In 2009, NHE is projected to have reached $2.5 trillion and grown 5.7 percent, up from 4.4 percent in 2008 (the latest available historical year), while GDP, with the economy still in recession, is anticipated to have declined 1.1 percent.

Note that although we are in the year 2010, health spending estimates for 2009 represent projections as data for all of calendar year 2009 are not yet available.

The projected acceleration in growth for 2009 was due in part to faster spending growth for the Medicaid program (9.9 percent; up from 4.7 percent in 2008), reflecting increasing growth in enrollment associated with the recession. Also contributing to the acceleration was faster growth in the use of a variety of health care services as many sought treatment for the H1N1 virus and an expected increase in the take-up rate for coverage provided through the Consolidated Omnibus Budget Reconciliation Act (COBRA) in response to the government's subsidization of COBRA premiums. As a result of NHE growth outpacing GDP growth in 2009, the health share of GDP is expected to have increased from 16.2 percent of GDP in 2008 to 17.3 percent in 2009, which would represent the largest one-year increase in history.

In 2010, NHE growth is expected to decelerate to 3.9 percent while GDP is anticipated to rebound to 4.0 percent growth. Much of the projected slowdown in NHE growth is attributable to a deceleration in Medicare spending growth (1.5 percent in 2010, from 8.1 percent in 2009) that is driven by a 21.3-percent reduction in Medicare physician payment rates called for under current law's Sustainable Growth Rate (SGR) provisions.

Under a scenario where the SGR provisions of law are revised and physician payment rates are held at 2009 levels, total health spending is projected to grow 4.7 percent—0.8 percentage points faster than under current law—and total Medicare spending is projected to grow 5.1 percent.

Private spending in 2010 is projected to grow just 2.8 percent, which is related to both declining private health insurance enrollment because of sustained high rates of unemployment and the expiration of Federal subsidies associated with COBRA coverage.

Over the projection period (2009-2019), average annual health spending growth (6.1 percent) is anticipated to outpace average annual growth in the overall economy (4.4 percent). By 2019, national health spending is expected to reach $4.5 trillion and comprise 19.3 percent of GDP. Public spending is projected to grow faster on average than private spending (7.0 percent versus 5.2 percent, respectively) for 2009 through 2019. As a result of more rapid growth in public spending, the public share of total health care spending is expected to rise from 47 percent in 2008, exceed 50 percent by 2012, and then reach 52 percent by 2019.

Opposite trends in spending growth for Medicare and Medicaid are projected to have occurred in 2009. Medicare spending ($507.1 billion) is projected to have increased 8.1 percent in 2009, down from 8.6 percent in 2008, partly due to slower growth in hospital spending. Medicaid spending ($378.3 billion) is projected to have increased 9.9 percent in 2009, up from 4.7 percent in 2008, due largely to rapidly increasing Medicaid enrollment during the recession. From 2009 through 2019, Medicare and Medicaid spending growth rates are projected to average 6.9 percent and 7.5 percent, respectively.

Spending on private health insurance premiums ($808.7 billion) is projected to have increased 3.3 percent in 2009, up from 3.1 percent in 2008. The steady rate of growth in premiums is the net result of a reduction in the number of people with private health insurance coverage due to job losses associated with the recession, somewhat offset by an increase in the take-up rate of COBRA due to government subsidization of these premiums.

Growth in out-of-pocket spending is expected to have slowed from 2.8 percent in 2008 to 2.1 percent in 2009 and have reached $283.5 billion. Recessionary effects resulting in slowing growth in the demand for services with significant out-of-pocket costs have helped drive the projected slowdown in out-of-pocket spending growth. Between 2009 and 2019, out-of-pocket spending growth is projected to average 4.8 percent.

Spending growth in three of the major health care sectors is expected to have accelerated in 2009. Hospital spending growth is expected to have increased 5.9 percent in 2009, up from 4.5 percent in 2008, and reached $760.6 billion. Physician and clinical services spending growth is expected to have increased 6.3 percent in 2009, up from 5.0 percent in 2008, and reached $527.6 billion.

