practices in Health Care Reimbursement

According to Martin (2015), health care organizations across the United States are reacting tochanges in reimbursement by federal and commercial payers. In addition to decliningreimbursement, there is increasing accountability to demonstrate improvements in safety, qualityand patient satisfaction (Martin, 2015). Furthermore, payers are implementing pay for-performance (P4P) programs to align financial incentives with the attainment of specificperformance criteria (Martin, 2015). These changes in reimbursement are calling into questionthe viability, utility and satisfaction of current physician compensation models (Martin, 2015).The current healthcare delivery system relies heavily on a fee-for-service (FFS) paymentmethod in which a provider is paid a fee for rendering a specific service (Janeba, 2008).Although seemingly straightforward, this system is built such that medical overutilization andresource inefficiency are rewarded (Janeba, 2008).Policies which further exacerbate this trendinclude the undervaluation of preventive services as well as the overvaluation of non-preventiveservices; non-payment to physicians for services required to provide patient-focused, carecoordination; and the provision of incentives for volume of services without regard to quality ofcare or resource utilization (Janeba, 2008)

What Healthcare Payment Models Exist?

In all of the healthcare payment models, quality is a key component, and most arrangements tie the final payment to the achievement of key quality metrics. Healthcare payment models break down into eight basic types:

Fee-for-Service

The most traditional of healthcare payment models, fee-for-service requires patients or payers to reimburse the healthcare provider for each service performed. There is no incentive to implement preventative care strategies, prevent hospitalization or to take any other cost-saving measures.

Pay-for-Coordination

Pay-for-coordination goes beyond fee-for-service by coordinating care between the primary care provider and specialists. Coordinating care between multiple providers can help patients and their families manage to a unified care plan and can help reduce redundancy in expensive tests and procedures.

Pay-for-Performance

In a pay-for-performance (P4P) or value-based reimbursement environment, healthcare providers are only compensated if they meet certain metrics for quality and efficiency. Creating quality benchmark metrics ties physician reimbursement directly to the quality of care they provide.

Bundled Payment or Episode-of-Care Payment

Bundled payments reimburse healthcare providers for specific episodes of care such as an inpatient hospital stay. This healthcare payment model encourages efficiency and quality of care because there is only a set amount of money to pay for the entire episode of care.

Upside Shared Savings Programs (Centers for Medicare and Medicaid Services (CMS) or Commercial)

Shared savings programs provide incentives for providers with respect to specific patient populations. A percentage of any net savings realized is given to the provider. Upside-only shared savings is most common with Medicare Shared Savings Program (MSSP) Accountable Care Organizations, but all MSSP participants must move to a downside model after three years.

Downside Shared Savings Programs (CMS or Commercial)

Downside shared savings includes both the gain share potential of an upside model, but also the downside risk of sharing the excess costs of healthcare delivery between provider and payer. Because providers are taking on greater risk with this model, the upside opportunity potential is larger in most cases than in an all-upside program.

Partial or Full Capitation

In this healthcare payment model, patients are assigned a per member per month (PMPM) payment based on their age, race, sex, lifestyle, medical history, and benefit design. Payment rates are tied to expected usage regardless of whether the patient visits more or less. Like bundled payment models, healthcare providers have an incentive to help patients avoid high-cost procedures and tests in order to maximize their compensation. Under partial- or blended-capitation models, only certain types or categories of services are paid on a basis of capitation.

Global Budget

A global budget is a fixed total dollar amount paid annually for all care delivered. However, participating providers can determine how dollars are spent. Global budgets limit the level and the rate of increase of healthcare cost. Global budgets typically include a quality component as well.

Current inititiative from government from help of internet data

The Patient Protection and Affordable Care Act of 2010 (Obamacare) creates several new Medicare programs intended to improve health care quality, using “pay-for-performance” payment strategies to put financial pressure on medical providers. In such programs, reimbursement reflects provider performance on metrics based on adherence to certain care processes, scores on patient satisfaction surveys, or patient outcomes. The rationale behind pay for performance is the result of a real problem: Payment for medical services, particularly by the large government health programs, does not reflect value or benefit for patients. To address this issue, the United States should move toward a genuine market-based payment system, rather than simply perpetuating flawed financing structures.

