Thursday, January 19, 2012

Important Research From Medicare Demonstration Projects: Almost Nothing Works

I will suggest that most of us believe the way to control health care costs, and at the same time maintain or improve quality, is to both use the managed care tools we have developed over the years, and perhaps more importantly, change the payment incentives so that both cost control and quality are upper most in the minds of providers and payers.

The Congressional Budget Office (CBO) has just released an important review of Medicare's results in testing those ideas. The news is not good.

From the CBO's blog post:

In the past two decades, Medicare’s administrators have conducted demonstrations to test two broad approaches to enhancing the quality of health care and improving the efficiency of health care delivery in Medicare’s fee-for-service program. 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. Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

In an issue brief released today, CBO reviewed the outcomes of 10 major demonstrations—6 in the first category and 4 in the second—that have been evaluated by independent researchers. CBO finds that most programs tested in those demonstrations have not reduced federal spending on Medicare.

Looking at 34 disease management programs and care coordination programs, the research found "little or no effect on hospital admissions." The CBO went on, "In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered."

Looking at the Medicare demonstration projects for value based purchasing, "Only one of the four demonstrations of value-based payment has yielded significant savings for the Medicare program. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent. The other demonstrations appear to have resulted in little or no savings for Medicare."

The good news here is that when put on a budget, when the payment system was changed to create a downside if results weren't improved, one of the studies did identify "significant savings." But only about 10%.

Thirty years into managed care, the stark reality is that we aren't yet smart enough to get things under control.

Medicare is now about to test the Accountable Care Organization (ACO) concept. In an earlier post, Why ACOs Won't Work, I argued that this approach couldn't work unless we change the game--we change how providers are paid so that there is a significant downside if results aren't achieved. I said, "Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population." At least one of the studies the CBO is citing would appear to support that notion--but only one.

When Medicare first announced their ACO demonstration project, the providers all howled--they were being put at too much risk for too little return. The feds then lowered the bar by improving the odds there could only be winners and not losers––eliminating participant risk in the first of two ACO tracks. The second track continues to carry risk but offers larger potential rewards.

Medicare policymakers may have had no choice but to placate the providers in order to entice them into the new system in order to get it off the ground. That said, Medicare's strategy of overpaying HMOs to entice them into the Medicare Advantage business hasn't exactly worked out toward the goal of lowering costs.

This CBO study makes it very clear that ACOs with little risk, just layering these tools over the top of the fee-for-service system, is a pointless exercise. When we just provide incentives to do the right thing, we don't do the right thing.

What we need to be testing and perfecting is the combination of the best tools we have and significant risk--changing the payment incentives for real.

Unless ACOs, or any other managed care scheme for that matter, start out paying less, and the tools we have are then used to achieve a profitable result, there is no evidence there will be savings.

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