The 2009 accelerations in spending growth for hospital services and physician and clinical services were in part driven by higher Medicaid spending growth and increased demand for services associated with treating persons who contracted the H1N1 virus.

Prescription drug spending growth is expected to have increased 5.2 percent in 2009, up from 3.2 percent in 2008, and reached $246.3 billion. This increase is due in part to higher use of antiviral drugs, as well as faster price growth for brand-name prescription drugs.

Over the projection period (2009-2019), average annual spending growth for hospital, physician and clinical services, and prescription drugs is projected to increase 6.1 percent, 5.9 percent, and 6.3 percent, respectively.

The health care spending projection data can be found on the CMS web site at http://www.cms.hhs.gov/NationalHealthExpendData/03_NationalHealthAccountsProjected.asp.

The authors cite previous research by Dr Harlan Krumholz (Yale University School of Medicine, New Haven, CT) and colleagues, reported by heartwire , that showed that these popular ratings systems cannot distinguish differences in quality between individual hospitals but only identify a list of centers that perform better than average in aggregate. Therefore, Osborne and colleagues focused on comparisons of aggregate outcomes of the top 50 centers in both rankings.

The authors studied 2005 and 2006 Medicare outcomes data for all patients undergoing abdominal aortic aneurysm repair, coronary artery bypass, aortic-valve repair, and mitral-valve repair, a total of 312 813 patients. The primary outcome measured was 30-day mortality. The researchers compared mortality rates at the 50 top-rated hospitals in the US News and World Report rankings and the 50 best hospitals in the HealthGrades rankings with all other hospitals and then adjusted the results for hospital volume to determine whether the differences in mortality correlate to differences in a hospital staff's experience with that particular procedure.

What Makes the Grade?

US News and World Report bases its rankings on a combination of three equally weighted measures: hospital infrastructure, hospital reputation among subspecialists, and 30-day mortality. To be considered for the rankings, a hospital must be a member of the Council of Teaching Hospitals, be affiliated with a medical school, or have a minimum number of advanced technologies. The hospital must also meet minimum thresholds for surgical volume and discharge for 12 subspecialties.

HealthGrades' "Best Hospitals" list is created with a proprietary method for calculating predicted 30-day mortality rates based on Medicare Part A billing data. Predicted mortality rates are compared with the observed mortality rates at each hospital for 27 procedures and diagnoses. The hospitals with the best observed-to-expected mortality ratio make the top 50 list.

Importantly, Osborne et al found little concordance in hospital rankings between the report cards. Only eight hospitals rank in the top 50 of both the US News and World Report "America's Best Cardiovascular Hospitals" and the HealthGrades "Best Hospitals."

The characteristics of the patients in the best-hospitals lists were "considerably different" from the patients in all other hospitals in the Medicare data. The top-ranked centers in the US News and World Report list treated a higher proportion of African American patients and were less likely to operate emergently or urgently, but patient comorbidities were similar to those of all other hospitals in the Medicare database. The centers in both the US News and World Report and HealthGrades lists of top cardiovascular hospitals were much less likely to have low volumes of the procedures evaluated in the study and were much more likely to be teaching hospitals compared with all of the centers in the Medicare data.

The study compared hospitals, controlling for available patient risk factors such as age, gender, race, comorbidities, and acuity of admission and operation. After adjustment for these characteristics, the 30-day mortality rates were lower in US News and World Report's top-ranked cardiovascular hospitals for all four procedures, but the difference was statistically significant only for abdominal aortic aneurysm repair. The centers in the HealthGrades list of top hospitals had considerably better-than-average adjusted 30-day mortality rates for coronary artery bypass, aortic-valve repair, mitral-valve repair, and abdominal aortic aneurysm repair.

Volume=Quality?

"We demonstrated that although highly rated hospitals have lower risk-adjusted mortality for some cardiovascular procedures, a substantial portion of these differences can be explained by hospital volume," Osborne et al explain. As previously described in research led by Dr John Birkmeyer (University of Michigan) and reported by heartwire , the correlation between a surgeon's procedure volume and outcomes for these procedures is well established, but the volume-to-outcome relationship varies across operations.