Pay-for-Performance Programs in Obamacare

The Medicare pay-for-performance programs enacted in the PPACA pay individual providers based on their past performance. This strategy to improve health care quality has been tried, discussed, and debated among health policy analysts over the past decade. The concept appears to be a logical approach, and its presentation even suggests that it is rooted in free-market ideas. It is grounded in the notion that providers should compete against each other based on quality and the overall value of their services, and that payment for health care services should reflect value, not volume. Such objectives would be naturally achieved in a free market, if one existed today in health care.

In fact, however, the Medicare pay-for-performance strategy is not market-driven; it is a strategy to replace the function of a market with government management of health care delivery. This approach will not solve the problem of sluggish quality improvement; nor will it drive patients to better value care. It will, however, introduce perverse new incentives into the delivery of health care that direct resources away from real improvement and even harm quality.

1. The In-Patient Value-Based Purchasing Program. Value-based purchasing is Obamacare’s main pay-for-performance quality-improvement mechanism. The program began in October 2012 and is intended to financially incentivize hospital performance improvement by reducing Medicare’s diagnosis-related group (DRG) payments for all hospitals, then redistributing the savings according to hospital performance. Hospital performance scores reflect overall achievement compared to other hospitals, as well as improvement from year to year. The quality measures that are used to rank hospitals are drawn from Medicare’s pay-for-reporting program, which went into effect in 2004 and serves as the precursor to value-based purchasing. In its first year, value-based purchasing measured performance with 12 indicators of clinical processes that reflect adherence to treatment guidelines, as well as the results of patient-satisfaction surveys. In the second year of value-based purchasing, emphasis on adherence to process indicators will be reduced by including measures of outcomes, including mortality rates.

Improving value in hospital care is a natural imperative for health care reform, but the value-based purchasing program in the PPACA is a flawed strategy for achieving this goal. Evidence shows that the strategy is ineffective at improving outcomes, despite its moderate effect on process adherence. The program is rife with incentives for hospitals to focus on improving their performance scores without actually improving the quality of patient care, and its narrow focus will lead hospitals to direct resources to narrow areas of care, reducing the level of improvement in other areas of need.

The Premier Hospital Quality Incentive Demonstration. The best example of how value-based purchasing will impact health care is the Premier Hospital Quality Incentive Demonstration, which began in 2003. Under the demonstration, Medicare offered financial incentives for high performance on measures related to five common conditions. Of the 34 quality indicators used, 27 measured processes and seven measured outcomes. The program went through two iterations; from 2003 to 2006, only the highest-achieving hospitals received bonus payments; thereafter, hospitals were rewarded for both high achievement and improvement, a process similar to today’s value-based purchasing program.

Both independent studies and the Congressional Budget Office (CBO) concluded that the Premier demonstration showed no evidence of improving outcomes, as measured by 30-day mortality rates, and had no significant impact on Medicare spending. In addition, the changes to the program made in 2006 were intended to encourage low performers to improve, even though they might not be able to surpass already high-performing institutions. Value-based purchasing is modeled after this second iteration, even though studies show it did not have its intended effect.

While participating hospitals did improve their performance on process measures, by the end of the demonstration, the rest of the nation’s hospitals had also improved following the introduction of required Medicare hospital quality reporting in 2004. After five years, one study shows, performance at participating and non-participating hospitals was “virtually identical.”[3]Regarding the Premier demonstration, the CBO concluded, “The best available evidence indicates that the demonstration was responsible for small increases in quality of care and that most of the increases in quality that occurred at the participating hospitals would have occurred in the absence of the demonstration.”Ironically, then, a program designed to improve quality using evidence of what works is grounded in little evidence that it itself will work.

