For insights into health reform and its impact on hospitals, What is Meaningful spoke with John D'Amore, vice president of enterprise performance management, Eclipsys. In Part 1 of his two-part interview, D'Amore pinpoints three areas that he believes hospitals can actively prepare: quality, finances and delivery change.
What is Meaningful Editor: What are the most important elements of health reform that hospitals and health systems can prepare for?
John D'Amore: That’s a question many experts have been working through since the bill’s passage a few months back. Many changes in reform are for the insurer market, like coverage expansion and removing preexisting conditions. Health systems can’t necessarily prepare for those. As I’ve read through the legislation and spoken to experts, I've begun to break down the things that hospitals can prepare for into three topics: quality, finances and delivery change.
Quality
First and foremost, reform brings measurement of quality into the spotlight. Over the past decade, providers have gotten comfortable with the idea that quality can be measured. Since 2002, they’ve been reporting a growing number of measures endorsed by the Joint Commission and National Quality Forum, which are now required for the full annual increase in Medicare payments. The data they report are published on the web for the public, but up until now, hospitals have not been systematically reimbursed differently based on those results. Reform enacts a major change through the adoption of what Medicare calls ‘Value-Based Purchasing.’ The idea is to pay systems with better results more over time relative to others with poorer results. This idea isn’t new to other industries. Who would expect car prices to all be the same regardless of quality? It’s a big shake-up, however, for hospitals. To go along with this program, there are two other independent reform initiatives that penalize poor quality. The first is a readmissions penalty, where hospitals with high rates of 30-day inpatient readmission will lose money in subsequent years. The readmission penalty and ‘Value-Based Purchasing’ go into effect in October 2012, not that far from now. The last one is a payment reduction for hospitals with high rates of hospital acquired conditions, like pressure ulcers and infections. This one is delayed a couple years and doesn’t start until October 2014. Investigate quality for your local hospital.
Finances
Next are the impacts to finances as part of health reform. In addition to the penalties for poor quality, reform makes a huge cut of $156 billion dollars to Medicare reimbursement over the next decade. Even though those cuts are designed to offset fewer losses from bad debt and charity, they begin this year while coverage expansion doesn’t take hold until 2014. This will place hospitals and health systems in a bit of a cash flow pinch over the next couple of years. This means managing revenues and expenses are going to be particularly important, even as organizations emerge from this current recession. In addition, reform places some new hurdles for non-profit systems to maintain their tax exempt status.
Payment for Care
Finally, reform begins the long process of reworking how the U.S. pays for medicine. Today, health systems and physicians get paid separately for individual services, like an office visit, ambulatory surgery or inpatient admission. Policy experts suggest that this payment methodology, a ‘fee-for-service’ model, causes more services to be used than are often necessary. Reform doesn’t radically change this system in year one, but it outlines future payment designs with the potential to increase quality while decreasing costs. One way, written in reform, is through bundling the payments to providers across settings for an episode of care. The idea is that making a single payment will encourage providers to better coordinate the utilization of services. A second method proposed by reform is the establishment of Accountable Care Organizations, or ACOs. Although the legislation doesn’t define them with great detail, the idea of ACOs is to broadly integrate services to manage communication, expenses, payments and quality for a large patient population. One way to conceptualize an ACO would be to examine the current models of system integration, pioneered by Geisinger or Intermountain Healthcare.
As you can tell, 2,409 pages of reform legislation make a lot of changes. Through the categorization into quality, finances and delivery change, health systems can begin to think about what taskforces and executives need to be engaged for each aspect of reform. Just within those three categories, there’s already a lot to prepare for.
WIM Editor: How do hospitals prepare for this new focus on quality?
D'Amore: Well, the good news is that many hospitals have started doing some of the right things. Since quality metrics are already publicly reported and used in national rankings, there’s been good reason to focus on improving scores. Now with dollars tied to quality, high performance is paramount.
Core Measures
A first focus with quality should be the 27 process measures, commonly called the ‘Core Measures,’ which are abstracted from patient charts. These are fundamental processes that experts agree should be completed on every eligible patient a hospital admits. For example, a smoker who has had a heart attack should be counseled to stop smoking before he or she leaves the hospital. How does a hospital make sure this happens? Some hospitals are using checklists or order sets. Others are dedicating clinical staff to manually ensure each measure is performed and documented before patient discharge. These are good activities, but I think one that may be missed is the use of technology. With the rush towards Meaningful Use, hospitals are rapidly upgrading their electronic medical records and codifying information to receive incentive payments beginning in 2011. As they make these investments, hospitals should simultaneously be thinking about how to use these new systems and data to improve their ‘Core Measures.’ For example, once problem lists, medications and laboratory data are all electronically in one system, it’s possible to screen inhouse patients for evidence of a heart attack. Then for the identified patients, reporting tools can automatically check if smoking cessation counseling has been documented. This process of electronic surveillance can be cheaper and more effective than manual reviews. I think hospitals will make investments to do so now that the technology and Meaningful Use will enable it.
Readmissions
A second focus will be on readmissions. Incredible as it may sound, over one-third of all Medicare inpatient spending is on patients who are readmitted to a hospital within 30 days of a prior discharge. While not all of those readmissions are avoidable, there is a lot of variation between providers in readmission rates. This is why reform creates a financial penalty for hospitals with high 30-day readmission rates. To prepare for this, hospitals need to track their readmissions every month and proactively put mechanisms in place to prevent readmissions. To track, it’s about optimizing patient reporting systems to scan and count medical record numbers that repeat for a facility. For proactive prevention of readmissions, there are many published studies on effective tactics, such as ProjectRED from Boston. The main lessons are to educate patients before they leave, get them on the right therapeutic course, and make sure they follow-up on prescribed outpatient activity.
Prevention of Medical Errors & HACs
A final issue for quality reform is the prevention of medical errors and hospital acquired conditions. Again, the means to succeed here come down to measurement and feedback. Are the right bundles of preventative practices being done in the ICU to prevent infections? Do nurses document skin integrity and follow-up when there’s a problem? If a hospital can reliably monitor the presence and completeness of preventative practices, it can manage quality, rather than hoping that clinicians don’t make mistakes. Atul Gawande, a surgeon and author, has written extensively on systematic processes that improve outcomes, like through the use of checklists. While humans work diligently and efficiently, the hectic nature of medicine means distractions and lapses inevitably occur. The right processes provide a fail-safe mechanism so that an oversight doesn’t become a costly or litigious mistake.
Quick Links & References:
AHRQ Statistics on Readmission
Re-engineering Patient Discharge (Project RED from Boston University)
Atul Gwande, the Checklist Manifesto
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