Catherine Jacobson, FHFMA, CPA
Make quality improvement a strategic imperative.
According to a recent article in The New Yorker by surgeon Atul Gawande, the small Texas town of McAllen is the most expensive place for health care in the country. In 2006, Medicare spent $15,000 per enrollee there, almost twice the national average and nearly $3,000 more than the average annual income per capita in McAllen.
Geographic variations in healthcare spending have been observed for decades. The inception of The Dartmouth Atlas of Health Care in 1996 brought scientific rigor to the documentation of regional variations in care. Gawande’s article sparked a renewed debate on the reasons underlying these differences.
Gawande asserts that paying physicians for quantity, rather than quality, is at the root of what has come to be called “the McAllen problem.” That may be so. Until now, noneconomic incentives have been the impetus for much improvement in clinical quality. Providers have improved processes as outcomes data reporting has grown more transparent and more public—and because it is the right thing to do. Substantial links between revenue and quality are still a future prospect for most hospitals and physicians. At the same time, the current system forces many hospitals to cope with declining and sometimes negative margins from patient care.
As we determine how to fix our broken payment system, one thing is clear: Payment reform will strengthen, if not codify, the relationship between payment and quality, with a significant amount of revenue at risk if quality goals are not achieved.
Some hospitals and communities have already taken steps toward aligning quality and payment incentives, even in the absence of a national framework for doing so. For example, Geisinger Health System in Danville, Pa., pays physicians a base salary plus incentives for patient outcomes, satisfaction, and productivity, with demonstrable improvement in quality and financial performance. And PinnacleHealth in Harrisburg, Pa., has a gainsharing program with its cardiologists that includes targets for reducing costs and increasing patient health.
As policymakers weigh alternative approaches to payment reform, we need to focus on quality improvement in our organizations. Our payment systems are going to depend on it. Finance professionals need to start modeling the implications of performance-based payment in our organizations along the lines of proposed initiatives. Readmission rates are a great example. Although these data are just now becoming public, hospitals with unacceptably high readmission rates are likely to be subject to payment reductions in the near future. Do you know how your hospital ranks?
Ultimately, the success of payment reform depends on true alignment of economic incentives across the care continuum, especially between physicians and hospitals. Finance professionals need to start building the case that quality improvement and incentive alignment are a strategic imperative for our organizations. That’s one of the most important things we, as healthcare finance leaders, can do to make it count.