The PROMETHEUS Bundled Payment Experiment: Slow Start Shows Problems In Implementing New Payment Models

By Peter S. Hussey, M. Susan Ridgely and Meredith B. Rosenthal
Health Affairs, November 2011

As mandated by the Affordable Care Act of 2010, the Centers for Medicare and Medicaid Services recently announced a national Medicare bundled payment initiative. There is strong support for bundled payment on conceptual grounds. However, there is only limited empirical evidence to support the use of bundled payment, and concerns have been raised about the feasibility of its implementation.

This paper presents findings from an evaluation of the initial “road test” of PROMETHEUS Payment. PROMETHEUS (an acronym for Provider Payment Reform for Outcomes, Margins, Evidence, Transparency, Hassle Reduction, Excellence, Understandability, and Sustainability) is a bundled payment model managed and implemented by the Health Care Incentives Improvement Institute, a nonprofit organization.

After three years of implementing systems and processes to support a bundled payment model, pilot participants have yet to make bundled payments or execute new payment contracts.

PROMETHEUS was designed to pay for all of the care required to treat a defined clinical episode, particularly those services recommended by clinical guidelines or experts. The multiple services that are anticipated to be required under a particular episode of care are referred to as “bundles.”

PROMETHEUS has defined twenty-one bundles that include chronic medical conditions such as diabetes, acute medical conditions such as acute myocardial infarction, and procedures such as hip replacement.

Our data collection occurred over the years 2009–11.

Progress of the pilots

As of May 2011, none of the pilot sites had achieved the goal of using PROMETHEUS as a payment method or had executed bundled payment contracts between payers and providers. The participants expressed disappointment at the slow progress, which for some lagged months or years behind their planned milestones.

Bundled payment is complex and must build on existing complex health care systems. As implemented, PROMETHEUS builds on fee-for-service claims infrastructure and thus adds to the complexity of existing payment systems. Services that are part of a clinical episode, and thus subject to bundled payment, are identified using the information about the patient’s diagnoses and services that providers report on fee-for-service insurance claims. The same information is also used to classify each service as either typical care or a potentially avoidable complication.

The decision rules that determine whether specific services are part of a bundle and, if so, whether they constitute typical care or potentially avoidable complications are complex and depend on the quality of the information that providers include on claims, which are not designed with the needs of a bundled payment system in mind.

Identifying bundles during claims processing is important not only so that payments can be processed appropriately by insurers, but also so that providers can rapidly receive information on their patients who had initiated clinical episodes subject to bundled payment. No site succeeded in modifying its claims processing methods to identify bundled services using the PROMETHEUS Engine or an alternative.

Executing contracts is difficult because of the number and complexity of considerations involved, including the market power – or lack thereof – of individual payers and providers in their own health care markets.

Shared savings has turned out to be more difficult to implement than expected. Interviewees at two sites reported that neither payers nor providers were eager to set aside funds from which to make the bonus payments. In addition, some payers did not accept the idea that they should share any savings.

All three sites are using electronic health records as a crucial component of their strategies for care redesign. However, the sites have found that their record systems lack key capabilities that would enable more effective care redesign.

Providers in all three sites have begun planning and implementing care delivery before payment methods actually change. However, they recognize that without new payment incentives in place, these efforts will be limited because they may decrease provider revenues.

We found that the PROMETHEUS road test encountered major challenges, and none of the pilot sites had made bundled payments as of May 2011. The pilot has taken longer than expected to implement primarily because of the complexity of the model and the fact that it builds on existing complex health care systems. Despite efforts by the institute and the pilot sites, some of the most prominent issues that have been raised with respect to bundled payment remained obstacles to implementation.

The debate we observed about how payers and providers should share risk around episodes of care mirrors the current debate about the final form of accountable care organization risk-sharing regulations.

http://content.healthaffairs.org/content/30/11/2116.abstract

The PROMETHEUS Bundled Payment Experiment held the promise of improving the quality of care while controlling costs simply by bundling together services of multiple health care providers into a single package covering a specific acute or chronic disorder. After three years of implementation, the payers and providers have not been able to make bundled payments or execute new payment contracts. The experiment is an abject failure.

