The building blocks of healthcare payment systems

The Building Blocks of Successful Payment Reform: Designing Payment Systems that Support Higher–Value Health Care

The implementation of healthcare payment systems is a complex task for any insurer, either public or private. Any option for reform is path-dependant and uncertain. The context and the inertia are the sources of lack of support for a change, unless a larger amount of Money -a big carrot- is put on the table.
A new report highlights the building blocks of a payment system. This is the instruction manual, and it refers to 4 issues:

Building Block 1: Services Covered by a Single Payment
Option 1–A: Adding new service–based fees or increasing existing fees.
Option 1–B: Creating a treatment–based bundled payment for a single provider
Option 1–C: Creating a multi–provider treatment–based bundle.
Option 1–D: Creating a condition–based payment.
Option 1–E: Creating a population–based payment.

Building Block 2: Mechanism for Controlling Utilization and Spending
Option 2–A: Adjustments in payment (pay for performance)based on utilization.
Option 2–B: Adjustments in payment (pay for performance)based on spending or savings.
Option 2–C: Bundled payment.

Building Block 3: Mechanism for Assuring Adequate Quality and Outcomes
Option 3–A: Establishing minimum performance standards.
Option 3–B: Payment adjustments (pay for performance) based on quality.
Option 3–C: Warrantied payment

Building Block 4: Mechanisms for Assuring Adequacy of Payment
Option 4–A: Risk adjustment or risk stratification.
Option 4–B: Outlier payments.
Option 4–C: Risk corridors.
Option 4–D: Volume–based adjustments to payment.
Option 4–E: Setting and periodically updating payment amounts to match costs.

A must read, keep it for your files.

 Halley meets Hortal, at Galeria Senda

 

PS. The revolving door of those that claim against revolving doors

Quo vaditis?

Resource allocation in health care is a nightmare for any regulator. Since competitive prices are unavailable, payment systems have to be designed in order to achieve a greater efficiency, better quality and access. Two decades ago a chapter in a book on that topic summarized the knowledge and potential applications. The title was: Hospital Groups and Case-Mix Measurement for Resource Allocation and Payment, and the authors: Pere Ibern, James C. Vertrees, Kenneth G. Manton,Max A. Woodbury. This was the result of my stay as a visiting researcher at Duke University, Center for Demographic Studies. I had the unique opportunity to share knowledge with extraordinarily talented people.
For many years, things moved smoothly. A summary of the state of the art in 2007 is provided in a chapter of this book (p.259).
After twenty years, things have changed, quo vaditis payment systems?. Right now we focus on incentives for integrated care, and accordingly payment systems have to follow a different path. Bundled care and episode of care, these are the crucial topics right now.
However, regulator's inertia and risk avoidance are the greatest constraints for change. It is difficult to leave the confort zone. Although we know that current payment systems require a new design, decisions are being delayed. The latest words of Seamus Heaney, recently passed away, fit perfectly as a key message: Noli timere, don't fear.

The priceless conundrum in healthcare

Pricing the Priceless: A Health Care Conundrum

Allocating resources in health care is a pivotal taks and three tools are used to solve it: market, government and professionalism. Briefly, in the market, prices paid would try to reflect information needed to take a decision for the supply side and demand side (hypotetically). Government allocates resources according to information of a benevolent ruler (biased and incomplete information). Professionals decide over the need of care according to "rules and guidelines" and specific patient situation (hypotetically).
As you may imagine, all these three approaches are used everyday in every health system in the world, and unfortunately they are imperfect, basically due to asymetric and incomplete information on one side, and incentives on the other.
Joseph Newhouse wrote a book fifteen years ago, that summarized many of these conundrums. The first is that we don't find prices, we find "administered prices" in health care, those set by insurers (private and public), and:

Setting administered prices is inevitably fraught with error, and because of lags in adapting to technological change, the extent of the error increases as pricing systems age.

This is reason why today we use the term payment systems instead of pricing. Payment systems try to combine different dimensions beyond price, sometimes volume, sometimes quality. Basically they want to correct the error of administered prices.
Unfortunately, the book finishes with a worrying  statement:

This is the conundrum of medical pricing; all arrangements that can be implemented have important drawbacks. Although variation in ideology plays a role in the payment methods that different countries use, the wide variation in institutional arrangements around the world as well as the ongoing efforts at attempting to reform and improve those arrangements in almost every country are consistent with that conundrum.

My impression differs a little bit, it is not and ideological issue. Payment methods differ because risk transfer may be possible or not. In a public system, finally the State assumes all the risk. In a private system, providers  market power may reduce the opportunities to transfer such risk.  Professionals in a public and private system don't assume financial risk, they decide but it is finally transferred to insurers and providers. Nowdays, the issue is still open for debate.

