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It used to be so simple.


A patient arrived at the office, the clinicians analyzed their problem, performed a service, and sent a bill. Next.


Even though I am wildly overstating the simplicity of fee for service (the method described above), at a very basic level it is pretty straightforward. The complexities primarily originate from the fact that we have over 1,000 health insurance companies each with slight variations (a single payer system would be a lot easier).


Even though fee for service (FFS) hardly seems simple, the future may be significantly more complex. We all know the reason: under the current system, which is dominated by FFS, the nation is approaching spending 20 percent of GDP on healthcare, an unsustainable level for individuals, companies and the country (on personal note, my premiums have doubled in the last five years—ouch.)


The one thread throughout all payment reforms schemes is an increased burden on providers and their organizations to deliver higher quality and lower cost care. This will require a significant transition in delivery models—the way medical work is done. More on that later. 


Here are some of the new payment modes on the near horizon.


Bundled Payments: instead of receiving a fee for each specific service, a bundled payment defines a flat fee that will be paid for a particular episode of care. Let’s say a patient is diagnosed with congestive heart failure or needs a new knee, under bundled payments a fee would be calculated for the diagnosis and then divvied out to the various providers that care for the patient. To prevent underutilization of services, quality measures are attached to payment. To prevent over-utilization, the fee is fixed and may specifically define what is allowed for a patient with a particular episode—anything above that will not be paid. It encourages coordination because all providers are on the hook for achieving desired outcomes. Although the details of this approach are daunting for any organization that has not fully integrated hospital, primary care, and specialty services, it does get the incentives right. If providers are getting a fixed fee and are judged on outcomes, the incentive is for efficient, high quality care. The devil is in the details which will mean some pretty sophisticated IT to operationalize it.


Modified Capitation: under a capitated plan providers receive a flat monthly fee for every member that is assigned to them. Version 1.0 of capitation got a black eye because of the overzealousness of some plans in restricting care as a means of controlling costs. In the new iteration of capitation, quality performance measures have been added so that plans and providers are incentivized to keep care standards high as well as keeping costs low. Patients are risk-adjusted (with an associated modification of fees), so that providers are not punished for having an unhealthy panel. I love the basic simplicity of capitation (like all of these systems, the under the hood details are brutal) and it can be lucrative for practices that perfect the model. Since providers are taking risk, they have strong incentives to keep people healthy. It does favor integrated delivery systems or medical homes that are actively coordinating care across settings. The challenges: collecting and managing to quality metrics and dealing with difficult, non-compliant, chronically ill patients. 


Hybrid Models: Some schemes will blend fee for service plus either rewards, penalties or supplemental fees to drive the right behavior. Example: providers that transition to a patient centered medical home (PCHM) may be eligible for monthly per member care coordination fee. This is a great idea since a huge hunk of medical costs are driven by individuals with chronic illnesses bouncing through the health care system. A fundamental principle of medical homes is help the chronically ill navigate this maze more effectively and with better outcomes. Physicians on FFS that are part of larger group or ACO (accountable care organization) may be able to participate in gain sharing in which bonuses are provided based on the ability of the group to achieve annual cost savings while meeting specified quality metrics.


Whatever ends up sticking, provider organizations will have to adopt their operations to fit the payment model. ACOs and the Patient Centered Medical Home (for primary care) are the two most prominent examples of modified delivery systems built to fit the new payment models.


Where are we now in payment reform? Still very early in the transition. Advocacy group Catalyst for Payment Reform recently reported that only about 11 percent of medical payments are outcome or value based. Report is here.


Since we are now in period of experimentation with new payment models, it is premature to predict what methodology will prevail; over the next five years there will be detailed analyses of pilot projects using these systems to see what works and what doesn’t. One thing is certain: the existing system will not stay the same.


What do you see coming down the road for healthcare payment reform?


Bruce Kleaveland is President of Kleaveland Consulting and a sponsored health IT correspondent for Intel

There are really two aspects of sharing of patient information—directly with patients and between providers. We are going take a look at both in the next couple of blogs, but let’s start with providers.


Provider-to-provider sharing is by far the more crucial dilemma to be solved. Nothing against the average patient, but the overwhelming majority are ill-prepared to fully consume and act on detailed and often confusing medical information (although the concept of shared decision making may help—but more on that in another blog).


Providers are pretty experienced at sharing with each other. Every time a referral is sent from primary care doc to specialist there is some degree of information exchange. And the technology that they use—phone and fax—are pretty good. User friendly, reliable, ubiquitous—a hard combination to beat.


So what’s the problem? While fax and phone are Steady Eddies, there is plenty of room for improvement. Phones are wonderful for nuanced conversations, but very inefficient for quick logistical tasks. Faxes are reliable but can only be stored within an electronic medical record as an image as opposed to discreet data. Both phone and fax are foundational elements of the old world, not the new world. You can’t do big data with fax machines.


We’ve making progress. Prodded by Meaningful Use incentives and new EHRs, healthcare providers large and small doing a much better job of electronically communicating within their own organizations. But electronic exchange dramatically breaks down when providers attempt to communicate with providers across the street. The problem is that the infrastructure for conversations between organizations is woefully incomplete.


