Progressive providers are positioning themselves to do well under performance-based payment structures by reaching across the continuum to improve clinical quality.

The Centers for Medicare & Medicaid Services (CMS) is taking off the kid gloves. Hospitals have been required to provide quality and patient satisfaction scores to CMS-as reported via Hospital Compare-for years. But when CMS' value-based purchasing program launches in October 2012, hospitals' Medicare reimbursements will be directly tied to their performance on these measures. Lower-performing hospitals stand to lose up to 1 percent of their Medicare revenues-rising to 2 percent in 2017. In addition, facilities with high readmission and high hospital-acquired infection rates will be hit with further Medicare penalties.

Private payers are also pushing for performance- and risk-based payment structures, negotiating capitated contracts and pay-for-performance incentives. At the same time, bundled payment demonstration projects, which package hospital and physician payments for patient services into a single fee, are being closely watched by providers and payers alike.

All of this means that providers are bearing greater financial risk for the health of patient populations. There are now clear financial reasons-in addition to omnipresent mission-related motivations-to invest time and dollars in improving clinical quality and managing population health through collaborative, cross-continuum efforts. As shown in these case studies, bundling clinical and financial goals can lead to an ROI that satisfies both clinical and finance leaders.


This is Section 2 of Leadership's Striving Beyond Reform special report.

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Case Study: Reducing Readmissions

When Medicare begins reducing payments to hospitals with high readmission rates in October 2012, St. Luke's Hospital in Cedar Rapids, Iowa, will be able to look back on a decade of work with pride.
Nationally, the 30-day readmission rate for congestive heart failure (CHF) patients is almost 27 percent. At St. Luke's, a 500-bed hospital with between 25 and 30 CHF inpatients each month, the 30-day readmission rate is 15 percent, down from 23 percent in previous years.

Experts estimate that 80 percent of readmissions are preventable. Given that, economist Kenneth E. Thorpe estimates that Medicare could save $21.4 billion in 2013 by reducing payments to hospitals with high readmission rates. Heart failure, heart attack, and pneumonia are the likely targets for the readmission provision in the health reform law, says Thorpe. (Thorpe, K.E., Ogden, L.L., "The Foundation that Health Reform Lays for Improved Payment, Care Coordination, and Prevention," Health Affairs, 2010, vol. 29, no. 6, pp. 1183-1187).

section-2_exhibit-Who Bounces Back to the Hospital

St. Luke's staff started working on heart failure readmissions in 2000, but their breakthrough came in 2006 when St. Luke's participated in the Transforming Care at the Bedside project, a national program aimed at improving care on medical and surgical units sponsored by the Robert Wood Johnson Foundation and the Institute for Healthcare Improvement.

"We had an eye-opening experience that this is not about a discharge-it is about a transition," says Peg Bradke, St. Luke's director of heart care. "We had been viewing heart failure readmissions as our problem; so we were looking only at our little portion of the issue. We soon found out that this is a continuum of care issue."

Standardizing care. St. Luke's Transition Home for Patients with Heart Failure program uses several strategies to improve patients' success after leaving the hospital:

  • An assessment of the patient's postdischarge needs that begins when the patient is admitted to the hospital
  • Patient and family education using the "teach back" method, in which patients and family caregivers are asked to explain in their own words what they understand about the patient's nutritional needs and medication regimen, and the symptoms that require immediate medical attention
  • Effective handoffs, including medication reconciliation and transmitting critical information to the next caregivers
  • A standardized process for posthospital follow-up care, including ensuring the patient sees a physician within five to seven days after discharge

The transition process includes a home care coordination visit within 24 to 48 hours of discharge. If the patients do not qualify for Medicare-paid home care, St. Luke's covers 60 percent of the cost of the visit and a home care agency subsidizes the rest.

"These home visits are really important in helping us identify specific ways to help patients manage their disease," says Bradke. For instance, she has come to believe that medication reconciliation-or obtaining a comprehensive list of a patient's medications and comparing that list against discharge medication orders-is best done at a patient's home. "The home care nurse actually sees how patients' medications are set up, and what other medications are in the home that a patient may have forgotten to tell us about," she says.

Additionally, the home care nurse can go through the kitchen with the patient and see what kinds of food are in the house, and assess a patient's understanding of his or her care plan.
Another postdischarge touch point is a telephone call from an advanced practice nurse, who contacts discharged patients to check whether they are taking medications correctly, monitoring their weight, and eating properly.