Payment systems vs. prices in health care

Payment Methods: How They Work

The problem in health care is not that prices play a role—that is unavoidable. The problem is that prices are distorted in ways that result in inefficient allocation of health care resources. Patients and physicians use too much of health care services that are of low value and not enough of services that are of high value.

This statement refers to US private health care. It may refer to any private health system. The JAMA article reflects an interesting and forgotten issue: The Importance of Relative Prices in Health Care Spending. Data is usually unavailable, and few studies are able to show the implications of relative prices on outcomes.
My impression is that we should review the role of prices in health care and understand better that we do need payment systems, that beyond the standard Hayek signal for producers and consumers, there is a signal of appropriate acces that sends the regulator. This is what some health systems try to apply in public settings, and what we did in Catalonia long ago.
Therefore, the key issue is not to define the method as this report does, though it is necessary. The most important focus should be devoted to the environment and the process that finally will guarantee access and quality of outcomes.

PS. By the way, does anybody know where current payment system in Catalonia stands? Glups!

Provider payment strategies to improve health

Value-based provider payment: towards a theoretically preferred design

The case for improving health is related, among many things, with the incentive structure of the whole system (people, professionals and providers). If we focus our aim towards providers, then we need to reassess current flaws in the system, and ask what do we have to do. A new article tries to address these issues.

In order to tackle the problems related to current payment methods, worldwide, policymakers and purchasers of care are exploring alternative payment strategies to help steering health care systems towards value . A well-known endeavour in this regard is pay-for-performance (P4P), in which providers are explicitly rewarded for ‘doing a better job’. Although P4P is an appealing idea, explicit financial incentives for value should in principle be used only modestly in provider payment methods because of the multitasking problem. Therefore, it is not surprising that in practice, the majority of provider revenues (typically referred to as the base payment) is not explicitly linked to value. This base payment, however, does create implicit (dis)incentives for value, because each payment method influences providers’ behaviour through incentives.

The article reflects a conceptual framework of key components and design features of a theoretically preferred Value Based Payment method. And the key message is:

We conclude that value is ideally conceptualised as a multifaceted concept, comprising not only high quality of care at the lowest possible costs but also efficient cooperation, innovation and health promotion. Second, starting from these value dimensions, we derived various design features of a theoretically preferred VBP model. We conclude that in order to stimulate value in a broad sense, the payment should consist of two main components that must be carefully designed. The first component is a risk-adjusted global base payment with risk-sharing elements paid to a multidisciplinary provider group for the provision of (virtually) the full continuum of care to a certain population. The second component is a relatively low-powered variable payment that explicitly rewards aspects of value that can be adequately measured.

I fully agree with what they say. Close politicians and officials should take this message into consideration regarding the next primary care physicians' strike, and forget the current confusing approach.

Norman Rockwell 

TIRED SALESGIRL ON CHRISTMAS EVE

Estimate $5,000,000 — 7,000,000

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Episode based payment systems (2)

The Impact Of Bundled Payment On Health Care Spending, Utilization, And Quality: A Systematic Review

THE CURRENT STATE OF EVIDENCE ON BUNDLED PAYMENTS

The topic has already been explained in this blog. Now you may find a systematic review of what is going on in US:

We performed a systematic review of the impact of three CMS bundled payment programs on spending, utilization, and quality outcomes. The three programs were the Acute Care Episode Demonstration, the voluntary Bundled Payments for Care Improvement initiative, and the mandatory Comprehensive Care for Joint Replacement model. Twenty studies that we identified through search and screening processes showed that bundled payment maintains or improves quality while lowering costs for lower extremity joint replacement, but not for other conditions or procedures.

 While bundled payment programs maintain or improve quality while lowering costs for Lower extremity joint replacement, our systematic review suggests that the effects of the payment model on health care spending and utilization varied considerably—particularly by clinical episode type.

So what?. The drivers for success still have to be found. But there is one that is mandatory: payment systems need to be holistic, any partial design will fail. 

Social distance

Episode based payments (3)

 Medicare's Bundled Payment Initiatives for Hospital‐Initiated Episodes: Evidence and Evolution

The Impact of Medicare’s Alternative Payment Models on the Value of Care

Bundled payments have been promoted as an alternative to fee‐for‐service payments that can mitigate the incentives for service volume under the fee‐for‐service model. As Medicare has gained experience with bundled payments, it has widened their scope and increased their duration. However, there have been few reviews of the empirical literature on the impact of Medicare's bundled payment programs on cost, resource use, utilization, and quality.

