iProtean—More on Measuring Quality

We know that many board members view their quality oversight role as elusive—and daunting. It may help to read about the broader context within which policy makers discuss various approaches to measuring quality across the organization.

 

Last week, we featured new criteria for measuring and proving “value.” Today, we focus on policy recommendations to improve quality measurement from Health Affairs Blog. Robert Berenson, author of the blog, notes that “performance measurement—if done right—can be a core activity to move the healthcare system to higher value [emphasis added] for the American public, while rewarding health professionals and healthcare institutions for doing the right thing for their patients.” (R. Berenson, “Seven Policy Recommendations to Improve Quality Measurement,” Health Affairs Blog, May 22, 2013.)

 

Mr. Berenson proposes a series of major policy steps to measure and report quality accurately and meaningfully. The hospital/health system board should be aware of this broader discussion as it assesses its organization’s approach to measuring quality.

 

  • Decisively move from measuring processes to outcomes.

Today, quality measurement focuses on processes rather than outcomes. But process measures are not strong predictors of outcomes “that matter,” notes Mr. Berenson.  In fact, current process measures may divert attention from work process improvements that would actually improve outcomes. Moving from process to outcome is difficult, but necessary. The end results of care, not technical approaches adopted by providers, should dominate providers’ efforts.

 

  • Use quality measures strategically, adopting other quality improvement approaches where measures fall short.

Mr. Berenson takes issue with value-based purchasing/pay-for-performance, noting these measures also may divert providers’ attention from efforts “to make culture and work process improvements that could produce larger improvements in outcomes.” He urges Congress to refocus its directives to CMS to more strategic performance measures that will improve specific quality deficiencies. This involves relying more on promoting collaborative quality improvement activities and new payment approaches rather than public reporting and pay-for-performance.

 

  • Measure quality at the level of the organization, not the clinician.

Measures should focus on team-based care rather than that of the individual clinician. This brings measurement to the organizational level, which is consistent with “population-based accountable care.” Please note, however, that performance measurement for accountable care organizations does rely on individual clinician feedback, according to Stephen Shortell, PhD, MPH, MBA. Dr. Shortell recently said that within an ACO, “performance measurement is critical at the practice level and the individual physician level to know what corrective actions to take.” (“The State of Accountable Care Organizations:  A Conversation with Health Policy and Management Expert Stephen M. Shortell, PhD, MPH, MBA,” AHRQ Health Care Innovations Exchange, May 8, 2013.)

 

  • Use measurement to promote the concept of the rapid-learning healthcare system.

Quality measurement data should not reside in isolation, institution by institution. These data should be shared between and among institutions to produce insights for a broader strategy to improve quality. Working together, institutions may produce insights that none could have produced on their own.

 

Mr. Berenson offers other policy steps—to read the full article, please click here.

 

 

iProtean subscribers, please refer to the iProtean advance course Value-Based Purchasing and Accountable Care Organizations, featuring health experts Nate Kaufman, Dan Grauman and Monte Dube. Also coming soon is the new course Employing Physicians with Nate Kaufman, Dan Grauman and Susan Douglass.

 

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here. www.iprotean.com/index.php/iprotean/demo

iProtean—Pursuit of Value, Part 2

Last week’s blog introduced Moody’s Investors Service Pursuit of Value paper (Lisa Goldstein, Special Comment: Pursuit of Value, May 8, 2013), and focused on the four key components a hospital/system must exhibit to create value:

  • Achieving breakeven performance with Medicare rates
  • Building scale through non-traditional methods
  • Improving patient experience
  • Cultivating informed leadership

 

This week, we continue with the second component inherent in pursuing value:  measuring and proving value, and the six new indicators Moody’s will use to measure quality and demand in a value-based payment structure. Ms. Goldstein notes in her paper that “measuring and proving value will become necessary for healthcare systems to maintain operating stability and distinguish themselves as market leaders.” (Special Comment: Not-for-Profit Hospitals: The Pursuit of Value, Moody’s Investors Service, May 8, 2013)

 

Three of the new indicators measure demand and three measure reimbursement risk.  These new indicators complement Moody’s historical volume-based statistics and “add new ways to measure value.” Additional indicators may be added over time.

 

New indicators measuring demand

Unique patients: this captures the number of individual patients who receive care at the hospital in a 12-month period, irrespective of inpatient or outpatient care. “Unique patients” differs from annual hospital admissions, which count an individual’s multiple stays at a hospital in a 12-month period. Moody’s anticipates that unique patients will be a key measurement of a hospital’s market capture as population health management accelerates.

 

Covered lives: similar to unique patients, this measures the number of individuals or beneficiaries for whom the hospital is responsible, either through an exclusive contract, ACO contract, or through an ACO-like structure through Medicare, Medicaid and commercial payers. “Covered lives” also includes the members and beneficiaries of a hospital-owned health insurance plan.

 

Employed physicians: this is a count of the number of physicians paid by the hospital or associated foundation or clinic through a salary or management fee. It serves as a cursory predictor of referrals. Moody’s includes hospital-based physicians and hospitalists, but excludes faculty practice groups and contracted groups.