Neither the HealthGrades nor US News and World Report rating systems explicitly account for differences in procedural volume in their quality ratings, but Osborne et al calculate that procedure volume explains between 14% and 79% of the differences in the mortality rates between the highly rated hospitals and all the hospitals in the database.

After adjustment for hospital volume, US News and World Report's best cardiovascular hospitals did not beat the 30-day mortality rates of other hospitals for any of the four procedures, but HealthGrades' best hospitals had lower volume-adjusted mortality rates for aortic-valve repair and coronary bypass. The superior mortality for aortic-valve repair and coronary bypass at the centers on the HealthGrades' "Best Hospitals" list could be a result of other unmeasured differences in hospital quality, such as hospital infrastructure or unmeasured surgical processes of care, the authors conclude.

Given that procedure volume is the best predictor of outcomes, the authors conclude that while the hospitals that make these lists of best hospitals certainly provide high-quality care, many hospitals that also provide high-quality care are not on the lists.

"While we did find a mortality benefit to choosing these highly rated hospitals, patients can benefit equally from going to a similarly high-volume hospital closer to their home." The authors cite previous research showing that over 75% of patients in the US live within 30 minutes of a high-volume hospital. Unfortunately, "these ratings fail to identify equally performing high-volume hospitals closer to the patients."

Transparency Needed

Commenting on the Osborne study, Krumholz told heartwire , "These systems that are judging others should make their methodology completely transparent. They should submit their methods to external evaluation, ideally through the National Quality Forum. We need to have high standards applied to systems that are seeking to steer patients to high-quality institutions. As they judge others, they need to be willing to be judged.

"Making performance visible, through the use of tested and credible measurement that focuses on outcomes of importance to patients, is sorely needed in our healthcare system. Without these measures, performance is invisible, and it is difficult to muster efforts to improve or even know what is being achieved by current efforts," he explained. "Certainly I expect measurement to grow, and our challenge will be to ensure that the efforts strengthen our ability to improve and do not beget unintended consequences that diminish the quality of care."

References

1. Osborne N, Nicholas L, Ghaferi A, et al. Do popular media and internet-based hospital quality ratings identify hospitals with better cardiovascular surgery outcomes? J Am Coll Surg 2010; 210: 87–92.

An estimated 553,000 children suffered physical, sexual or emotional abuse in 2005-06, down 26 percent from the estimated 743,200 abuse victims in 1993, the study found.

"It's the first time since we started collecting data about these things that we've seen substantial declines over a long period, and that's tremendously encouraging," said professor David Finkelhor of the University of New Hampshire, a leading researcher in the field of child abuse.

"It does suggest that the mobilization around this issue is helping and it's a problem that is amenable to solutions," he said.

The findings were contained in the fourth installment of the National Incidence Study of Child Abuse and Neglect, a congressionally mandated study that has been conducted periodically by the Department of Health and Human Services. The previous version was issued in 1996, based on 1993 data.

The new study is based on information from more than 10,700 "sentinels" — such as child welfare workers, police officers, teachers, health care professionals and day care workers — in 122 counties across the country. The detailed data collected from them was then used to make national estimates.

The number of sexually abused children decreased from 217,700 in 1993 to 135,300 in 2005-2006 — a 38 percent drop, the study shows. The number of children who experienced physical abuse fell by 15 percent and the number of emotionally abused children dropped by 27 percent.

The 455-page study shied away from trying to explain the trends, but other experts offered their theories.

"There's much more public awareness and public intolerance around child abuse now," said Linda Spears, the Child Welfare League of America's vice president for public policy. "It was a hidden concern before — people were afraid to talk about it if it was in their family."

She also noted the proliferation of programs designed to help abusers and potential abusers overcome their problems.

Finkelhor, whose own previous research detected a drop in abuse rates, said the study reveals "real, substantial declines" that cannot be dismissed on any technical grounds, such as changing definitions of abuse.

He suggested that the decline was a product of several coinciding trends, including a "troop surge" in the 1990s when more people were deployed in child protection services and the criminal justice system intensified its anti-abuse efforts with more arrests and prison sentences.