Part of the challenge is a HIPAA security artifact—providers don’t have the freedom to send a traditional email and with an attachment of the last progress note.


Also, communication systems don’t work unless the overwhelming majority of providers have them. That’s why telephone and fax have been so successful and persistent; they are easy to use, everyone has one, and they are cheap. This is tough competition. 


The current nascent efforts are a mixed bag; secure email is cumbersome, poorly integrated with EHRs, a pain in the neck to use, and has spotty penetration. The Continuity of Care document (CCD) provides a reasonable standard for electronic patient summaries that can travel back and forth between EHRs.


However, before I can send a CCD from my EHR to your EHR, a CCD integration needs to be built between our two systems. There appears to be no universal CCD integration. Each EHR to EHR CCD interface is built one at a time. With 200+ EHRs out there, that’s a ton of integration work—hardly the recipe for universal and seamless sharing.


Health information exchanges (HIE) offer the most promise. Conceptually, they are right on; a secure, digital infrastructure, broadly designed for information exchange among trusted parties all seeking to manage patient care. HIEs are not perfect. Business models are problematic (public exchanges will probably flop when the government money runs out and the privates exchanges will have to morph to be more inclusive). HIEs also have room for improvement on the work flow side (i.e. referral management tools), so that average provider can perform specialized information sharing tasks quickly and easily.


Despite these issues, some form of HIEs will be the information highway for health care, allowing much improved provider communication and care coordination. But just like the real interstate highway system, it will take a lot of money and time to build. Don’t throw away that fax machine just yet.


What do you think?  


Bruce Kleaveland is President of Kleaveland Consulting and a sponsored health IT correspondent for Intel

One of the ways that hospitals and health systems are attempting to woo independent doctors into their camp is by offering sweet deals on electronic health records (EHRs).


Here’s how it works: the hospital has negotiated a package price from an ambulatory EHR, typically as a hosted or cloud based model (which means that you will be accessing it via the internet as opposed to installation on a local server). They have deployed it among their employed physicians and theoretically have the kinks work out.


To increase “alignment” with independent physicians, they begin offering the EHR often at attractive prices (usually on a per provider per month charge). Should you bite?  


Maybe. Besides a good price, a hospital sponsored EHR typically offers a nice local service package consisting of hospital staff available both via phone and on-site. Additionally, these EHRs often include an integration package of hospital interfaces to labs, HIEs, or ADT systems. If the lion’s share of your lab business and inpatient admissions are directed to the hospital sponsor of the EHR, subsidized integration is a real advantage from a cost, convenience and support perspective. Additionally, hospital-sponsored EHRs may offer advanced analytics in terms of quality and outcome reporting that will increasingly become a part of medicine as we transition from fee-for-service to accountable care. Hospital sponsored EHRs allow you to outsource a complex task to a competent third party.


What’s the downside? The primary disadvantage is that you are giving up a good deal of your freedom and independence on a mission-critical portion of your business. Example 1: While a hospital sponsored system will offer some flexibility in configuration, you are likely to be bound by certain conventions and standards established by the hospital. It is also likely that meaningful changes will either be impossible or time consuming, since they have to be considered in the context of the system as a whole. Example 2: What if your relationship with the hospital sours? Certainly the value of hospital interfaces diminish if you are no longer doing much business with the hospital. Getting hospital staff to craft new interfaces to competing labs or hospitals may be both problematic and expensive. Switching EHRs is never easy; a troubled relationship with the hospital is not going to help.


Finally, while hospitals are increasingly getting in business of supporting ambulatory practices—for many it is a new thing. There is no guarantee that hospital service will be great.


How do you decide? Independent of any of the details of the offer, the decision primarily rests on the type of relationship you wish to have with the hospital/system. If you see your future inextricably entwined with the hospital (including the possibility of a buy-out), then purchasing an EHR from them is worth pursuing.


If on the other hand, maintaining the independence your group is paramount and you have the wherewithal to assume the burden and responsibility of independence, then buying an EHR from a hospital is probably not a good idea.


What questions do you have?

One of the great strengths of our healthcare system is its specialization.


It is also one of its great weaknesses.


Here’s why: since there is such a proliferation of ‘-ists” (neurologists, cardiologists, pulmonologists) a primary care doc (particularly in urban settings) feel obligated to send the patient to the local specialist every time he encounters an issue beyond the scope of his expertise or practice.


Traditionally, the PCP (primary care provider) writes a referral, hands it to the patient on a piece a paper and….moves on to the next patient. In many instances, there is no tracking of whether the patient completed the referral and what happened if the patient did go.


Why is this a problem? Well, in the old model of visit based medicine—it really wasn’t a problem. The system was (and still is) based on individual encounters between various providers. Since the primary care provider (the main source of referrals) has no specific financial incentive to coordinate with others (other than professional courtesy), American healthcare does not have a well developed model for tracking the transition of patients from provider to provider (the buzzword for this process is called care coordination).