Creating a team. Making a successful transition requires a caregiving continuum that extends beyond the hospital. As St. Luke's began to reevaluate its heart failure care in 2006, it formed a team that represented many perspectives from within the hospital: front-line nurses, nurse managers, pharmacists, discharge planners, and rehabilitation therapists. The team also included representatives from physician clinics, long-term facilities, home health agencies, and-especially important-patients and their families.

"We expanded our ranks and tried to look at it from a bigger picture," says Bradke. "Creating a successful transition is not one person's role. Everybody works together on it."

The heart failure team initially met weekly; now it meets twice a month to review all readmissions, including the causes and whether anything could have been done to avoid the patient's return. When needed, a representative from the emergency department or the palliative care unit joins the group. "A lot of these heart failure patients are end-stage, and we are getting more palliative care referrals to help patients make decisions on what their options are," says Bradke.

Monitoring results. At about $10,000 a year, St. Luke's share of the complimentary home care visit is the hospital's biggest expense for its Transition to Home program, followed by the time needed for the advanced practice nurse to call heart failure patients at home.

Although the cost for the program is low, the ROI could be huge when Medicare starts reducing its payments for hospitals with high readmission rates. "This program fulfills the hospital's mission, which is to give the care we would like our loved ones to receive," says Bradke. "We get a lot of support from administration that really helps us. This is all part of the strategic plan."

St. Luke's is currently adapting the heart failure transition practices to its chronic obstructive pulmonary disease patients. However, it is too early to know how the readmission rate for that patient population will be affected by the interventions.

Case Study: Sharing Risks via a Value-Based Contract

St. Luke's cross-continuum success story sprung out of the hospital's quality improvement efforts. Serendipitously, the hospital's low heart failure readmission rates now promise to benefit hospital finances-as well as hospital patients.

A contrasting, business-driven scenario is unfolding in Wisconsin. Two health systems-Bellin Health and ThedaCare-and more than 600 physicians are partnering to offer a value-based contracting opportunity to private payers in northeastern Wisconsin. By forming a clinically integrated provider network- called the Northeast Wisconsin Health Value Network (NEWHVN)-the health systems are differentiating themselves in the marketplace on quality measures and the ability to coordinate patient care.

"We are really trying to assume accountability and responsibility for outcomes and cost efficiencies," says Jeff Squier, executive director of NEWHVN.

Now in its third year, NEWHVN serves some 155,000 members in 12 counties through contracts with Anthem Blue Cross and Blue Shield, Humana, and two regional health plans. NEWHVN accounts for about 30 percent of Bellin Health's non-Medicare patient base, says Jim Dietsche, vice president and CFO at Bellin Health.

Bellin Health and ThedaCare are noncompeting health systems in two different markets. Bellin Health serves the Green Bay, Wisc. area, and ThedaCare is based in Appleton, Wisc. Most of the primary care physicians in NEWHVN are employed by one of the health systems, but the specialty physicians are independent.

The health systems and physicians originally worked together as the joint owners of a health plan that was sold to United Healthcare in 2004. That experience demonstrated the value of being able to contract jointly. "This is an opportunity for us to work together in a slightly different model, but at least we are able to contract together," says Tim Olson, ThedaCare's CFO.

The providers are working together to thrive through a strong partnership that helps all participants buck the trend of consolidation. "We are starting to hear that independent physicians are going to be a thing of the past and that networks are going to be getting larger and larger," says Dietsche. "But the delivery of health care means delivering quality and value back to an individual patient-and we think that can be done locally and independently."

Choosing the right model. NEWHVN is patterned after the Rochester Independent Physicians Association in New York, which received the Federal Trade Commission's blessing in 2007. This clinical integration model has two major components:

  • A shared electronic health record
  • The routine monitoring, measurement, and reporting of physician- and hospital-level quality data

Although all participants do not yet use the same medical record technology, the hospitals and physicians are moving in that direction, says Squier. In the meantime, physicians use an interface that allows them to share patient information electronically across different IT systems. The physician groups who are still using paper charts have those records scanned so the information can be shared electronically.

"This creates a complete record that helps us coordinate care as a patient moves across and through the delivery system," says Squier. "And we can capture data to create report cards for each of our physicians."

The report cards show how NEWHVN physicians perform on a variety of primary care quality measures, compared with other physicians who report to the Wisconsin Collaborative for Healthcare Quality (WCHQ). NEWHVN's goal is that its physicians, as a group, rank in the top quartile.

NEWHVN is also building a patient registry that draws information from the medical record technology, providing information that helps with population health management. As a clinically integrated network, NEWHVN has single-signature authority to contract with private payers on behalf of all its participants. The contracts provide pay-for-performance incentives that kick in if NEWHVN physicians, as a group, rank in the top quartile of the WHCQ rankings.