Finkelhor also suggested that the greatly expanded use of medications may have enabled many potential child abusers to treat the conditions that otherwise might have led them to molest or mistreat a child.

"There's also been a general change in perceptions and norms about what one can get away with, so much more publicity about these things," he said.

One curious aspect of the study was the manner of its release. Although HHS had launched the study in 2004 and invested several million dollars, it was posted a few days ago on the Internet with no fanfare — neither a press release nor a news conference. Finkelhor, noting that experts in the field had been impatiently awaiting the study, described this low-profile approach as "shocking."

The findings might be disconcerting to some in the child-welfare field who base their funding pitches on the specter of ever-rising abuse rates, said Richard Wexler, executive director of the National Coalition for Child Protection Reform.

"The best use of scarce child welfare dollars is on prevention and family preservation — not on hiring more people to investigate less actual abuse," said Wexler.

The study found some dramatic differences in child abuse rates based on socio-economic factors. Poor children were three times more likely than other kids to experience abuse, and rates of abuse in African-American families were significantly higher than for whites and Hispanics.

Family structure also was a factor — for example, children whose single parent had a live-in partner faced an abuse rate 10 times that of a child living with two parents.

Wexler said a primary reason for the overall drop in abuse rates was the relatively prosperous economy during the period under study.

"The fact that the economic gains were unequal explains why maltreatment declined less in black families," he said.

The main author of the study, Andrea Sedlak of the Rockville, Md.-based research firm Westat Inc., said she was heartened by the overall findings of declining abuse rates. However, she was troubled to find that more than half of child maltreatment incidents are not investigated by child-protection agencies.

"Is the system still so strapped?" she asked. "There's still a lot of material here saying the system has a long way to go."

The study does not cover the recent period in which the United States plunged into a recession, prompting some reports of increased domestic violence and abuse in hard-off families.

For more information, click here or here.

In states that base their workers compensation medical fee schedules on the Medicare physician reimbursement schedule, clearly workers compensation medical costs can be affected by changes to Medicare reimbursement rates. But workers compensation medical costs can also be affected by changes to either the underlying formulas Medicare uses to determine those reimbursement amounts or to the way Medicare allocates payments by type of service. Failures to account for changes to Medicare’s methodology or for trends in how Medicare reimburses physicians in the various medical specialties might have reduced the effectiveness of some workers compensation physician fee schedules.

This paper looks at some aspects of the role that Medicare has played in workers compensation medical cost containment. Medicare confronts major near-term challenges, some in common with workers compensation. The tactics that Medicare uses to address those challenges might, in some cases, be worth considering for use in workers compensation. In addition to direct comparisons between Medicare and workers compensation, we use experience from Group Health to add perspective on the impact of workers compensation and Medicare fee schedules on workers compensation medical costs.

The key points that this article discusses are:

• While there are administrative efficiencies from referencing the Medicare reimbursement formula, workers compensation fee schedules that do so must react appropriately to ongoing changes in Medicare methodology.
• Some workers compensation fee schedules have not been adjusted to account for changes in the relationships between Medicare reimbursements and prices paid by private payers or Medicare reimbursement relativities between service types. In some cases, this has allowed excessive reimbursements to specialists by workers compensation insurers.
• The proportion of workers compensation medical costs that are subject to physician fee schedules is declining, with proportionally more billings by facilities. To maintain the effectiveness of medical fee schedules, workers compensation might consider using Medicare billing approaches for hospital stays (DRG) and ambulatory services (APC), but in doing so should adapt Medicare models to workers compensation priorities.

      As the workforce ages, workers compensation might focus safety initiatives toward falls and hip injuries, where Medicare protocols should provide valuable insight in designing treatment guidelines.

• Medicare faces enormous demographic and fiscal challenges. Workers compensation shares some of those challenges, and Medicare’s response might offer suggestions to enhance workers compensation medical cost containment.

View complete report: Medicare and Workers Compensation Medical Cost Containment.

As required by the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), all suppliers of the TC of advanced imaging will have to become accredited by an accreditation organization designated by the Secretary of Health and Human Services by Jan. 1, 2012. The accreditation requirement applies to physicians, non-physician practitioners, and physician and non-physician organizations that are paid for providing the technical component of advanced imaging services under the Medicare Physician Fee Schedule.