Main messages:

•  Evidence suggests that bundled payment contracting can slow the growth of payer costs relative to fee‐for‐service contracting, although bundled payment models may not reduce absolute costs.
• Bundled payments may be more effective than fee‐for‐service payments in containing costs for certain medical conditions.
• For the most part, Medicare's bundled payment initiatives have not been associated with a worsening of quality in terms of readmissions, emergency department use, and mortality. Some evidence suggests a worsening of other quality measures for certain medical conditions.
• Bundled payment contracting involves trade‐offs: Expanding a bundle's scope and duration may better contain costs, but a more comprehensive bundle may be less attractive to providers, reducing their willingness to accept it as an alternative to fee‐for‐service payment.

Both articles reflect the current situation on payment systems in US. The effort to change fee-for-service is more difficult than expected. There is a lot of money at stake.

 

The Gossips by Norman Rockwell

Episode based payment systems

Unraveling the Complexity in the Design and Implementation of Bundled Payments: A Scoping Review of Key Elements From a Payer’s Perspective

After per case based payment systems (DRGs) everybody was waiting for a comprehensive system to measure health services activities. And instead of focusing on episodes, what happened is that bundling was the new frame. Unfortunately, after all these years bundling has not provided the answer because the scope of measurement is related to several diseases and it is not holistic.
When everybody was asking for an alternative to fee-for service, the answer was in my opinion "patient focused episodes of care", but the US government decided otherwise and protected the interests of those that leverage fee-for-service.
Therefore, now it is the time to fix this mistake and take the right  road. In this article you'll find some issues to consider when you have to design a payment system. It still talks about bundling, forget it, substitute it by episodes and it will be fine.

Our framework provides a structured overview of the principal, literature‐based elements of the design and implementation of bundled payment contracts from a payer's perspective. We identified 53 elements that involve all procurement phases and relate to actors on all levels of the health care system. A better understanding of these elements can help payers and other actors devise a strategic approach and reduce the complexity of implementing these contracts. Compared with traditional FFS models, bundled payment contracts introduce an alternative set of financial incentives that affect the entire health care system, involve almost all aspects of governance within organizations, and demand a different type of collaboration among organizations. This is what makes the design and implementation of bundled payment contracts complex and is why they should not be strategically approached by payers as merely the adoption of a new contracting model but, rather, as part of a broader transformation to a more sustainable value‐based health care system, based less on short‐term transactional negotiations and more on long‐term collaborative relationships between payers and providers.

El disseny de sistemes de pagament

 A Framework for the Design of Risk-Adjustment Models in Health Care Provider Payment Systems

A partir d'avui aquest blog es trasllada a Substack. Durant unes setmanes serà accessible simultàniament per blogger i per substack. Anoteu l'adreça: econsalut.substack.com

Article resumit amb IA.

Aquest article presenta un marc conceptual integral per al disseny de models d'ajust de risc (RA) en el context de models de pagament prospectiu a proveïdors d'assistència sanitària. L'objectiu és desenvolupar un marc que expliciti les opcions de disseny i les compensacions associades per tal de personalitzar el disseny de l'RA als sistemes de pagament a proveïdors, tenint en compte els objectius i les característiques del context d'interès.

Introducció (1-3): Durant les últimes dècades, els reguladors i els responsables polítics de la salut han fet esforços per millorar l'eficiència de la prestació d'assistència sanitària mitjançant la reforma dels sistemes de pagament a proveïdors. Específicament, l'eficiència s'ha perseguit mitjançant la introducció d'elements prospectius en els models de pagament, donant lloc a diversos Models de Pagament Alternatius (MPA) com els acords de qualitat alternatius i els pagaments agrupats. Aquests MPA tenen com a objectiu incentivar l'eficiència traslladant (part de) la responsabilitat financera dels pagadors als proveïdors. Una característica típica dels pagaments prospectius a proveïdors és que es basen en un "nivell de despesa normatiu" per a la prestació d'un conjunt predefinit de serveis a una determinada població de pacients. El nivell de despesa normatiu es refereix al nivell de despesa que "hauria de ser" depenent de la població de pacients d'un proveïdor, en lloc de la despesa observada. Un element clau en la determinació dels nivells de despesa normatius és la correcció de les diferències sistemàtiques en les necessitats d'assistència sanitària de les poblacions de pacients dels proveïdors, comunament coneguda com a ajust de risc (RA). L'RA és crucial per garantir un terreny de joc igualitari per als proveïdors i per evitar incentius per a comportaments no desitjats, com la selecció de riscos.

