Q&A with Partners HealthCare: Goodbye Fee-for-Service, Hello Population HealthJanuary 17, 2014 by Melissa McCormack
Fee-for-service payment models have drawn harsh criticism in recent years because of the financial incentives they provide for doctors to provide more care, but not necessarily better care. The shift away from such models is being called for on the highest stages by the government, payors and even patients.
Partners HealthCare—a non-profit health system whose members include Brigham and Women’s Hospital and Massachusetts General Hospital—has long been at the forefront of healthcare delivery innovation. Their answer to the fee-for-service challenge? Population health management, a strategy that has helped them lower spending while providing high-quality care to patients.
I recently spoke with Dr. Sreekanth Chaguturu, Medical Director of Population Health Management at Partners HealthCare, to learn more about Partners’ population health management strategy and its transition to value-based care.
Q: Why is it important to move away from fee-for-service payment models?
A: We’ve seen that with fee-for-service, we have a system which incentivizes the quantity of services a physician provides to patients. With alternative payment systems that shift the focus away from quantity, we have the opportunity to ensure that we’re also incentivizing quality and coordination of services, which ultimately will improve the health status of the patients we’re providing care for. Moving to alternative payment systems will allow us to be better stewards of our limited resources.
Q: Your solution to the fee-for-service problem has been to move towards population health management. Explain the payment model you’re using now.
A: The specifics differ for each payor contract we have, but here’s the general idea: In population health management, we identify patient populations, look at historical costs for each population and agree on target spending benchmarks for the year. We still bill traditional fee-for-service, but at the end of the year, we look at aggregate spend per population and compare that to our benchmarks. If we’re under the benchmark, we share in the savings with our payors. If we’re over, there’s a penalty.
Each payor contract has slight variations in its spending benchmarks and quality measures for each patient population. But, we’ve developed an internal compensation framework for our physicians that pulls out commonalities from the individual contracts and aggregates them into a single set of benchmarks and quality measures. This lets our physicians operate under a single compensation plan, shielding them from having to navigate the nuances of each individual contract.
Q: So what keeps doctors from skimping on services so that they’ll have more money left at the end of the year? Is there anything built into your model to address concerns with rationing care?
A: There are two primary ways we believe we mitigate against this concern. First: we’re continuously monitoring quality measures (such as lowered blood pressure in patients with hypertension) side-by-side with cost. We must maintain or improve quality in parallel to our cost reduction efforts. Second: we have invested significantly in data and analytics, and we’re continuously looking at our data to ensure we’re tracking performance of our clinicians, and providing dashboards and reports to ensure that we’re not rationing care.
Additionally, a number of our physicians are paid by salary. For those clinicians, there is an incentive program on top of their salary so that they can participate in our shared savings programs. But for those physicians for whom the majority of their income is based on a salary, we find they don’t have a direct financial incentive to ration care.
Q: What role does the patient-centered medical home play in population health?
A: The patient-centered medical home (PCMH) is critical to our efforts. Primary care is where a majority of care is delivered for our patients. Improving the way our primary care practices are designed to deliver care is foundational. As the place of first contact and longitudinal care, primary care is the cornerstone of an effective population health strategy.
Improving the workflow in primary care allows us to build other programs around the primary care system. One such program is our high-risk care management program for our medically-complex, chronically ill patients who we determine (through data and analytics) are at high risk of becoming high-cost. The most cost-effective element of our enhanced primary care is the role of the nurse care manager who proactively manages high-risk patients.
We have clearly demonstrated that the nurse care manager role, if properly structured and supervised, can deliver four percent cost reductions in three years, and up to 10 percent cost reduction in five years, resulting in a return on investment of over three to one. Success requires being able to correctly identify high-risk patients, training the care manager, and providing ongoing supervision and support.
Q: What role do information systems and health IT solutions play?
A: There are a number of technologies we believe are critical for population health management. One specific technology we’re investing in heavily is patient registries, which help identify populations of patients, identify their care gaps and then help you build in workflows that can close those care gaps. This technology is not just the provenance of large, integrated delivery networks—there are a number of patient registry companies looking to provide these services to small and mid-sized practices, too.
Another example of how IT is helping us in population health is the Massachusetts General Hospital (MGH) Radiology Order Entry (ROE) system. ROE uses a set of standard criteria from the American College of Radiology to provide a decision-support score and harnesses clinical data to help caregivers make better decisions in real time. Implementing ROE has led to growth decreases in CT, MRI and ultrasonography at MGH.
Q: What unexpected obstacles have you encountered in transitioning away from fee-for-service?
A: The overarching challenge is developing systems and processes that work for your clinicians and clinical teams: you have to ensure that they’re scalable, and that your teams buy into them. One major investment for us has been in analytical tools, to help us understand our data. Data and analytics are incredibly important at any level, whether it’s investing in large enterprise data warehouses or just being diligent about looking at your panel of patients and ensuring that you’re providing best practice quality care.
We also spend a lot of time thinking through the financial flows in population health management. For example, to develop the internal funds-flow framework we use for compensation, we had to think through the flow of funds between payors and the hospital, between the hospital and our affiliated practices and between those practices and the individual clinicians.
Q: Have you seen any benefits from the value-based structure that you didn’t expect when you began this effort?
A: We believe our efforts are ultimately going to reduce healthcare costs and improve quality—that has always been the goal. By improving the delivery of care in primary care and providing additional services for those patients who are medically fragile, we are improving care for patients and saving the system money. But in the process, we’ve found we’re also building out a system that helps our clinicians practice care the way they want to practice.
Q: Is it working? What evidence do you have to support this model?
A: Our first year of experience has validated our belief that population health management can reduce costs and improve quality. We’ve saved money on all of our population health contracts, while simultaneously improving quality across all of these contracts.
Quantitatively, in our first year with one of our largest contracts—our Medicare Pioneer Accountable Care contract—we slowed the rate of cost growth by approximately 3 percent, translating to some $14.4 million in shared savings. We lowered cost growth for around 52,000 Medicare patients. At the same time, our data shows that we delivered extremely high-quality care to those patients, exceeding national averages in virtually every quality indicator the federal government tracks and maintaining a low mortality rate.
Q: Large hospitals have been early movers in transitioning away from fee-for-service models. But what incentives do non-hospital-based practices have to participate in a system like this?
A: There are external motivations and internal motivations. The external motivation is that there’s increasing pressure on all healthcare providers, whether they’re from large integrated delivery networks or small practices, to reduce healthcare costs. These external pressures are coming from patients, payors, purchasers, employers and the government.
But there’s also an internal motivation: the desire to create a healthcare delivery system which is not driven purely by providing a high quantity of services, but by providing coordinated, high-quality services. And though it’s a difficult transition, if we all work together, we can help create a system that does reward high-value health care. That internal motivation is incredibly powerful.