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Value-Based Purchasing

Value-Based Purchasing

New Medicare payment reforms required by the 2010 ACA, have given the way to convincing providers to embrace value-based payment methods and to transform their processes for delivering care (Fensholt, 2012). By 2017, CMS will attach nine percent of Medicare payments to some form of value purchasing. The Partnership for Patients; an element of the ACA challenges private purchasers to use payments in support of a safety improvement goals set by HHS. Private purchasers, both large and small, will need to make good use of this opportunity to pay on value and to avoid the cost shifting that providers often claim accompanies Medicare pay. However, two studies released by Congressional Budget Office (CBO) recently present different pictures in relation to the ability of the America’s health care system to reduce costs by coordinating care and paying health care providers based on the quality and efficiency of care (Fensholt, 2012).

These studies are interesting because the federal health reform law puts all its cost-containment eggs in one basket, hoping that changing the way health care is paid can generate large-scale savings and, in turn, hold down the cost of health insurance. [Delete:The new law is playing several cards in this important bet, including] ACOs, are designed to enhance the quality of care in exchange for enhanced payments for meeting specific performance benchmarks, and various initiatives to facilitate coordination of care in order to realize efficiencies and cost savings (Fensholt, 2012). When health care providers become better and more efficient, the patient wins, but this doesn’t necessarily translate into cost savings. For instance, the hospital that responds to incentive-based payment models will provide better care, make fewer mistakes, and see fewer re-admissions, resulting in smaller insurance payments on behalf of its individual patients. (Fensholt, 2012).But if the hospital frees [FONT SIZE?] up patient space faster, doesn’t it lose revenue? However, it can be argued that the hospital through participating in the ACO can gain through the gain-sharing reform that will allow it to benefit from the extra saving. It is hoped that the extra saving gained can make up for this decrease in revenue due to fewer admissions. So potentially, the hospital can be rewarded for providing less yet higher quality care, but the question is where do the savings come from? How much savings can be achieved? Will the extra savings make up for the reduced revenue from less patient care? [will this really happen with the increased participation (i.e., covered patients)?]

Medicare has conducted two broad categories of demonstrations aimed at enhancing the quality of health care and improving the efficiency of health care delivery in its fee-for-service program. These demonstrations are: firstly, Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly. Secondly, Value-based payment demonstrations have given health care providers financial incentives to improve the quality of care rather than payments based on the volume and intensity of services delivered.

CBO reviewed the outcomes of 10 major demonstrations that have been evaluated by independent researchers. The evaluations show that most programs have not reduced Medicare spending. Results from demonstrations of value-based payment systems were mixed. In one of the four demonstrations examined, Medicare made bundled payments that covered all hospital and physician services for heart bypass surgeries; Medicare’s spending for those services was reduced by about 10 percent under the demonstration. Other demonstrations of value-based payment appear to have produced little or no savings for Medicare (Congressional Budget Office, 2012).

Study Site: Gotham Hospital

Gotham Hospital is a large urban-based not-for-profit medical center in the New York City (NYC) Metro Area serving a population of approximately 500,000 residents who live in Bronx County. The hospital has: 1,060 total acute care beds on two campuses; a network of 19 primary care; two specialty ambulatory care centers near Gotham hospitals; a 420,000 visit home health agency providing short and long term care to home bound patients; a unified, enterprise-wide clinical and business information system connecting all of the above components. There are more than 800 house staff members and 800 full-time academic faculties in all clinical specialties at Gotham (Boucai and Zonszein, 2007). Gotham hospital has three general hospitals and one children’s hospital along with 23 community primary care centers, 16 school health centers, 3 major specialty care centers, 2 special care units, and 4 emergency departments (Ashkenase, 2010).

Medicare and Medicaid make up the largest portion of the hospital’s payer mix at 80%, ( Medicare 37%, Medicaid 43%) while commercial (13%) and other tertiary insurance make up 20% of healthcare coverage carried by patients (Chase D, 2010) (Exhibit 1). Specific figures for the number of uninsured patients that receive services at Gotham were not available. Over the last several years the hospital has seen an increase in the number of cases of bad debt, i.e. unpaid patient accounts, and Charity Care, which includes an increase of $62 million from 2007 ($126M) to 2009 ($188M) (Ashkenase, 2010).

As a part of its 120-year tradition, the hospital has provided healthcare access to the poor, immigrants, and medically underserved patients in the Bronx. 90% of Gotham’s patients are from the Bronx or Westchester. The hospital employs modern disease management concepts, using evidence-based medicine and population surveys.

This capstone project aims to study the diabetes management unit at Gotham Hospital (the study site), a subsidiary unit at Gotham, which is a member provider of The Bronx area ACO structure. The group aims to evaluate how the coordination of care across the various provider groups comprising a typical ACO model (The Bronx ACO Group) will lead to cost reduction through patient centered integrated care in managing a typical chronic disease (Diabetes). The group will analyze the various contributory variables that are responsible for increased cost of management of diabetes Pre-ACO and evaluate how these factors can be addressed Post-ACO. However, since one of the major effects of the ACA reform leading to the formation of ACO is universal coverage for all Americans, special emphasis will be placed on how to reduce the cost of managing diabetes through increased access and utilization of services by the target population. Accordingly, the team will research the contributory factors responsible for underutilization of the services and offer appropriate recommendation on how to increase enrollment as a long-term measure to reduce the cost burden of diabetes. [Isn’t the issue really participation vs. enrollment? i.e., controlled vs. uncontrolled diabetes? Isn’t that the purpose of the ACOs?]


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