*Editor's note* Co-written by Tim Long, Business Consultant.
The ongoing effort to control hospital surgical costs now includes adoption of a value-based system of reimbursement. In principle, basing reimbursement on outcome—quality and cost—makes a lot of sense. Indeed, there have been many published peer-reviewed studies that demonstrate a well-conceived and administered value-based care system can significantly improve outcomes and cost.
Successful value-based surgical care, in part the Surgical Home, is typically limited to specific service lines/procedures; i.e., lower extremity joint replacement, colon surgery, etc. It requires a consistent patient-centric process from scheduling thru discharge and follow-up. For value to be attained, all those involved in patient care, from the surgeon to the home health nurse, need to be part of a defined and collaborative team.
An essential component of value-based care is continual and comprehensive feedback on outcomes; i.e., quality, efficiency, cost and satisfaction. It is this kind of data, provided as individual and collective report cards, that measures progress and brings about appropriate change in behavior and process.
For example, Surgical Directions was recently involved in surgical home project with a participating surgeon who received an initial report card revealing a relatively high readmission rate and low patient satisfaction. As could be expected, he received this report with both surprise and embarrassment; he didn’t think that he had a problem with either! Working with the ‘team’, he immediately set out to improve his long-established process and patient communication style. Within a year, his data-driven efforts were rewarded with dramatic improvements in his outcomes and patient satisfaction.
It cannot be overly emphasized that appropriate metrics, both collective and specific, drives change. Until relatively recently, neither hospitals or clinicians sought or received comprehensive feedback on their outcomes. It’s only been during the past decade that outside organizations (NSQIP, HCAP, CMS, SCIP, etc), grading hospitals and physicians, brought to light the extent of problems related to needlessly expensive hospital-based surgical care.
Hospitals in the US are now aggressively attempting to improve data collection and analysis. Unfortunately, most hospital’s EHRs are challenged to provide the broad range of data required in implementing successful high value surgical care.
The analytics can be divided into two important categories; 1) CMS mandated quality-to-payment metrics 2) activity-based cost reduction
CMS mandated quality-to-payment metrics
Since the rollout of The Affordable Care (ACA) in 2010, private payors have followed in implementing similar quality-based programs in the form of accountable care organizations, care coordination strategies, and bundled payments. Aetna, for example, has targeted 75 percent of its spend to be in value-based contracts by 2020.
The three most important CMS mandated quality programs for hospitals to monitor are 1) Value-Based Purchasing 2) Hospital Readmissions Reduction Program 3) Hospital-Acquired Condition Reduction Program
Value Base Purchasing is an incentivized quality program whereby CMS holds back 2% of the hospital’s Medicare payment each year. The facility can either earn back less than, equal to, or more than that 2%, depending on its performance compared nationwide. The metrics include mortality rates (observed vs. expected), complication rates, patient experience scores (HCAHPS), Medicare spend per beneficiary, and infection rates.
The Hospital Readmissions Reduction program reduces payments to hospitals with excess readmissions in the following six conditions, Acute Myocardial Infarction (AMI), Chronic Obstructive Pulmonary Disease (COPD), Heart Failure (HF), Pneumonia, Coronary Artery Bypass Graft (CABG) Surgery, and Elective Primary Total Hip Arthroplasty and/or Total Knee Arthroplasty (THA/TKA). CMS stratifies hospitals into five peer groups in order to appropriately calculate each providers’ excess readmission metric. The payment reduction is capped at 3% of a facility’s Medicare reimbursement.
The Hospital-Acquired Condition Reduction program is another pure penalty program, as it reduces Medicare payments to hospitals by 1% for those that rank in the worst-performing quartile. The analyzed conditions include Central Line-Associated Bloodstream Infections (CLABSI), Catheter-Associated Urinary Tract Infections (CAUTI), Colon and Hysterectomy Surgical Site Infections (SSI), Methicillin-resistant Staphylococcus aureus (MRSA) bacteremia, and Clostridium difficile Infections (CDI).
If a hospital performs worse than average nationwide in these various programs, it can end up losing millions of dollars in Medicare reimbursements each year. As a result, it is imperative for providers to analyze and react to their quality metrics in real-time and not wait for CMS to release results.
Cost to Serve Reduction
In addition to avoiding CMS and private payer quality-induced penalties, implementing a value-based surgical care model (eg: a perioperative surgical home) benefits an organization by reducing the cost to serve patients. The American Society of Anesthesiologists (ASA) has proven that a Perioperative Surgical Home (PSH) model can reduce length of stays, complications, readmissions and unnecessary testing, while improving patient satisfaction.It is imperative to have a highly accurate activity-based costing system in place in order to understand per patient surgical costs; perioperative, intraoperative and postoperative. This will allow for a meaningful financial comparison following the implementation of the PSH and for comparison between service lines that are included/excluded in the PSH. It is this pre & post implementation analysis that will be critical to the success and the continual enhancement of the program.