Nova Contribució (8-10): Tot i les contribucions conceptuals existents sobre el disseny de l'RA, actualment no hi ha un marc integral per adaptar el disseny de l'RA al pagament de proveïdors i a les característiques essencials del context. Aquest article desenvolupa aquest marc sintetitzant, ampliant i aplicant coneixements de la literatura existent. La metodologia va incloure una revisió de la literatura combinada amb consultes a experts en el camp de l'RA i els sistemes de pagament. La informació recopilada es va sintetitzar per desenvolupar el marc, del qual van sorgir tres criteris per al disseny de models d'RA i es van agrupar les opcions i les compensacions en dues dimensions principals: (a) la tria dels ajustadors de risc i (b) la tria de les ponderacions de pagament.

Definicions de Conceptes Clau (11-13): Els models de pagament prospectiu i els MPA traslladen la responsabilitat financera dels pagadors als proveïdors per tal d'incentivar el control de costos i l'eficiència. Qualsevol trasllat de responsabilitat financera requereix que el pagador determini el nivell de despesa normatiu, que reflecteix el nivell de despesa apropiat donades les necessitats d'assistència sanitària d'una població i els objectius dels MPA. El nivell de despesa normatiu no fa referència necessàriament al nivell de despesa absolut o òptim, sinó al nivell considerat apropiat donat el nivell/objectius d'eficiència perseguits pel MPA.

Fonts de Variació de la Despesa i el Paper de l'RA i la Mancomunació de Riscos (14-19): Quan s'estableixen nivells de despesa normatius, és important considerar tres fonts de variació de la despesa: (a) variació sistemàtica impulsada per factors fora del control dels proveïdors (variables C o "factors de compensació"), (b) variació sistemàtica impulsada per factors que els proveïdors poden influir (variables R o "factors de responsabilitat"), i (c) variació aleatòria. Per evitar que els proveïdors assumeixin riscos excessius que no poden influir, els MPA solen aplicar alguna forma de mancomunació de riscos. L'RA prospectiu s'utilitza per compensar la variació de la despesa deguda a les variables C. La naturalesa i el grau en què s'ha de compensar la variació de la despesa resultant de les variables C forma el punt de partida d'un model d'RA.

Tres Criteris per al Disseny de Models d'RA (19-26): L'objectiu general de l'RA en els MPA és compensar els proveïdors per la variació de la despesa deguda a les variables C, alhora que els manté responsables de la variació de la despesa deguda a les variables R. Això implica dos criteris clau: (a) compensació adequada per a les variables C i (b) cap compensació per a les variables R. Un tercer criteri important és la viabilitat.

• Criteri 1: Compensació Adequada per a les Variables C (20-26): Per evitar problemes de selecció, l'RA hauria de compensar adequadament les variables C que són rellevants a la llum de les possibles accions de selecció de riscos per part dels proveïdors (atraure/dissuadir pacients sans/no sans). També hauria de compensar les variables C que varien entre les poblacions de proveïdors per evitar la participació selectiva en el MPA.
• Criteri 2: Cap Compensació per a les Variables R (26-29): Per evitar ineficiències, l'RA no hauria de compensar les variables R. La compensació per la variació de la despesa de les variables R pot donar lloc a problemes d'eficiència, com la perpetuació de les ineficiències existents ("biaix d'status quo") i la creació d'incentius per a noves ineficiències (reducció dels incentius per al control de volum i preu, codificació ascendent).
• Criteri 3: Viabilitat (29-30): Un tercer criteri crucial és la viabilitat, que inclou la disponibilitat de dades i l'acceptació per part de totes les parts interessades (pacients, proveïdors, pagadors, reguladors).

Un Marc per al Disseny de Models d'RA (30-31): Aquest marc distingeix entre preguntes de disseny, opcions associades i consideracions i compensacions clau pel que fa a (a) la tria dels ajustadors de risc i (b) la tria de les ponderacions de pagament.

La Tria dels Ajustadors de Risc (31-47): Aquesta secció aborda tres preguntes principals de disseny:

• Quin tipus d'informació es basa els ajustadors de risc? (32-38): Les opcions inclouen informació demogràfica, socioeconòmica, subjectiva (de salut), diagnòstica, d'utilització, clínica, de despesa (retardada) i del costat de l'oferta. L'ús d'informació endògena (diagnòstics, utilització, despesa) és altament predictiu de la despesa de tipus C, però pot perpetuar ineficiències i introduir nous incentius perversos per al volum i el preu. L'ús d'informació exògena (demogràfica, socioeconòmica) no manté ni introdueix incentius perversos relacionats amb el volum o el preu, però el seu poder predictiu és generalment baix.
• A quin període de temps (període base) pertany la informació? (38-45): Es pot distingir entre ajustadors concurrrents i prospectius. Els efectes d'incentiu relatius d'aquestes opcions no estan clars a priori.
• Com dissenyar els ajustadors de risc? (46-47): Això inclou l'especificació de l'escala de mesura, l'operacionalització dels ajustadors (considerant condicions, jerarquies, restriccions) i les interaccions entre ajustadors.

