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 

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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.

Improving physician compensation

A Guide to Physician-Focused Alternative Payment Models

A fixed flat monthly payment to  physicians is a vulgar method to compensate a professional effort. At some initial stages of the career, it may work. As far as experience and knowledge improves results, than some adjustments are needed. In general the publicly funded health system is not able to change the initial stage and remains with more or less the same approach of low-powered incentives. This may work for some individuals, but not for all of them.
Paying on a fee-for service it creates strong incentives to boost volume, and paves the way to overdiagnosis and overtreatment. Privately funded health care is still using mostly this high-powered approach and it is also not able to reform.
Alternative methods of compensating physicians have been described recently in an interesting report. Forget for a while that it is based on the US health system. These are the seven options:

APM #1: Payment for a High-Value Service 
APM #2: Condition-Based Payment for a Physician’s Services

APM #3: Multi-Physician Bundled Payment

APM #4: Physician-Facility Procedure Bundle

APM #5: Warrantied Payment for Physician Services

APM #6: Episode Payment for a Procedure

APM #7: Condition-Based Payment

Food for thought. Something should done to go beyond fee-for service. And do not forget it, changing incentives without any organizational alignment or reform may drive to surprises and poor performance.

PS. Just the opposite to us, NHS expands private care . A controversial trend.

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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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!

Dynamic risk adjustment in provider's payment

Prevention and Dynamic Risk Adjustment

Adjusting Medicaid Managed Care Payments for Changes in Health Status

"Risk-adjustment methods have an inherent structural flaw that rewards preventable deterioration in enrollee health status and improved coding of disease burden", this is the key statement in Fuller et al. article. The answer they provide is the introduction of an additional payment adjustment according to changes in health status for similar mix of enrollees. The payment adjustment being proposed is based on changes in aggregate relative payment weights for all enrollees avoiding any individual adjustment.
This is a concrete application of the initial dynamic risk adjustment proposal that Eggleston et al. made in 2007. They suggested a two step payment system: a conventional risk adjustment (for variations in population health outside the provider’s control) and an additional one related to prevention efforts.
There is still a lot to learn about it. Let's keep an eye on this crucial topic.

PS. Have a look at Commonwealth Fund anouncement: "Our initiative recognizes that a wide range of factors influence providers’ choices, beyond financial rewards or penalties, including intrinsic motivation and medical professionalism, organizational influences, and policy" (see Box)

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.

La retribució personalitzada de l'esforç del metge (2)

 Individual performance-based incentives for health care workers in Organisation for Economic Co-operation and Development member countries: a systematic literature review

Si considerem que cal introduir incentius basats en la qualitat, l'excel·lència i el valor aportat, aleshores hem de preguntar-nos per on començar. I el millor és fer una ullada al que fan els països amb els que ens volem comparar. Recentment ha sortit una revisió de l'estat de la qüestió que ajuda a fer-nos una idea de tot plegat. El resum és aquest:

Employing a behavioral psychology framework, we categorized PBI programs included in our review into four distinct reinforcement groups, including negative reinforcements for individual-level behavior (per output/outcome or overall targets) as well as positive reinforcement for individual-level behavior (per output/outcome or overall targets). In general, there was a level of ambiguity regarding the details of incentive activities and many studies did not present comparable results, but we strived to extract systematic information when possible, and compared and contrast odds ratios when available. We found PBI programs that utilized positive reinforcement methods are most commonly observed in OECD countries – with slightly more overall bonus incentives than payment per output or outcome achieved incentives. When comparing the outcomes from negative reinforcement methods with positive reinforcement methods, we found more evidence that positive reinforcement methods are effective at improving health care worker performance. Overall, just over half of the studies reported positive impacts, indicating the need for care in designing and adopting PBIs. 

Per tant, reforç positiu, o reforç negatiu i relacionar-ho amb l'output/resultat o amb objectius agregats. Dins l'article hi ha exemples concrets. I al final suggereixen molta atenció als detalls i als objectius que es pretenen, només la meitat han aportat impactes positius.

KBR Photo Award

Paying providers and adjusting for quality and performance

Payment Methods and Benefit Designs: How They Work and How They Work Together to Improve Health Care

Value-Based Provider Payment Initiatives Combining Global Payments With Explicit Quality Incentives: A Systematic Review

Figure 1. Core components and associated design features of a VBP model combining global base payments with explicit quality incentives.

In the coming years, VBP models stimulating value in a broad sense will likely continue to gain ground, as the quest toward VBHC proceeds. This article demonstrates that VBP models consisting of global base payments combined with explicit quality incentives are operationalized in practice in various ways. In addition, our results show that this particular VBP model has the potential to improve value and contribute to VBHC. Going forward, this article may serve as inspirational material for those interested in developing new or improving on existing VBP models.

Why are we waiting?

Waiting Time Policies in the Health Sector What Works?

One could say quickly, waiting lists exist in NHS because prices are mostly absent and insurance plays a role. In consumer markets, waiting lists appear when there are creators of scarcity as Brandenburger-Nalebuff explained in his book as a specific strategy, or when there is a temporary mismatch between supply and demand. Since the solution in health care is not to introduce prices and forget insurance, we have to ask about the best practices on tackling such issue. The report by OECD says:

Supply-side waiting time policies, by themselves, are usually not successful. In the earlier OECD study on waiting time policies, the most common policy was to provide increased funding to health providers to decrease waiting times, and this type of policy continues to be a common approach. It has almost invariably been unsuccessful in bringing down waiting times over the long term. Generally, there is a short-term burst of funding that initially reduces waiting times, but then waiting times increase, and occasionally return to even higher levels when the temporary funding runs out. The other main supply-side policy is increasing hospital productivity, by introducing new payment methods such as activitybased financing (ABF) using diagnosis-related groups. This increases hospital productivity, but does not necessarily decrease waiting times.

The most promising tool is prioritisation within a waiting list. The cases of Norway and Australia are interesting examples to check. Nearer here we started with research, and finally a decree was prepared to be released. Unfortunately last April we received a phone call saying it was not possible to rule on waiting lists, that somebody would do it for us. At that moment I said that the intervention of health policy started. The answer today to the initial question - why are we waiting- is at least this one: we have made unnecessary political concessions and we should apply our legislation, we don't need the intervention from outside. That's it.

PS. Data on waiting lists at December 2012.

The right rate

International Variations in a Selected Number of Surgical Procedures

If you want to be astonished by the huge variation on the rate of surgical procedures in OECD countries, have a look at this report. It is difficult to find arguments for such a huge differences in health care. The key statement:

The data presented here provide contemporary assessments of the size of the clinical margins of uncertainty for the procedures studied. These may also in part be a consequence of varying legal constraints, methods of payment, availability of cover and patient preferences. They therefore provide basic evidence for research priorities in an increasingly evidence-based medicine paradigm. The only way to make proper judgements on the optimal level for a particular procedure is to have national longitudinal data linking individuals’ treatment (and deliberate withholding of treatment) to outcomes. Such data do not exist in most countries. This is a critical deficiency in health service delivery, which means current policy on which procedures to fund, for whom, is formulated in circumstances based more upon local custom and scientific tradition than empirical effectiveness data.

Meanwhile you can add this report to the folders with the Atlas VPM that you may already know.