 

New indicators measuring reimbursement risk

Medicare readmission rate (%): Medicare readmissions reflect readmissions within 30 days of discharge as a percentage of total Medicare admission excluding readmissions that are part of the plan of care (based on CMS criteria and definition as of reporting date). Note: since last October, CMS has penalized hospitals with high Medicare readmission rates for three clinical diagnoses: congestive heart failure, heart attack and pneumonia.

 

All-payer readmission rate (%): Moody’s expects that commercial payers will follow Medicare, placing a hospital’s entire payer mix at risk. All-payer readmissions are within 30 days of discharge excluding readmissions that are part of the plan of care and include all payers and all clinical diagnoses.

 

Risk-based revenues (%): Moody’s has added a new section in its annual data form that asks hospitals to provide data on the type of reimbursement methodology in its contracts. Along with the traditional forms of payment such as DRGs, per diems and traditional capitation in which hospital receives a per member/per month payment, Moody’s is also including a risk-based revenue category. Risk-based revenues includes most of the emerging reimbursement models such as bundled payment and pay-for-performance, whereby reimbursement is based on the ability of the provider to deliver care at a cost lower than has been agreed with the negotiating partner (e.g., Medicare, commercial insurers, etc.).

 

Ms. Goldstein notes that these new indicators, introduced earlier this year, are “part of our commitment to publish forward-looking, anticipatory research and ratings that look beyond the near term.” Executives and board members should become familiar with and consider reviewing these indicators in advance of a credit rating review.

 

iProtean subscribers, please note the new advanced Mission & Strategy course in your library, Affiliation & Consolidation Strategies, Part Two, featuring health experts Lisa Goldstein, Marian Jennings, Dan Grauman and Monte Dube. The experts discuss how to analyze alignment, regulation implications and the ratings impact of a consolidation.

 

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here.

iProtean—Pursuit of Value

“Healthcare reform is a federal mandate to replace an antiquated and unsustainable reimbursement system with a more rational payment system based on value,” writes Lisa Goldstein from Moody’s Investors Service in a recent Special Comment, Not-for-Profit Hospitals: The Pursuit of Value. Ms. Goldstein, an iProtean expert featured in many foundational and advanced iProtean courses, presents a value perspective—both creating and measuring value.

 

If you have viewed the Finance and Mission & Strategy courses in which Ms. Goldstein appears, you will be familiar with her argument:

  • Providing quality healthcare services at an affordable cost will be integral to a hospital’s financial strength as the sector begins a historic shift to value-based reimbursement after decades of following volume-based incentives.
  • Measuring and proving value will become necessary for healthcare systems to maintain operating stability and distinguish themselves as market leaders.

 

In this week’s blog, we will cover Ms. Goldstein’s comments on creating value. She examines four management objectives hospitals are pursuing during the business model shift:

  • Achieve breakeven performance with Medicare rates
  • Build scale through non-traditional methods
  • Improve patient experience
  • Cultivate informed leadership

 

Achieve breakeven performance with Medicare rates

A pervasive objective across hospital management teams is to reach breakeven performance with Medicare rates (on a total cost basis) by lowering costs. Some hospitals compute what the financial gap is to reaching breakeven performance by assuming every patient (including commercially insured) is paid at Medicare rates. The rationale here is that over time, blended rates from all payers—commercial, exchange-based products, Medicaid, and self-pay patients—will equal Medicare rates.

 

Hospital management teams have adopted various strategies to accomplish breakeven performance with Medicare rates:

  • Lowering costs by improving the flow of patients between clinical areas within the hospital
  • Discharge planning with the patient and family so that medications and post-care treatments are well understood (particularly important because of Medicare penalties for unplanned readmissions)
  • Opening lower-cost units designated exclusively for 23-hour observation patients who consume the same resources as an inpatient admission but for whom reimbursement is usually much less

 

Build scale through non-traditional models

Hospital management teams and boards may struggle with the question of optimal size. There is no standard answer; situations vary with the local market, long-term goals of the organization, and the organization’s focus on quality and financial viability.  In many cases, hospitals try to achieve the benefits of scale by expanding beyond their traditional geographic service area through collaboration/consolidation, merger and/or acquisition. With the structural initiatives under the Affordable Care Act (ACA), many hospitals want to increase the number of “covered lives” and gain greater efficiencies.

 

Ms. Goldstein notes that Moody’s expects full-asset mergers and acquisitions to continue. Hospitals will also pursue scale through non-traditional consolidation strategies, which can diversify revenues while building size and expertise in managing a population. These contemporary consolidation strategies are taking various forms. Moody’s analysis of these new strategies takes a case-by-case approach. Rating implications will depend on the near-term financial and capital investment compared to the long-term impact on hospital performance and debt coverage. (See Ms. Goldstein elaborate on this in iProtean’s latest advanced course, Affiliation & Consolidation Strategies, Part Two).