La Tria de les Ponderacions de Pagament (48-60): Per trobar ponderacions de pagament apropiades, els responsables de la presa de decisions s'enfronten a tres decisions principals de disseny:

• Quina mostra d'estimació? (49-52): Es requereix una mostra d'estimació representativa de la població d'interès i dels nivells de despesa normatius. En la pràctica, sovint s'utilitzen dades històriques i poblacions de pacients similars.
• Quines intervencions de dades? (52-58): Quan la mostra d'estimació no és representativa, s'han de considerar intervencions de dades sobre la població de pacients i/o les dades de despesa per millorar la coincidència amb la població d'interès i el nivell de despesa normatiu. Això pot incloure correccions per biaixos i inequitats.
• Com derivar les ponderacions de pagament? (59-60): Això implica decidir quins ajustadors de risc incloure (considerant el biaix de la variable omesa) i quin criteri d'optimització utilitzar per estimar aquestes ponderacions. Les opcions van des de criteris d'optimització estàndard (OLS, GLM) fins a criteris personalitzats (regressió restringida, aprenentatge automàtic).

La Interconnexió Entre les Opcions de Disseny per als Ajustadors de Risc i les Ponderacions de Pagament (61-62): Les decisions de disseny dins i entre aquests dos temes estan altament interrelacionades. Per exemple, la tria de la informació en què es basen els ajustadors de risc afectarà la seva especificació i operacionalització. De la mateixa manera, les decisions sobre com es deriven les ponderacions de pagament depenen tant de la tria dels ajustadors de risc com de la tria de la mostra d'estimació (modificada).

Discussió (63-68): No hi ha un enfocament únic per al disseny de models d'RA, i el disseny adequat pot variar segons la configuració i les evolucions al llarg del temps. És crucial la decisió normativa sobre quines variables es consideren C i quines R. L'abast de la preocupació pels possibles incentius de selecció i control de costos pot variar segons el context. Les consideracions de viabilitat, com la disponibilitat de dades i l'acceptació de les parts interessades, també són importants.

Consideracions Més Amplies per al Disseny de l'RA en el Finançament de l'Assistència Sanitària (69-70): Tot i que aquest article se centra en el pagament a proveïdors, el marc proposat també podria beneficiar altres reformes de finançament, com les iniciatives de participació del consumidor, tot i que es necessita més recerca.

Conclusió (71): El disseny de models d'RA per a sistemes de pagament prospectiu a proveïdors és un exercici complex que requereix una consideració explícita de moltes preguntes, opcions i compensacions difícils. El procés de disseny ha de guiar-se per tres criteris clau: compensació adequada de les variables C, cap compensació de les variables R i viabilitat. Les diverses preguntes i opcions de disseny es poden classificar en la tria dels ajustadors de risc i la tria de les ponderacions de pagament. Es necessita més recerca per donar suport a les decisions normatives sobre les variables C i R, així com per desenvolupar mètriques d'avaluació integrals per a la valoració dels efectes dels incentius.

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Episode based payment systems (2)

Value-based provider payment: towards a theoretically preferred design

The details of a payment system methodology are clearly described in this article. I was not surprised to confirm that the proposals we made two decades ago were in the same direction: two-part payment, fix and variable. Unfortunately nowadays we have a retrofuture system that nobody knows exactly how incentives really work. Of course, this is the first best for a discretionary behaviour by a resource allocator. This is a clear step in the wrong direction that started a decade ago. Without proper incentives, efficiency suffers, and to be clear this means less efficient healthcare for the patients. Unfortunately again, nobody cares about it.

The main contribution of this paper is twofold. Inspired by the societal debate on what
stakeholders in health care should ideally strive for, as well as by existing definitions of value, we first described and further specified the concept of value, facilitating the specification of requirements in the design of VBP. We conclude that, in this respect, value is ideally conceptualised as a multifaceted concept, comprising not only high quality of care at the lowest possible costs but also efficient cooperation, innovation and health promotion. Second, starting from these value dimensions, we derived various design features of a theoretically preferred VBP model. We conclude that in order to stimulate value in a broad sense, the payment should consist of two main components that must be carefully designed. The first component is a risk-adjusted global base payment with risk-sharing elements paid to a multidisciplinary provider group for the provision of (virtually) the full continuum of care to a certain population. The second
component is a relatively low-powered variable payment that explicitly rewards aspects of value that can be adequately measured.