MIPPA specifically defines advanced diagnostic imaging procedures as including diagnostic magnetic resonance imaging (MRI), computed tomography (CT), and nuclear medicine imaging such as positron emission tomography (PET). The details of the accreditation organization selection process went through notice and comment rulemaking in the calendar year 2010 Physician Fee Schedule rule.

“While advanced diagnostic imaging procedures can be useful in identifying health problems that might otherwise require surgery, the rapid growth in their use raises important questions of quality and safety,” said Barry Straube, M.D., CMS chief medical officer and director of the CMS Office of Standards and Quality. “The three organizations that will be accrediting suppliers have the expertise and authority to set a standard of excellence industry-wide.”

To be designated, the accrediting organizations had to demonstrate that they were experienced in the advanced diagnostic imaging area, and that their accreditation requirements met or exceeded the standards set out in MIPPA, including requirements for:

• Qualifications of non-physician personnel performing the imaging;
• Qualifications and responsibilities or medical directors and supervising physicians;
• Procedures to ensure the safety of the individuals furnishing the imaging procedure and of the persons to whom the services are furnished;
• Procedures to ensure the reliability, clarity, and accuracy of the technical quality of the diagnostic images produced by the supplier;
• Procedures to assist the beneficiary in obtaining his/her imaging records on request; and
• Procedures to notify CMS of any changes to the imaging modalities subsequent to the accrediting organization’s decision.

In addition, the accrediting organizations were required to develop a plan for reducing the burden and cost of accreditation to small and rural suppliers. The accrediting organizations are also required to provide CMS with detailed information about their survey processes.

MIPPA specifically excluded from the accreditation requirement certain imaging services such as x-rays, ultrasound, and fluoroscopy procedures. The law also excludes from the CMS accreditation requirement diagnostic and screening mammography, which are subject to quality oversight by the Food and Drug Administration under the Mammography Quality Standards Act.

CMS will issue further guidance to suppliers about meeting the accreditation requirements. CMS plans to undertake a provider education outreach program to ensure that all affected suppliers understand the requirements and are able to comply with them prior to the Jan. 1, 2012, accreditation deadline.

For more information, please see the CMS Web site at: www.cms.hhs.gov/medicareprovidersupenroll.

The designation gives the three organizations the authority to accredit providers of advanced medical imaging mandated by the Medicare Improvements for Patients and Providers Act of 2008, which requires that providers of CT, MRI, PET, and nuclear medicine exams, who bill Medicare for the technical component under the fee schedule, be accredited by Jan. 1, 2012.

CMS will not set the standards for accreditation, but will rely on accrediting standards from the three organizations that are as stringent as the legislation requires, particularly as those standards relate to imaging quality, the qualifications of imaging professionals, and patient safety.

These new data from the Guttmacher Institute are especially noteworthy because they provide the first documentation of what experts have suspected for several years, based on trends in teens' contraceptive use—that the overall teen pregnancy rate would increase in the mid-2000s following steep declines in the 1990s and a subsequent plateau in the early 2000s. The significant drop in teen pregnancy rates in the 1990s was overwhelmingly the result of more and better use of contraceptives among sexually active teens. However, this decline started to stall out in the early 2000s, at the same time that sex education programs aimed exclusively at promoting abstinence—and prohibited by law from discussing the benefits of contraception—became increasingly widespread and teens' use of contraceptives declined.

"After more than a decade of progress, this reversal is deeply troubling," says Heather Boonstra, Guttmacher Institute senior public policy associate. "It coincides with an increase in rigid abstinence-only-until-marriage programs, which received major funding boosts under the Bush administration. A strong body of research shows that these programs do not work. Fortunately, the heyday of this failed experiment has come to an end with the enactment of a new teen pregnancy prevention initiative that ensures that programs will be age-appropriate, medically accurate and, most importantly, based on research demonstrating their effectiveness."

