Transformation of the Health Care Industry: Curb Your Enthusiasm?

Policy Points: Policymakers seek to transform the US health care system along two dimensions simultaneously: alternative payment models and new models of provider organization. This transformation is supposed to transfer risk to providers and make them more accountable for health care costs and quality. The transformation in payment and provider organization is neither happening quickly nor shifting risk to providers. The impact on health care cost and quality is also weak or nonexistent. In the longer run, decision makers should be prepared to accept the limits on transformation and carefully consider whether to advocate solutions not yet supported by evidence. CONTEXT: There is a widespread belief that the US health care system needs to move "from volume to value." This transformation to value (eg, quality divided by cost) is conceptualized as a two-fold movement: (1) from fee-for-service to alternative payment models; and (2) from solo practice and freestanding hospitals to medical homes, accountable care organizations, large hospital systems, and organized clinics like Kaiser Permanente. METHODS: We evaluate whether this transformation is happening quickly, shifting risk to providers, lowering costs, and improving quality. We draw on recent evidence on provider payment and organization and their effects on cost and quality. FINDINGS: Data suggest a low prevalence of provider risk payment models and slow movement toward new payment and organizational models. Evidence suggests the impact of both on cost and quality is weak. CONCLUSIONS: We need to be patient in expecting system improvements from ongoing changes in provider payment and organization. We also may need to look for improvements in other areas of the economy or to accept and accommodate prospects of modest improvements over time.

Dialysis composite rate bundling: potential effects on the utilization of home hemodialysis, daily and nocturnal hemodialysis, and peritoneal dialysis.

Home hemodialysis was introduced because it was less expensive than center dialysis, so allowing more patients to be treated with the limited funds available in the 1960s. The start of the Medicare ESRD Program in July 1973, with almost universal entitlement, removed the financial barriers, and had many other effects including reducing the use of home dialysis. Bundled payment for dialysis, including necessary dialysis supplies and laboratory tests, was introduced as the "composite" rate in 1983. Over the ensuing years, the costs of providing dialysis treatment increased, and expensive new drugs were introduced, particularly erythropoietin. As a result, the government introduced a more extensive bundle at the beginning of this year, aimed at better control of costs. This article considers the potential effect of this reimbursement change on home dialysis.

Components of Medicare reimbursement.

The history of the Medicare reimbursement system, how it works, and issues related to fraud and abuse are discussed. The statutory charge of Medicare is to ensure adequate reimbursement through a Prospective Payment System (PPS) to cover the costs for providing a given service to Medicare beneficiaries. The PPS was introduced as a way to change hospital behavior through financial incentives that encourage cost-efficient management of resources. The system utilizes a rate of payment in which a hospital is paid a fixed amount that is expected to cover the costs of care while treating a typical patient in a particular diagnosis-related group (DRG). The PPS uses DRGs as payment categories and Major Diagnostic Categories (MDCs) for classifying the DRGs into similar groupings. One of the first steps in DRG assignment is identification of the principal diagnosis represented by an International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM) code. The secondary diagnoses (referred to as complications or comorbidities), presence or absence of surgery, age of the patient, and discharge status are the other pieces of information making up assignment of a specific DRG to a patient. A basic knowledge of the Medicare program will help in the understanding of how hospitals will be reimbursed for patient care, as well as how changes in Medicare payment may affect reimbursement. Medicare is one of the largest health insurance providers in the United States. A basic understanding of the Medicare system will provide valuable insights into Medicare reimbursement and the influence it has on a hospital's bottom line.

The history and evolution of hospital payment systems: how did we get here?

After many years of testing and experimentation, most insurance companies, managed care plans, and self-insured employers now have effective programs in place to manage their health care expenditures. More important, the recent efforts to balance the federal budget have led to a series of changes in the payment systems for both Medicare and Medicaid that are designed to reduce the amount of money the federal government will spend on health care services in the future. It appears that all the loopholes have been closed. Many hospitals, as well as other types of providers, are now projecting flat revenue growth, while some are actually anticipating declines in revenues. To fully understand health care finance and be effective in reducing costs, hospital managers need to understand the history and evolution of the payment system and how they have influenced both cost measurement and cost control efforts.

Ambulatory surgery: the growth of an industry.

Over a short 30 years, ambulatory surgery has grown from a few freestanding facilities to a continuously growing industry. This article gives a historical overview of that growth, while specifically documenting the impact that competition, regulation, capitation, technology, and the consumer have on nursing and a single industry.

Home care past, present, and future: opportunities and challenges in a managed care environment.

This article describes the history of Medicare-based home care and the changing requirements of the home care industry as the reimbursement models continue to evolve. Medicare-based home care was once seen as an ancillary service of the hospitals. Now, with the advent of managed care, home care provides new options and opportunities and is facing new challenges at both the local and the national levels. Current proposals in Washington, such as bundling, co-pays, and a Prospective Payment System, will have farreaching effects on the industry. This article discusses the various reimbursement models, including Medicaid, Medicare HMOs, managed care, and capitation, and identifies key areas and opportunities for home care in the future.

The economic motivations for clinical information systems.

For three decades (1960-1990) the primary use of computers in hospitals' in the U.S. was to ease the task of reimbursement for care rendered and to automate results reporting for high-volume, time-critical tests such as clinical laboratory procedures. Hospitals were regarded as independent organizations/revenue centers which could pass costs to third party payers. Beginning in the mid-eighties, U.S. hospitals were no longer reimbursed on a fee-for-service basis for many patients, but received a fixed payment regardless of the actual cost of treating a patient. The size of the payment depended upon the patients' type of illness (Diagnostically related group). This approach gave hospitals incentives to reduce costs, but did not foster a fully competitive environment. Now, in the mid-nineties, hospitals in the U.S. are seen as cost centers in an integrated health care delivery system. Within this environment, a longitudinal patient record is necessary to increase levels of communication between healthcare providers. While certain management functions remain hospital-centered, clinical information systems must now cover a spectrum of patient activities within the ambulatory and inpatient arena. Several of the leading healthcare providers use computer-based logic to alert care givers whenever standards of care are not being achieved. These institutions feel that such capability will be the real impetus to reduce cost and improve the quality of care. Based upon observations over four decades, it appears that economic considerations play the major role in determining which kinds of information systems are deployed in the healthcare arena.