The time to fix the current mess has arrived.

Jordi Sàbat

Spillover effects of payment systems

 Randomized trial shows healthcare payment reform has equal-sized spillover effects on patients not targeted by reform

From PNAS: 

Changes in the way health insurers pay healthcare providers may not only directly affect the insurer’s patients but may also affect patients covered by other insurers.

This is the research question. And this is the result:

We use a payment reform in TM, which was randomly applied to some markets but not others, to study spillovers of healthcare payment reform. We find spillovers of the same sign and similar magnitude on privately insured MA patients. Naturally, our findings are specific to our setting; the existence, sign and magnitude of any spillovers may well vary across contexts.

Sounds good. However, there is a previous research question, which is the insurer's market share that allows to have the option to change the payment system. This former question is as relevant as the later one.

 

Hockney

Unwarranted variations, what's next?

Geographic Variations in Health CareWhat Do We Know and What Can Be Done to Improve Health System Performance?

We all know that there are unwarranted variations in health care. Unfortunately we haven't the same analysis about the drivers and its impact on health outcomes for such variations. OECD has just released a report on this topic, and suggests the following:

Eight types of policies might be envisaged:
• Public reporting on geographical variations, in order to raise questions among stakeholders and prompt actions, particularly in “outlier” regions.
• Setting targets at the regional level can support public reporting and help promoting  appropriate use.
• The re-allocation of resources to increase (or reduce) supply of resources (e.g., beds, doctors) in regions with low (or high) utilisation rates.
• Establishment and implementation of clinical guidelines in order to promote greater consistency in clinical practice.
• Provider-level reporting and feedback to improve clinical practice and discourage unnecessary provision of health services.
• Changes in payment systems to promote higher (or lower) use when there is high suspicion of underuse (or overuse).
• The measurement of health outcomes, to promote greater consistency in clinical practice that ensures improved patient outcomes.
• The utilisation of decision aids for patients, to promote more informed decisions about benefits and risks of various interventions, and to better respond to patient preferences.

These proposals fall short in my opinion. After a decade of publishing information on variations, public reporting has not raised deep questions for "stakeholders", at least as far as I know. Incentives have not changed substantially in order to reduce differences in utilization. Current payment systems require a redefinition from scratch in order to take into account such issues. Any citizen should be concerned about the results of the report. Something should be done.

PS. By the way, regarding OECD recommendations, they have not explained clearly what Wennberg suggested: shared decision making

PS. Bad journalism at LV. Why CAC doesn't care about complaints on written press.

Ferrando at Galeria Barnadas

DRGs 101

 DIAGNOSIS-RELATED GROUPS: a question and answer guide on case-based classification and payment systems

WHO has released a report on DRGs that is useful as introduction to the concept and the design of payment systems.

The document consists of four parts:

Part 1 outlines definitions, terminology and the main conceptual aspects related to CBG and DRG.

Part 2 covers the assessment phase and highlights questions and issues that policy-makers should consider before taking the decision to introduce a CBG system.

Part 3 delves into the preparation phase by exploring policy and design aspects once a country has decided to introduce a CBG system.

Part 4 is concerned with the implementation phase and discusses implementation questions, requirements for system adjustments and the need for monitoring and revision in order to identify and address unintended impacts of a CBG system.

 

 

Lliçons sobre política farmacèutica (3)

Regulation, Innovation and Competition in Pharmaceutical Markets

Si voleu un llibre introductori que descriu amb precisió el mercat farmacèutic aquesta és l'opció del moment. Els conceptes habituals necessaris per moure's bé en aquest entorn són explicats amb tots els detalls.

M'ha interessat especialment el tema de pagar per retardar l'entrada dels genèrics, els acords de pagament invers, perquè s'explica amb tota claredat una pràctica vergonyosa de la indústria que ja coneixia però que em faltaven peces.

Es tracta d'això:

‘reverse payment’ patent settlement agreements (also called pay-for-delay settlements), because they provide for the patentee to pay the alleged infringer, rather than the opposite (considering the standard expectation that a defendant would pay a plaintiff to settle), with the aim of delaying its market entry. In other words, in its typical scheme, the brand-name drug pharmaceutical company enters into an agreement with the generic competitor to settle the dispute and to limit its market entry in return for a transfer of value.1 Such transfer can take different forms, including either a direct monetary payment or another form of valuable agreement (eg an authorised licensed entry at a specific date, distribution agreements, favourable terms in a side deal in which the originator company grants a commercial benefit to the generic company), or both. 