The teen pregnancy rate declined 41% between its peak, in 1990 (116.9 pregnancies per 1,000 women aged 15-19), and 2005 (69.5 per 1,000). Teen birth and abortion rates also declined, with births dropping 35% between 1991 and 2005 and teen abortion declining 56% between its peak, in 1988, and 2005. But all three trends reversed in 2006. In that year, there were 71.5 pregnancies per 1,000 women aged 15-19. Put another way, about 7% of teen girls became pregnant in 2006.

Just as the long-term declines in teen pregnancy occurred among all racial and ethnic groups through 2005, the reversal in 2006 also involved all demographic groups:

    * Among black teens, the pregnancy rate declined by 45% (from 223.8 per 1,000 in 1990 to 122.7 in 2005), before increasing to 126.3 in 2006.
    * Among Hispanic teens, the pregnancy rate decreased by 26% (from 169.7 per 1,000 in 1992 to 124.9 in 2005), before rising to 126.6 in 2006.
    * Among non-Hispanic white teens, the pregnancy rate declined 50% (from 86.6 per 1,000 in 1990 to 43.3 per 1,000 in 2005), before increasing to 44.0 in 2006.

Because the decline among black teens was so much greater than that among Hispanics, the long-standing gap between the two groups has disappeared. However, the gap between white teens and teens of color is as large as ever.

State-level data are not yet available for 2006, but varied widely in 2005. The highest pregnancy rates were in New Mexico (93 per 1,000 women 15-19), Nevada (90), Arizona (89), Texas (88) and Mississippi (85), and the lowest rates were in New Hampshire (33), Vermont (40), Maine (48), Minnesota (47) and North Dakota (46). Teen pregnancy rates declined in every state between 1988 and 2000, and in every state except North Dakota between 2000 and 2005.

"It is too soon to tell whether the increase in the teen pregnancy rate between 2005 and 2006 is a short term fluctuation, a more lasting stabilization or the beginning of a significant new trend, any of which would be of great concern," says Lawrence Finer, Guttmacher's director of domestic research. "Either way, it is clearly time to redouble our efforts to make sure our young people have the information, interpersonal skills and health services they need to prevent unwanted pregnancies and to become sexually healthy adults."

Click here for the full report, "U.S. Teenage Pregnancies, Births and Abortions: National and State Trends and Trends by Race and Ethnicity."

Click here for Facts on American Teens' Sexual and Reproductive Health.

Conduits are surgically implanted valves used to treat congenital heart defects of the pulmonary valve. Patients with congenital heart defects have narrowed, leaky, or missing pulmonary valves that impede the proper flow of blood from the heart's right ventricle to the pulmonary artery, which then sends the blood on to the lungs for oxygenation. Conduits can have a limited lifespan and often require replacement. The Melody is intended to provide another option to conduit replacement.

"The FDA's approval of Melody allows patients to undergo a much less invasive procedure to treat their heart condition," said Jeffrey Shuren, J.D., M.D., director of the FDA's Center for Devices and Radiological Health. "Congenital heart defects represent the number one birth defect worldwide and this approval represents a new, first-of-a-kind treatment option for some of those patients."

Like other valves, the Melody does not cure the heart condition and over time, the Melody may wear and require replacement. However, it is implanted without open heart surgery, can prop open the poorly functioning conduit, and can keep blood flowing in the proper direction because of the tissue valve in the Melody. These characteristics will allow a patient's conduit to function longer than usual, which can delay the need for more invasive open-heart surgery.

Approval of the Melody valve should be especially beneficial to pediatric patients with right-sided valvular heart disease who may face several surgeries over their lifetimes.

Clinical studies of 99 participants in the United States and 68 participants in Europe showed that the device improved function of the heart, and the majority of participants have noted improvements in their clinical symptoms. The device showed similar, limited durability compared with existing alternative treatments; 21 percent of U.S. participants experienced a stent fracture, a rate consistent with stent fractures reported for the bare metal stents presently used to treat congenital heart defects of the pulmonary valve.