The authors of this report suggest that the experiment has been of value because the participants have learned lessons, and they understand the complex obstacles to implementation, even if they were unable to surmount them. They conclude, “Payment and delivery reform models may yet yield desired improvements in health care quality and spending, but notable gains may not come quickly or easily.”

It is so clear that the health reform efforts to date have been a fiasco, and yet what do we do? We diddle around playing the PROMETHEUS board game, trying to get past “Go” so we can collect $200, but without going to jail (though perhaps some players should).

It is long past time to get serious about reform. We have more than enough money to finance a premier health care delivery system for everyone. We simply need to start spending our health care dollars more wisely, by enacting a financing system that places patients first – a single payer national health program (Improved Medicare for All).

Balancing Coverage Affordability and Continuity under a Basic Health Program Option

By John A. Graves, Ph.D., Rick Curtis, M.P.P., and Jonathan Gruber, Ph.D.
The New England Journal of Medicine, November 30, 2011

According to the Congressional Budget Office, the Affordable Care Act (ACA) will bring health insurance coverage to an estimated 32 million currently uninsured people. It does so through various mechanisms, including an expansion of Medicaid to Americans with incomes up to 138% of the federal poverty level (133% plus a 5% “income disregard”), premium and cost-sharing subsidies for coverage purchased through a new insurance exchange, small-employer tax credits, and an individual mandate to obtain health insurance.

The ACA’s incremental approach to near-universal coverage has raised concerns that changes in income, employment, and family composition will shift people into and out of different coverage arrangements over time – a phenomenon referred to as “churning.” Avoiding disruptions in coverage is an important goal because it can reduce unnecessary administrative costs and improve health plans’ incentives to invest in achieving longer-term health outcomes. Continuity of coverage can also help maintain clinician–patient relationships, especially in places where there are substantial differences between the clinicians participating in Medicaid and those participating only in private plans.

To address concerns about churning, some states are considering adopting a Basic Health Program (BHP) – an ACA-created option modeled after Washington State’s Basic Health Plan. Under this option, a state would receive an annual lump-sum payment equal to 95% of the projected cost of the subsidies for coverage through an insurance exchange for households with incomes between 139 and 200% of the federal poverty level. The state would then assume responsibility for financing a BHP for adults in that income range that met or exceeded the generosity and scope of benefits available in the exchange. A number of states are considering this option, including California, where BHP legislation has already passed the senate and final consideration is planned for 2012.

The eligibility range for a BHP is narrow – and there’s no guarantee that there will be continuity of access for people moving from Medicaid to a BHP, or vice versa. A BHP could theoretically extend access to the same plans and providers as Medicaid does, but in practice, states may find that providers willing to accept reimbursement that is often below their costs for their most indigent patients will be unable or unwilling to do so for an additional population. Moreover, introducing a BHP may create a new point of disruption: although patients might retain their coverage when moving above or below 138% of the poverty level ($30,843 for a family of four in 2011), they would be more likely to have coverage disruptions when moving above or below 200% of the poverty level ($44,700 for a family of four). Such disruptions could occur if the mainstream plans and providers used by people with incomes above 200% of the poverty level do not participate in the BHP. Finally, introducing a BHP would reduce the subsidized population in the insurance exchange by about half, which could compromise its efficiency and market role and reduce the proportion of uninsured people who gain access to mainstream coverage.

To investigate BHPs’ potential for reducing churning between Medicaid and an exchange by acting as a bridge between them, we used data from a dynamic income microsimulation model of the ACA. Since we follow an initially eligible cohort over a 2-year period, we can more easily model relative changes in churning in varied policy environments.

For our analysis, we used a national sample of adults 18 to 61 years of age who were initially uninsured or enrolled in nongroup coverage and who were eligible for subsidized coverage (had an income below 400% of the poverty level). We then simulated eligibility for Medicaid, a BHP, and an exchange in three policy environments: the baseline ACA structure, under which people with incomes up to 138% of the poverty level are eligible for Medicaid and those with higher incomes are eligible for the exchange; an integrated BHP, under which Medicaid and the BHP are run as a single program, with identical plans and providers; and three separate programs, with Medicaid, the BHP, and the exchange all operating independently, with different reimbursement rates, cost-sharing structures, and provider networks. Both Washington State’s original BHP and California’s pending BHP legislation would fit in the third category.