Aquest és l'índex del llibre: 

Introduction 1

I. The Different Faces of Pharmaceutical Markets 1

PART I

1. Regulating Entry 15

I. The Main Features of Pharmaceutical Markets: The Supply Side and the Demand Side 15

II. The Product Life Cycle and the Costs of Innovation 20

III. The Access to the Market: Regulatory Approaches 23

A. The European Regulatory Framework 23

B. The US Regulatory Framework 27

IV. Concluding Remarks 33

2. Regulating Exclusivity 34

I. The Interplay between Regulatory Exclusivities and Intellectual Property Rights 34

II. Intellectual Property Rights in the Pharmaceutical Industry: An Overview on the Role of Patents 35

III. EU Supplementary Protection Certificate and US Patent Term Restoration 41

IV. Regulatory Exclusivity 48

V. Research and Bolar Exemptions 52

VI. Exhaustion Doctrine and Parallel Trade 59

VII. Concluding Remarks 63

3. Regulating Prices 64

I. Pharmaceutical Pricing and Reimbursement Systems in Europe 64

II. The US System 70

III. Concluding Remarks 76

viii Contents

PART II

4. Competition Law Enforcement in Pharmaceutical Markets: An Introduction 79

I. EU and US Antitrust Rules: An Essential Overview 79

II. Antitrust Enforcement in the Pharmaceutical Sector 87

III. Market Definition 95

IV. Concluding Remarks 100

5. Reverse Payment Patent Settlements 102

I. The Recurrence of Reverse Payment Patent Settlements in Pharmaceutical Markets 102

II. Reverse Payment Patent Settlements in the United States 105

A. Earlier Case Law and the Actavis Ruling 105

B. Critical Issues after Actavis 109

C. Further Developments 113

III. EU Case Law on Reverse Payment Patent Settlements 119

A. Lundbeck 120

B. Generics 123

IV. Comparative Analysis 127

A. Legal Frameworks 127

B. The Antitrust Assessment 129

V. Concluding Remarks 134

6. Product Hopping 136

I. Pharmaceutical Product Reformulations 136

II. Product Hopping before US Courts 140

III. The EU Experience 146

IV. The Antitrust Assessment of Product Reformulation 151

V. Concluding Remarks 155

7. Excessive Drug Pricing 157

I. The Resurgence of Excessive Pricing Cases in the Pharmaceutical Sector 157

II. Excessive Pricing under EU Competition Law 161

A. Aspen 165

III. The US Approach 169

IV. The Role of Antitrust Enforcement on Excessive Drug Prices 176

V. Concluding Remarks 178

PART III

8. Further Interactions: Pharmaceutical Markets, Intellectual Property and Human Rights 183

I. The Right to Health and Access to Medicines and the Relationship with Intellectual Property Rights: An Overview 183

II. Compulsory Licensing 191

III. Concluding Remarks 196

9. Public Health and Public Interest in Competition Law 198

I. Public Health and Competition Law 198

II. Competition Law and Non-competition Interests 203

III. Concluding Remarks 208

Conclusion 209

Bibliography 213

Index 233

Retrofuturistic payment systems (2)

Long time ago I alerted about a potential payment system that tried to convince everybody and didn't satisfied its goals for equity and efficiency. I was concerned about reproducing the mistakes of the past and creating flaws for the future. What I said more than two years ago, has been recently confirmed more or less by a recent decree. Its detailed analysis goes beyond any post in a blog. The retro part is related to an administrative discretionary classification of hospitals that was initially defined two decades ago (Decree  June 30th, 1992) and failed afterwards. The future part is related to a dual payment system: population and service based that will be defined according to idiosyncratic situations. Both are the pillars of uncertainty in the model.
Right now the most important task to accomplish will be to think about its next reform.

Resource allocation for universal coverage in healthcare

Price setting and price regulation in health care: Lessons for advancing Universal
Health Coverage

Once upon a time Joseph Newhouse said that there are no prices in healthcare. There are some forms of administered prices, tariffs and payment systems. Unfortunately current health economists forget to read some books like "Pricing the priceless", a must read.
Now a new report by WHO and OECD insists again on prices and says:

Pricing health services is a key component in purchasing the benefits package (the covered services) within the overall financing system (Evetovits, 2019). Pricing and payment methods are important instruments in purchasing that provide incentives for health care providers to deliver quality care. A second instrument is contracting, in which the conditions for the payment of services are defined, and prices can be used as signals to providers. A third is performance monitoring. Where health care providers are rewarded based on the outcomes they achieve, these payments also must be priced correctly to provide the right incentives.