However, in the new world of accountability--as exemplified by accountable care organizations (ACO) and patient centered medical homes (PCMH), primary care practices are supposed to know if you showed up for the cardiology referral and what happened when you went there.


In this new model, patients will have a “home” (a primary care practice) that is responsible for helping patients navigate the system if they are referred out and working with patients and specialists to make sure that referral appointments are kept (or at least understand why they are being neglected). Moreover, the primary care practice will be expected to consolidate the reports from consultants so that they have global view of their patients.


The clinical and financial reasons for this are sound; patients that neglect completing their referrals may be compromising their health. Compromised health can lead to expensive interventions (like emergency ED visits or inpatient admissions) that might be avoided with better coordinated care. 


This new and long overdue focus on care coordination exposes one of the fundamental weaknesses of our system; we do not have a good way of electronically communicating information between practices. Yes, there is secure email, but it is not universally distributed and used and has no real work flow component. The Continuity of Care (CCD) is great start for creating a standard for distributing clinical summaries, but will not be enough for managing the subtleties of care coordination.


There seems to be the misguided notion that somehow the EHR will fill this void, but that is pipe dream; at its heart an EHR is internal documentation tool—not a means for communicating between practices. Some wags think the HIE (health information exchange) will provide the infrastructure. I wouldn’t bet on it—an HIE is too complex and expensive and was not intended as a workflow tool.


In the absence of software based communication methods, practices use people, fax, and telephone. This is going to change—and the cloud is going to be enabling technology. The cloud allows the development of light, subscription based, work-flow enabled applications that can be rapidly and inexpensively deployed. It is no longer necessary to build a behemoth IT infrastructure in order to get things done. We already have an infrastructure; it’s called the internet.


Insightful companies are starting to pickup on this. Clarity Health Services in Seattle is offering a web-based care coordination platform that is starting to create some noise. Athena Health recently acquired a cloud based care coordination company (Proxsys) to complement its EHR and billing service offerings. There will be more.


What questions do you have?


Bruce Kleaveland is President of Kleaveland Consulting and a sponsored health IT correspondent for Intel.

At a certain point in the lifecycle in any business, the predominant business model gets exhausted.


Medicine is a case in point. The dominant U.S. business model—visit based, fee-for-service—is slowly buckling under the crushing cost burden it is imposing our society.


Although it will take awhile to transform this $2 trillion bloated behemoth into a system that offers better care at a lower cost, there are flurry of movements under way that are both interesting and promising. One of the most interesting and most promising is the patient centered medical home (PCMH).


What is it? It is a primary care practice that puts together a mix of people, process, and technology so that patients get better care and better customer service.  It also intended to help increasingly burnt-out providers step off the 30 visit a day rat-race and reconnect them to a more satisfying and less frantic patient care model.


At the people level, the PCMH emphasizes teams of care providers vs. strict reliance on the physician for all clinical and patient decision making. The teams consist of doctors, PAs, nurses, medical assistants—and even administrative staff. This does not mean that the receptionist is making diagnoses, but rather provides the basis for a more coordinated effort to meet patient needs both before and after the visit. A simple example: a patient is referred to a cardiologist. Did they go? Has the practice received the documentation of the visit? Physicians are not going to track this, but a team member certainly can.


At the process level, the PCMH require practices to think about their practices not as a visit factory organized around the availability of overworked providers, but as a patient-centric service center, where it is easy for patients to make last minute appointments and communicate with the care team as question arise.


A PCMH also brings an element of practice accountability to patient care: Am I managing my diabetics effectively?  Are my cardiac patients adhering to the recommended meds? This is a distinct switch from the predominant model of reactive medicine to a proactive approach. This can have a big payoff for the management of chronically ill patients that consume much of our health care dollars.


It is impossible to implement these people and process changes without technology. The technology centerpiece of the medical home is the electronic health record (EHR), which provides not only a repository for patient information, but can also trigger preventative reminders based on the patient’s condition, plus practical tools such as e-prescribing. The EHRs make the patient record universally available to anyone with access to a workstation—a critical requirement for team based care.


While EHRs are very well suited to individual record keeping, they may not be as well suited at looking at populations of patients (i.e. How many of my diabetic patients are well controlled for HgA1c?). To help answer these questions some PCMHs may use a disease registry (more technology) to track patients.  Finally, since patient engagement and easy access to providers is a core element of the patient centered medical home, many are adopting patient portals and secure messaging to provide an alternative to traditional phone and fax communication.


Does the PCMH work? At least one study suggests that they do. Research done by Seattle-based Group Health’s medical home pilot (published in Health Affairs in May of 2012) indicated that medical home patients (when compared to patients in traditional Group Health practices) had 29 percent fewer ER visits and 6 percent fewer hospitalizations, with a net savings of about $10 per patient per month. The data also suggest improved patient satisfaction and happier providers.


The downside: setting up a PCMH is hard work and expensive (team based care means more practice FTEs per patient). However, the PCMH model that is not going away and is fully aligned with the necessary shift from quantity to quality in American medicine. It is the right approach.


What questions do you have?


Bruce Kleaveland is President of Kleaveland Consulting and a sponsored health IT correspondent for Intel