Payment reflects patient characteristics. Beyond the likelihood that it will be ineffective, value-based purchasing has the potential to actually harm the quality of patient care. Performance scores are calculated based on both overall achievement, relative to other hospitals, and improvement relative to the same hospital’s score in previous years. This is done to avoid penalizing safety-net hospitals, teaching hospitals, and other providers that may score low on quality metrics because of the complex cases and demographics of their patients. Punitive reimbursement for these low-ranked hospitals could reduce the resources available for investment in quality improvement, reducing quality and increasing outcome disparities among different races and ethnic groups.

Nevertheless, the methodology for calculating value-based purchasing performance weights achievement higher than improvement, putting low-performance hospitals and those serving certain patients at a distinct disadvantage. For hospital achievement, the program measures all participants equally; in other words, a certain level of achievement at one hospital would be scored equal to the same level of achievement at a different hospital. The same is not true for scoring improvement. As Drs. William Borden and Jan Blustein explain, hospital improvement on quality metrics is measured according to an “elastic ruler,” such that “initial low-performing hospitals have a wider improvement range and, thus, need a greater absolute score increase to achieve the same improvement score as an initial high-performing hospital.”

If low performance on quality metrics is influenced by patient demographics and case complexity, then, logically, the reverse is also true. Hospitals serving healthier, wealthier patients and providing less complicated care may perform better and receive bonus payments, not due to better quality, but due to “better” patients. Even in its first year, a disproportionate number of physician-owned and specialty hospitals were among the top-performing hospitals across the nation. Critics of these care delivery models blamed their high performance scores on the patient population they serve and have called for their exclusion from the program as a result of their high performance

But the problem is not physician-owned and specialty hospitals. These institutions often do deliver better value due to their ability to streamline care, increasing efficiency, and offering quality care at lower prices than general hospitals. The problem is value-based purchasing itself; if the program penalizes hospitals for taking care of sicker, poorer patients and rewards those serving the opposite, its measures do not solely reflect the quality of care provided by hospitals; they reflect patient characteristics. Paying hospitals differentially will not improve value unless hospitals assuming responsibility for more complicated cases receive more payment, and hospitals that care for less complicated patients are paid less to reflect proportionate gains in efficiency. As Harvard researchers explain, “If the business model of general hospitals today can be separated into its component value propositions with distinct business models of care delivery, and the payment system properly rewards each for their work, what seems to be cherry picking today will in reality be recognized as the efficient distribution of resources.”This is impossible under a system of administrative pricing, such as the traditional Medicare program, even with value-based modifications.

Perverse incentives detract from real quality. The measures used in the first year of value-based purchasing reflected areas of care where performance was already high due to years of quality reporting by Medicare. Under the new program, measures are to be removed once they become “topped out”—meaning when there is little room left for significant improvement. Officials at the Centers for Medicare and Medicaid Services (CMS) explain that these measures are to be removed in order to avoid unintended consequences, including “inappropriate delivery of a service to some patients (such as delivery of antibiotics to patients without a confirmed diagnosis of pneumonia), unduly conservative decisions on whether to exclude some patients from the measure denominator, and a focus on meeting the benchmark at the expense of actual improvements in quality or patient outcomes.”

Even so, for 11 of the 12 clinical care process indicators used in 2012, the achievement threshold was greater than 90 percent, meaning that hospitals must adhere to the indicator 90 percent of the time to receive any bonus at all. Since payment depends on hospital scores for this narrow subset of quality metrics, the program encourages large investments to achieve relatively insignificant improvements, solely to obtain a moderately improved score. The small amount of improvement possible from this kind of endeavor would not likely have a significant benefit for patients. According to Tufts Medical Center researchers, “A hospital with 97.5% compliance may be penalized, and it may take a significant financial expenditure and use of staff resources to increase that compliance from 97.5% to 98.5% with minimal or unclear gains to patients.”