Right, there are more elements in the equation than prices, but the tools for fine tunning are too open. Anyway, this report is really welcome and the cases are well described.

Payment systems: a review

 Design of financial incentives and payment schemes in healthcare systems: A review

Decisions públiques amb fonament

Medicare and the Health Care Delivery System

Repasso habitualment els informes de Medpac, la Medicare Payment Advisory Commission. Malgrat la distància, aquests documents són l'expressió pràctica de com el coneixement acadèmic de l'economia de la salut pot acabar sent d'utilitat per a la presa de decisions públiques. El mes de juny surt l'informe clau, i el mes de març un altre, enmig hi ha documents diversos. Del darrer informe m'ha interessat un capítol dedicat a les proves complementàries, com es poden compensar millor i augmentar l'adeqüació. En un entorn de pagament per acte mèdic, l'informe fa referència obligada a les limitacions a l'"auto-derivació". És a dir, a que un metge prescrigui una prova diagnòstica i la realitzi en un centre de la seva propietat.

Physician self-referral of ancillary services leads to higher volume when combined with fee-for-service payment systems, which reward higher volume, and the mispricing of individual services, which makes some services more profitable than others. The Ethics in Patient Referrals Act, also known as the Stark law, prohibits physicians from referring Medicare patients for designated health services (DHS)—such as imaging, radiation therapy, home health care, durable medical equipment, clinical laboratory tests, and physical therapy—to entities with which they have a financial relationship.

Però aquesta llei va permetre excepcions i per aquí se n'ha anat la mà, amb unes inversions fortes fetes per grups de metges i una preocupació pública creixent pel volum i l'adeqüació de les proves.
Observo que per aquí aprop i en l'àmbit privat hi ha poca preocupació sobre aquests temes. I encara menys preocupació per que un Parlament es doti de comissions a l'estil de Medpac que ajudarien a formular les polítiques fonamentades en el coneixement.

Drivers of health cost variation

Variation in Health Care Spending:Target Decision Making, Not Geography

Variations in medical practice are well known and documented. Variations in costs, not so much, at least in our country. Now you can check what happens to geographic cost variations in US. Have a look at IOM report and you'll get the right approach to the issue:

Geographically-based payment policies may have adverse effects if higher costs are caused by other variables like beneficiary burden of illness, or area policies that affect health outcomes. Further, if there are substantial differences in provider practice patterns within regions, cutting payments to all providers within a region would unfairly punish low cost providers in high-spending regions and unfairly reward high cost providers in low spending regions.

A clear alert for any designer of payment systems. The Economist adds more details on this topic and finishes with an additional alert:

The transition from fee-for-service will inevitably be slow. In the meantime, it would help if the millions of Americans with private insurance had any idea what hospitals charge. In May CMS published hospitals’ price lists, showing huge gaps from one hospital to the next. But few patients pay these charges—it would be more useful to know the rate negotiated with their insurers. This transparency does not require restructuring the health system. It just requires hospitals to lift the veil on prices. If they don’t, a regulator may do it for them.

PS. For those that claim that our tax pressure is low. Have a look at taxes over labour costs (41,4%)  OECD average 35,6% (2012), why this figures are not broadcasted? The medium is the message? Who controls the medium? Does anybody consider that competitivenes is possible with such rates?

Patient focused episodes

We all know that no measurement means no management. In health care the measurement of the burden of disease is not that easy. Fortunately at a global level there is the recent study published at Lancet and quoted in this post. If we need to be precise in the measurement with consequences for health care management then we need better tools. Diseases finally appear around episodes, and we may have three type of episodes: event based, disease cohort and population based. The definition of episode needs to be patient-focused rather than disease centered. If you want to know the details of the newest approach to morbidity measurement have a look at this document. It is the evolution of former Clinical Risk Groups towards a new model that will be extremely helpful for management decision making and the definition of appropriate incentives.

PS. Some months ago I explained that new payment systems were in train of being defined. An impact analysis may be found here. My post was titled: A retrofuturist payment system. Now, I would like to change the title once I've seen the details, my proposal is: A complete MESS that needs to be rebuilt from scratch. (to be continued)

PS. Yesterday I attended a book presentation: "I am not Sidney Poitier", by Percival Everett. It was at La Central bookstore. Percival explained the rationale of the book and its subliminal messages.  This is not the kind of novel I'll read.