Our main findings are summarized in the Kaplan–Meier curves (see graph, available at link below), which show the overall proportion of subsidized adults who would remain continuously eligible for their initial program over a 24-month period.

As the graph shows, operating separate BHP, Medicaid, and exchange programs substantially increases churning. Under that policy, just 44% of adults remain eligible for their initial program after 1 year and less than one third remain so after 2 years; under the baseline ACA structure, the proportions are 63% and 49%, respectively. Given the dynamic nature of the wages and incomes of adults with moderate incomes, this finding is not entirely surprising: a separate BHP coverage category based on a narrow income range increases the likelihood of eligibility shifts between programs.

Perhaps more striking, however, is our finding that a BHP operating within Medicaid would result in slightly more eligibility losses than would the baseline ACA structure. Although we find that a BHP would reduce churning (i.e., increase retention) at the 138%-of-poverty threshold, there would be a more-than-offsetting increase in churning between the exchange and the Medicaid–BHP at 200% of the poverty level. The net result would be slightly more overall churning than with the baseline ACA structure. Moreover, these program-eligibility shifts would now happen around a “notch” created at 200% of the poverty level, where there are much larger implications for enrollees, in terms of premiums and cost sharing, of moving from Medicaid–BHP to private coverage. For example, a family moving from a Medicaid-like BHP program to the exchange tax-credit structure at 200% of the poverty level could suddenly see the value of its benefits fall by as much as 25% (depending on state decisions about patient cost sharing under the BHP). The ACA’s sliding-scale subsidies were designed to avoid such notches, which create major inequities between people with marginally different incomes and penalize them for additional work and earnings.

Ensuring access to stable and affordable coverage is an important ACA goal. Whether by design or through attrition of willing plans and providers, however, operating a BHP with provider networks different from those of both Medicaid and the exchange could further stratify the low-income and moderate-income population into three separate classes of coverage. As our modeling shows, such stratification would exacerbate the concerns about churning that BHPs were designed to address. Moreover, even a BHP integrated with Medicaid would slightly increase churning overall, with the increased churning around the 200%-of-poverty point more than offsetting the reduced churning around the 138%-of-poverty point. Although various policy considerations should enter into decisions about adopting a BHP, the need to achieve coverage and provider stability is an argument against doing so.

http://www.nejm.org/doi/full/10.1056/NEJMp1111863

Section 1331 of the Patient Protection and Affordable Care Act (ACA) authorizes states to establish “basic health programs” to cover individuals with incomes between 133% and 200% of the federal poverty level, who are not otherwise eligible for Medicaid. The primary thrust of ACA is to cover many of the currently uninsured by expanding Medicaid and by establishing new state health exchanges offering private health plans. This NEJM article evaluates whether adding a third option – a basic health program – would improve stability and continuity of coverage for this low-income sector.

This is an important question since setting up an additional program adds considerable administrative costs and complexity to our health care financing system. The brief answer is “no.” After two years with three separate programs, less than one-third would still be in the programs in which they were originally enrolled.

Suppose the states decided against establishing basic health programs, what would happen under the baseline ACA structure with just Medicaid and the private exchange plans? Half of individuals would no longer be in their initial programs. This is only over a period of two years. Because of continual fluctuations in eligibility (changing income levels, etc.), stability over a decade or two would be virtually nonexistent.

This instability can be quite disruptive. Between Medicaid, basic health programs, and private exchange plans, there may be little or no overlap in provider networks. A change in coverage could also have a major impact on out-of-pocket expenses required of the insured individuals.

One intent of the basic health programs would be to save the government money by paying providers at levels close to those of Medicaid. Many physicians already reject Medicaid because of these low rates. Adding many more new patients to the Medicaid program, plus introducing an entirely new, under-funded, basic health program, would surely cause providers to flee both Medicaid and the basic health programs. The patients might have a basic health ticket, but nowhere to use it.