The incentive payments add up to about $500,000 a year. "It is a large enough sum to get the physicians' attention and keep us pushing forward with new initiatives," says Squier. Within about two years, Squier expects contracts will be built on a shared-savings model that rewards NEWHVN for achieving specific clinical and efficiency objectives, such as lower readmission rates and higher utilization of generic drugs.

"If we meet these objectives, we know that we are helping to promote better health and better care for the communities, and saving contracted employers or payers money," he says. "The payers will reward us with some of those saved dollars-and that will push the quality program forward even more."

Improving quality. NEWHVN already has a good story to tell. As of June 2009:

  • Seventy-six percent of patients treated by NEWHVN providers had their blood pressure under control, compared with 63 percent of patients nationally
  • Fifty-five percent of NEWHVN's patients with diabetes were maintaining good hemoglobin A1c levels, compared with 42 percent of patients nationwide
  • Seventy-four percent of NEWHVN's coronary artery disease patients had healthy cholesterol levels, compared with 60 percent of patients nationally

section-2_exhibit-NEWHVN Quality Scores

The network's medical director develops an annual quality plan that sets priorities and goals for the coming year. The quality priorities are chosen based on:

  • The availability of an evidence-based measure or other established national standard
  • Relevance to NEWHVN's private-pay customers who are primarily interested in high-volume or high-risk health conditions for people under the age of 65
  • The feasibility of collecting physician-level data from medical records, electronic data bases, or other readily available sources
  • The potential for improved performance
  • The potential to increase the integration or standardization of physician practices
  • The potential to increase efficiency

Physicians in the NEWHVN network are notified about their performance relative to the goals at least twice a year. Those who fall short are coached by NEWHVN leaders to improve. A written development plan and significant improvement must be shown or they may be dismissed from the panel.

The ability to review quality data across the NEWHVN network presents new ways of identifying opportunities for improvement. For example, the network's database includes information on 15,000 patients with diabetes in its service areas-and highlights significant variation in quality scores between the contracting health plans.

That prompts the question of what health plans can do to improve their members' health status. NEWHVN works to match its quality initiatives with the improvement goals of various payers and to make sure incentives are aligned, says Squier.

"That was one of the real 'aha' moments," he says. "Most people think if we could just do things better in health care, if we could just work better with the docs, everything would be fine. But really it is a continuum of having the patients, the employer/payer, the physician, and the hospital all on the same page."

Building trust. Like most partnerships, success in the clinical integration model requires trust. Squier says senior-level members of the health system and strong physician leaders must be highly engaged in discussions from the outset. "This is not a six-month project-it is a couple-of-years project," says Dietsche. "A lot of energy has to be put into planning."

One upfront planning decision: who pays for what. NEWHVN's start-up expenses were funded evenly by the two health systems and the physicians, and ongoing expenses have been funded by an annual assessment on those owners. Now that NEWHVN is earning money for quality performance, the network is beginning to accrue a surplus that may reduce or eliminate the need for future contributions from its owners, says Squier.

Another major challenge was committing to a single information system platform. It takes time to decide how to share information, develop a single-fee schedule, and create a system of quality measures.

Olson says the health systems and specialty physicians see themselves as partners-a dynamic that does not exist in all markets. "We're pretty fortunate because many of the specialty physician groups are forward-thinking, have good leadership, and see value in this," he says.

Beyond that, the network can only be successful if private payers trust its leaders. When independent health systems like Bellin and ThedaCare work together and align themselves with physicians, payers may fear that contract negotiations will become difficult.

"They see us as two independent systems in two different markets. So that is a challenge that we have to overcome," says Dietsche. "We feel very strongly that increasing the ability to share information and to improve clinical quality will deliver lower healthcare costs, which will benefit the employers in our community."

Positioning for the future. While the clinical integration model is rarely used nationally, Dietsche believes its features-strong physician/hospital alignment, electronic sharing of information and a focus on cost and quality-prepare its participants to succeed in a changing healthcare marketplace. The model fits well with the accountable care organization model being pursued by Fairview Health Services, described in Section 1 of this report.

"We think NEWHVN is a vehicle that will easily translate into an accountable care organization, which could become much larger than what we have today," says Dietsche.  

Sidebar: Key Steps in Implementing Bundled Payment

Return to the Leadership Fall-Winter 2010 Special Report.

Publication Date: Wednesday, October 27, 2010