As a condition of the FDA's approval, the system's manufacturer, Medtronic Inc. of Minneapolis, will conduct two post-approval studies to assess long-term risks and benefits as well as to evaluate the physician specialization needed to perform the implantation procedure, also called generalizability. One study will continue to follow 150 participants from the initial clinical trial for five years, and the second study will enroll more than 100 new participants to be evaluated over five years, in order to evaluate and assess the training program. Safety and benefit assessments will be part of both studies. The FDA also requires that Medtronic maintain a database of Melody recipients.

The FDA approved the Melody under the Humanitarian Device Exemption (HDE) program, which supports the development of medical devices intended to benefit patients in the treatment or diagnosis of diseases or conditions affecting fewer than 4,000 people in the United States per year. Under an HDE, the FDA can approve a device for limited use if there is a reasonable assurance that the device is safe and if the probable benefit to health outweighs the risk of injury or illness. Such products can only be used at medical institutions with an overseeing Institutional Review Board.

Manufacturers of most HDE devices are prohibited from selling their device for an amount that exceeds the costs of research and development, fabrication and distribution of the device. However, this prohibition does not apply to an agency-specified number of Melody devices sold each year and intended for the treatment or diagnosis of a disease or condition that occurs in pediatric patients, due to a provision in the Pediatric medical Device Safety and Improvement Act of 2007.

Policy Analysis Expores Key Considerations in Moving Away from Fee-for-Service Payment

Written by researchers at the Center for Studying Health System Change (HSC) and Mathematica Policy Research, the analysis identifies key policy considerations involved in designing and implementing an episode-based payment system that would essentially bundle payment for some or all services delivered to a patient for an episode of care for a specific condition over a defined period.

For example, a typical episode might focus on a heart attack, beginning with the onset of a patient's chest pain, continuing with urgent care by a physician or emergency services provider, followed by hospitalization services and any procedures performed, and lastly post-acute and rehabilitation services during a recovery stage. For chronic conditions, such as congestive heart failure, an episode could be defined as a period—a month or a year—of management of the condition, including physician services, the services of other personnel and, in some cases, hospital stays.

Ideally, a well-designed episode-based payment system would encourage providers to improve efficiency and quality of care, according to the analysis. Careful consideration of how to design and implement episode-based payments, however, will set the stage for success or failure. Key policy considerations include:

• how to define episodes of care;
• how to establish episode-based payment rates;
• how to identify which providers should receive episode-based payments;
• how to ensure compatibility with other proposed payment reforms; and
• how to stage implementation to focus on a narrow set of priority conditions, patients and providers.

Written by HSC's Hoangmai H. Pham, M.D., M.P.H.; and Paul B. Ginsburg, Ph.D.; and Mathematica's Timothy K. Lake, Ph.D.; and Myles M. Maxfield, Ph.D.; the new Policy Analysis—Episode-Based Payments: Charting a Course for Health Care Payment Reform—is available here.

Although the broader health reform debate has sidestepped in-depth discussion of provider payment reform, most health policy experts agree that fee-for-service payments contribute to the overuse of well-reimbursed services and the underuse of less-lucrative services; a medical culture that places little value on such activities as care coordination that are not explicitly reimbursed; and a fragmented delivery system that patients and providers find increasingly difficult to navigate.

At the other end of the spectrum, capitated payments-fixed per-enrollee, per-month payments-provide strong incentives for care coordination to maximize efficiency and could motivate quality improvement if accompanied by quality-based bonuses. However, full capitation, where the provider is at risk for all care required by a group of patients, exposes providers to financial risk that few are capable of managing well given current market and practice structures. Moreover, while fee-for-service payment raises concerns about incentives for providers to deliver unnecessary care, full capitation raises the opposite concern-that providers might withhold needed services to maximize profits.

In today's fragmented delivery system and payment environment, individual providers have little financial incentive to step out of their silos to coordinate care across a patient's conditions and care settings and limited ability to influence other providers' behavior. The quandary for policy makers is how to motivate providers to reconfigure their practice arrangements and care processes to produce more efficient and coordinated care without setting many of them up for failure with a rapid transition to full capitation. Between the two extremes of fee-for-service and capitation lie intermediate models, such as episode-based payments, which pay providers based on a set of related services delivered to a given patient.

For more information, click here.