The entire ACA infrastructure is irreparably fragmented and dysfunctional. It needs to be replaced with… yes, an improved Medicare for all.

By Gary Claxton and Larry Levitt
Kaiser Family Foundation, November 15, 2011

Various market watchers have reported that the use of health care services has not been growing recently as it had in the past, resulting in lower than expected health care claims for people with private insurance and higher than expected earnings for insurers. A look at physician office visits by nonelderly patients with private insurance over the past decade illustrates the change in the use of services.

Although the total number of visits jumps around somewhat from quarter to quarter, the analysis shows generally that the quarterly number of office visits by privately insured patients increased from about 140 million visits per quarter at the beginning of the decade to 160 million visits early in 2005. The number of non-elderly people with private insurance changed hardly at all over that period, increasing by about 1% according to our analysis of the National Health Interview survey. So, the increase was driven by people with private insurance going to the doctor more often.

From 2005 through 2008, the trend in physician visits was largely flat as the number of people with private insurance dropped slightly (about 1.7%).

Then, as the economic downturn deepened, the number of physician visits among the privately insured started a downward trend, which has continued even as the recession technically ended in June of 2009. The number of visits fell to a low of 129 million in the 2nd quarter of 2011, a decline of 17% from 156 million visits in the 2nd quarter of 2009. The number of people with private insurance declined over this period as well as many people lost their jobs and their insurance along with them. But, the decline in the number of people with private insurance is much smaller than the decline in visits – about 2% between 2009 and 2010.

Even people who are insured are going to the doctor less. Likely, consumers are reacting to the severe economic downturn and significant job-loss which has defined the economy over the last several years by cutting back on health spending. Higher deductibles, copays and coinsurance increase the cost of care, and their impact may be magnified in these tough economic times. The Kaiser/HRET Annual Survey of Employer Health Benefits finds that the share of workers covered on the job by plans with a deductible of at least $1,000 grew from 18% in 2008 to 31% this year. In some cases people may be foregoing unnecessary care, meaning that health costs are reduced with little or no effect on health. In other cases people are likely cutting back on necessary care, potentially endangering patients’ longer term health and leading to higher costs over time.

http://healthreform.kff.org/notes-on-health-insurance-and-reform/2011/november/the-economy-and-medical-care.aspx

KFF – Increase in employer-sponsored high-deductible plans:
http://ehbs.kff.org/?page=charts&id=2&sn=22&ch=2257

Comment: 

By Don McCanne, MD

In the past two years, office visits by privately insured patients under age 65 decreased by 17 percent. Although the insurers attribute this lower utilization to the economic downturn, it does correlate very closely to the increase in enrollment in employer-sponsored high-deductible plans.

Although it is difficult to predict future trends, it is very likely that the diminished utilization will persist since other studies have confirmed that high out-of-pocket expenses deter access to health care. It is also clear that many of the forgone services are beneficial.

Every reasonable person in the policy community agrees that patients should have access to beneficial services, but some believe that financial disincentives to care are important because they will encourage patients to forgo unnecessary services. The problem with this reasoning is that a person with symptoms cannot know without a consultation whether or not the visit is unnecessary. Even if it turns out that no intervention is required other than reassurance, even reassurance itself provides an important medical outcome in the form of reduced anxiety.

The consumer-directed advocates are winning the battle. The increase in high-deductible plans has placed financial barriers between patients and the care that they should be receiving. By making patients more sensitive to the costs of office visits, they are using fewer. But is this wise?

Studies such as the RAND Health Insurance Experiment suggest that there is not much harm done. But those studies do not measure certain endpoints such as symptom relief or simple reassurance. They also do not measure longer term consequences such as complications from inadequate management of chronic disorders – diabetes, hypertension, consequential hyperlipidemia, and many others. They do not measure the benefits of preventive screening in this under 65 population, which may prevent or ameliorate disorders that might occur only decades later.

Most of these office visits are for primary care services and constitute only a very small percentage of our national health expenditures. Reducing office visits by 17 percent does not save much overall because 17 percent of a small number is a very small number. Since primary care is essential in improving value in health care, we should be adopting policies that encourage primary care access, not discourage it as these high out-of-pocket costs do.