Payment Reform

toddSpring 2013

Episodes of Care to Replace Fee for Service

By Elizabeth Caldwell

The health care system consumes up to 20 percent of the nation's gross national product.

The health care system consumes up to 20 percent of the nation’s gross national product.

In the not-too-distant future, payments to health care providers in Arkansas will be based on overall quality of care rather than the number of office visits or procedures performed.

In fact, in UAMS clinics and those of other providers across the state, the traditional “fee for service” type of payment system has already been replaced in favor of one called “episodes of care” for nine medical conditions, with four more to be added in October.

It’s a central piece of payment reform — an all-payer approach — that Arkansas health care leaders say is desperately needed to stem the tide of rising health care costs that threatens to bring the whole system crashing down.

The health care system consumes up to 18 to 20 percent of the nation’s gross national product. Insurance costs for a family of four have risen from $6,300 in 2000 to $11,816 in 2010. In Arkansas, 25 percent of people ages 18-64 don’t have insurance coverage. The state has the sixth-lowest median household income, meaning less discretionary income to spend on insurance.

“The nation’s health care system is at a tipping point and largely falling apart,” said Joe Thompson, M.D., M.P.H., Arkansas surgeon general and director of the Arkansas Center for Health Improvement. “There’s definitely not only a case for change, but an imperative to modify our delivery system.”

Thompson, also a professor at UAMS, has been leading the charge for payment reform in Arkansas.

With the all-payer strategy, he said, all insurance companies as well as Medicare and Medicaid would reinforce improved quality and efficiency in the same financial way, providing incentives for high-quality, coordinated care and improved monitoring of chronic diseases at an appropriate cost.

This came out of the state’s Health Care Payment Improvement Initiative that began in 2011. Arkansas Medicaid and private insurers Arkansas Blue Cross and Blue Shield and QualChoice collaborated to find ways to shift to a higher-quality and more cost-efficient system of care.

The partnership worked with hundreds of physicians, hospital executives, patients, families and others to design the new payment system. Arkansas is the first state to use this approach statewide and with both public and private payers.

One step in transforming the system is establishing payment thresholds for episodes of care for nine conditions that providers are given incentives to meet. The first five began in October 2012: upper respiratory infections, total hip and knee replacements, congestive heart failure, attention deficit hyperactivity disorder (ADHD) and pregnancy. The next four began in April: colonoscopy, cholecystectomy, tonsillectomy and oppositional defiant disorder (ODD).

To be added in October: coronary angioplasty/coronary artery bypass surgery, chronic obstructive pulmonary disease (COPD) exacerbation (sudden worsening)/asthma exacerbation (sudden worsening), neonatal care, and combination ODD/ADHD.

The provider has an incentive to manage costs. If expenses go above the acceptable level of cost to treat the condition, the provider absorbs the loss. If expenses are below the acceptable level of cost, the provider shares in the savings. The goal is to expand the approach so that 80 percent of care is under the new payment structure within three to five years.

Yet that’s not the most important part of payment reform, Thompson said. Two other components promise even more effective management of costs while providing better care.

It starts with the patient-centered medical home, a care model that personalizes a patient’s care and health professionals work as a team to address chronic conditions.

In 2009, UAMS’ Family Medical Center in Little Rock was the first in Arkansas recognized as a patient-centered medical home by the National Committee for Quality Assurance (NCQA). In 2012, six regional UAMS centers with a total of eight clinical practices also were recognized by the NCQA, as well as clinics in the UAMS Institute on Aging and Internal Medicine North. UAMS upgraded its software and hired additional staff to provide monitoring of patients with chronic conditions. It also developed the UAMS Center for Primary Care to assist clinics in providing excellent care to their patients.

The move is paying off by preventing hospitalizations, readmissions and long-term complications that are very costly, said Mark Mengel, UAMS vice chancellor for Regional Programs, who oversees the regional family medical centers.

Also in 2012, the federal Centers for Medicare and Medicaid Services (CMS) Innovation Center selected Arkansas as one of seven geographic markets in the country to participate in a major initiative to help physicians better care for patients with chronic diseases and complex illnesses.

Under the Comprehensive Primary Care Initiative (CPCI), Medicare pays participating providers an average of $20 per patient per month to improve coordination of care. Also, Medicaid, Arkansas Blue Cross and Blue Shield, QualChoice and Humana Medicare Advantage are contributing extra funds to providers for delivering preventive care, checking medications to prevent error, increased access to care and helping patients monitor their own chronic conditions.

“In the long term, this has more of an opportunity to reinforce the transformation we’re trying to have our system undertake,” Thompson said. “Better use of electronic records, better use of clinical workforce and enhanced quality over time.”

Five UAMS regional family medical centers — Fort Smith, Fayetteville, Jonesboro, Springdale, and Texarkana — are participating in the CPCI.

Mengel said the extra payments are helping them build the infrastructure needed to coordinate care. “We are seeing improved outcomes of care which, I think, will continue as we learn more about the improvement process.”

In January, Wal-Mart Stores Inc. of Bentonville announced it is investing $670,000 in the Health Care Payment Improvement Initiative to assist with creation of public awareness materials and an annual statewide tracking report to assess the initiative’s progress. Wal-Mart also is co-leading an employer advisory council to provide a venue for self-insured employers to provide input, feedback and ideally align with the statewide efforts.