For many hospitals, improving in the measured areas of care reduces time and resources that could be invested in areas of care in greater need of attention. Conversely, removing topped-out measures might allow high performance to diminish over time, as attention moves to performance on new measures. The Kaiser Permanente health system experienced performance decline for diabetic retinopathy and cervical cancer screenings between 1997 and 2007, following the removal of financial incentives for performance on these measures of care.

Finally, a narrow focus on quality measures can harm quality by incentivizing care that is not appropriate for certain patients. A number of current measures were initially introduced under the Surgical Care Improvement Project (SCIP) in 2006. Under this and programs like it, according to Tufts researchers,

measures are rolled out before their full impact is assessed, using live hospitals as the testing ground and relying on the individuals trying to comply with these measures to troubleshoot. When issues do arise that require the measures to be changed, response times are invariably at least 6 months; meanwhile patients may be at risk, and measures are consistently failed…. At our institution, even a small number of misses can result in major losses in compensation.

Under SCIP, the initial measures were too rigid to dictate sensible decision making in many clinical situations. For example, one quality measure indicated use of one class of antibiotic to prevent surgical infection and another if the patient was allergic to the first-line choice. The alternative drug, however, had the potential for severe side effects. A third, unlisted class of antibiotic might have been more appropriate, pitting physicians’ choices among one drug that would cause an allergic reaction, another with potential for severe side effects, or a third that may work better for the patient but would lower the quality score. While the specific measures used in SCIP have since been refined, similar experiences are to be expected with greater reliance on quality metrics for defining and rewarding quality in medicine.

Insufficient financial gain to drive quality improvement. As one study predicted, the financial amounts of even the largest value-based purchasing bonuses and penalties are fairly insubstantial, amounting in most cases to less than 1 percent of Medicare payment. This makes it doubtful that value-based purchasing will be able to drive the change needed in care delivery. The balance between the cost of investing in quality improvement and the financial benefit is likely to be even less attractive to hospitals where performance on quality metrics is already low and improvement would require significant investment. While the size of the incentive payment will increase as the program moves forward, so will the breadth and complexity of the quality measures used to assess performance. As a result, despite the potential for perverse and unintended consequences, value-based purchasing will still prove an insufficient driver of change.

2. The Hospital Readmissions Reduction Program. The Hospital Readmissions Reduction Program (HRRP) is a variation of the pay-for-performance strategy. Rather than offering incentive payments, it penalizes hospitals with high 30-day readmission rates for three conditions. Penalties are determined based on a comparison of a hospital’s performance to the national average, adjusting for clinically relevant factors, such as patient demographics, comorbidities, and patient frailty. Readmission rates are calculated using discharge data for each hospital from the three years prior to the year in which the penalty is assessed. In the first year of the program, which began in October 2012, the maximum penalty was 1 percent of total Medicare reimbursement; in 2013, it will increase to 2 percent, and in 2014, to 3 percent. In the first year, roughly two-thirds of hospitals were penalized.

Readmission rates reflect external factors. The goal of the HRRP is to reduce readmissions, which are considered an indicator of poor quality of care. However, like many other outcome measures, the quality of hospital care is not solely responsible for high readmission rates, which also reflect a patient’s socioeconomic status, complexity of illness, and the availability of other health resources in the community. Despite the attempt to adjust for factors that fall outside hospitals’ control, concerns remain that providers caring for sicker, poorer patients are disproportionately penalized under the program. One study has already shown that in the first year of the program, a higher percentage of the penalized hospitals were large hospitals, teaching hospitals, and safety-net hospitals.As with value-based purchasing, reducing payment based on factors that reflect patient profile could decrease the availability of funding for quality improvement investments, making it more difficult for hospitals that care for patients with more complicated needs to show improvement.

Hospital readmissions also reflect the level of care patients receive outside the hospital. It thus seems odd that hospitals should assume responsibility for keeping discharged patients out of the hospital, when a stronger role for others involved in a patient’s care—including primary care physicians, case managers, and insurers—might have more of an impact. Availability of these resources clearly also influences readmission rates. For example, calculated 30-day readmission rates might be higher in an area if patients have access to better outpatient services, which would keep healthier patients out of the hospital in the first place and leave only the sickest patients, who ended up in the hospital, in the denominator of the calculation of a hospital’s readmission rate.

Readmission rates do not always signal low quality. Another issue is that readmissions do not necessarily signal poor-quality care. A disease management program conducted by the Brisbane Cardiac Consortium for inpatient and post-discharge congestive heart failure patients sought to increase use of evidence-based guidelines to improve processes of care; the program was successful in reducing mortality rates, but, unexpectedly, readmission rates actually increased.This same paradox was further noted by Cleveland Clinic clinicians in a study that showed that while the Cleveland Clinic has lower mortality rates for heart failure than the rest of the nation, its readmission rates are higher, indicating that taking better care of more patients and preventing deaths may increase readmission. In another Cleveland Clinic study, no evidence was found of a strong association between a hospital’s performance on mortality and readmission rate for acute myocardial infarction or pneumonia, although there was a modest inverse relationship for heart failure. Whether or not low mortality rates cause high readmission rates, it seems clear that they are not necessarily tied to low quality.

Readmission rates are not always preventable. Even if a hospital does succeed in providing the highest quality of care, some readmissions simply are not preventable. Researchers estimate that 23.1 percent of 30-day unplanned readmissions are potentially unavoidable. Meanwhile, the CMS goal for the Hospital Readmissions Reduction Program is to reduce 30-day readmission rates by 20 percent by the end of 2013. This would require a 91 percent reduction among those readmissions that are avoidable, which may be unrealistic.

Reducing preventable hospital readmissions through better care coordination, discharge planning, medication adherence, and increased use of outpatient services is important to achieving cost-control and quality-improvement goals. However, a federal program to achieve this mission through strict management of hospital care is misguided. Comparisons of the quality of care experienced by patients covered by traditional Medicare versus Medicare Advantage shows that Advantage enrollees experience lower readmission rates, despite using the same hospitals and physicians as other Medicare patients.[19] This indicates that the best way to achieve this goal may be through a new insurance model and engagement of stakeholders other than hospitals in readmission reduction.

3. The Physician Value-Based Payment Modifier. Under the PPACA, Medicare will administer another pay-for-performance program for physicians through a modification of the existing Medicare fee schedule: the value-based payment modifier. This new fee adjustment will be applied to Medicare physician reimbursement beginning in 2015. Medicare physician payment will be adjusted to reflect performance using quality data from the Physician Quality Reporting System, and cost data from Medicare fee-for-service claims. In 2015, the value-based payment modifier will be applied to group practices with 100 or more “eligible professionals,” based on quality data reporting from 2013. In 2017, the modifier will apply to individual and small group practices, using quality and cost data from 2015.

While nurse practitioners, physician assistants, and other health care professionals are included in determining the number of eligible professionals in a practice, only Medicare payment to physicians is subject to adjustment by the modifier. The program is budget neutral for the federal government, like value-based purchasing, which means there will, by necessity, be winners and losers. At the onset, practices that meet the reporting requirements, either by reporting on one or more measures from the PQRS group practice reporting option or by electing administrative claims reporting, can choose to receive no pay adjustment, or a pay adjustment based on a composite score reflecting quality and cost data. Eligible practices that do not meet the reporting requirements will face a penalty of 1 percent of Medicare reimbursement.

Evidence that pay for performance improves the value of care offered by physician groups or individual physicians is even weaker than it is for hospital-based programs. Dr. Robert Berenson of the Urban Institute points out that process indicators used to measure physician performance reflect a small portion of a physicians’ professional activities, and large measurement gaps exist that are unlikely to be filled. For example, it is not possible to measure a physician’s ability to make a correct diagnosis or choose an appropriate intervention, taking into account each patient’s clinical condition and personal preferences, using only administrative claims data. In short, “the numerator of the value equation—quality—captures too little of any physician’s performance on quality, while the denominator—cost—cannot be accurately attributed to an individual physician.”

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