 

Improve patient experience

Hospitals are using a variety of strategies to improve the patient experience. Examples include:

  • Care navigators to accompany a patient through the course of his/her hospital treatments
  • Team-based care models to determine a patient’s treatment plan
  • Social media applications to increase brand awareness and promote convenience, particularly with respect to emergency room waiting times
  • A Chief of Patient Experience in the C-suite to oversee these strategies
  • Increased focus on information technology to coordinate care and improve the patient experience

 

Cultivate informed leadership

Ms. Goldstein, a long-time advocate of the importance of well-informed boards, notes that “it is undeniably clear that effective management and governance is paramount to creating high value healthcare systems.”

 

The ACA is driving providers to re-examine their business model with an accelerated urgency. Its new payment models will test management and governance in a profound way. The most successful hospitals will be able to quickly and effectively make changes mid course and re-adjust longer-term plans to respond to the rapidly changing dynamics in the industry.

 

Because of the process changes that may be required, many hospitals are adding executives and board members with atypical skills and backgrounds, including individuals with engineering and manufacturing backgrounds. Hospitals are recruiting managers with corporate backgrounds who bring consolidation expertise. Additionally, they are adding management and board members who come from industries with a heavy reliance on technology, particularly relevant given the large IT investment most hospitals are making.

(Special Comment: Not-for-Profit Hospitals: The Pursuit of Value, Moody’s Investors Service, May 8, 2013)

 

Next week the blog will continue Ms. Goldstein’s assessment of the pursuit of value by focusing on her second point, measuring value, and Moody’s new Indicators: measurements of demand and measurements of reimbursement risk.

 

iProtean subscribers, please note the new advanced Mission & Strategy course in your library, Affiliation & Consolidation Strategies, Part Two, featuring health experts Lisa Goldstein, Marian Jennings, Dan Grauman and Monte Dube. The experts discuss how to analyze alignment, regulation implications and the ratings impact of a consolidation.

 

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here.

 

iProtean—Community Health Needs Assessments Proposed Regulations Released in April

(Note: for an update to last week’s blog, Health Spending and the Economy, please check our Facebook page.)

 

The Internal Revenue Service (IRS) officially issued proposed regulations in early April addressing the requirement under Section 501(r)(3) of the Internal Revenue Code that tax-exempt hospitals conduct community health needs assessments. The proposed regulations also provide details on related reporting obligations and the consequences of noncompliance with community health needs assessments and other requirements of Section 501(r).

 

Although compliance still may be a challenge and penalties for noncompliance remain significant, tax-exempt hospital leaders and boards should be encouraged because the proposed regulations specify that a hospital will not automatically lose its exempt status or the exempt status of any bonds for minor and inadvertent errors made in complying with Section 501(r) requirements. (Mayer, “An Overview of Proposed Rule on Community Health Needs Assessments,” Health Lawyers Weekly, May 03, 2013 Vol. XI Issue 17)

 

The Affordable Care Act (ACA) added Section 501(r) to the IRS Code specifying additional requirements tax-exempt hospitals have to meet. Elizabeth Mills, Esq. (Proskauer) reviewed the ACA’s new community benefit requirements in iProtean’s foundational course Community Benefit and Tax-Exempt Status.  She noted that these additional requirements do not replace the community benefit standard; they supplement it.

 

Background

Section 501(r),for the first time, imposed certain requirements that hospitals had to meet to qualify for exemption under Section 501(c)(3). Section 501(r) generally requires a tax-exempt hospital to:

  • Conduct a community health needs assessment at least once every three years for tax years beginning after March 23, 2012
  • Establish written financial assistance and emergency medical care policies
  • Limit charges for emergency and other medically necessary care provided to individuals who qualify for financial assistance
  • Not employ extraordinary collection actions until the hospital has made reasonable efforts to determine whether an individual qualifies for financial assistance

 

The ACA also added a section that requires a tax-exempt hospital to report on its IRS Form 990 a description of how it is addressing the needs identified in the community health needs assessment, a description of any such needs that are not being addressed, and the reasons such needs are not being addressed. Another section imposes a $50,000 excise tax for any tax year in which a tax-exempt hospital fails to meet the community health needs assessment requirement of Section 501(r). (Mayer, “An Overview of Proposed Rule on Community Health Needs Assessments,” Health Lawyers Weekly, May 03, 2013 Vol. XI Issue 17)

 

The Proposed Regulations

According to the proposed regulations, if a hospital fails to report required information in a policy or report, or makes errors with respect to implementation or operational requirements, it will not be considered a failure to comply when:

  • the omission or error is minor, inadvertent, and due to reasonable cause
  • such omission or error is corrected within a reasonable amount of time after discovery

 

If a hospital fails to meet one or more requirements of Section 501(r) but continues to be exempt under 501(c)(3), the noncompliance itself will not cause the interest of bonds issued to the hospital to be taxable.

 

However, because the IRS has the authority to revoke a hospital’s tax-exempt status if the hospital fails to comply with one or more requirements of Section 501(r), if non-compliance becomes apparent, it will conduct a review of the relevant facts and circumstances surrounding that non-compliance. The review will include:

  • The size, scope, nature, and significance of the failure
  • Reasons for such failure
  • Whether the failure is a repeat offense
  • Whether the failure was corrected promptly
  • Whether the hospital adjusted its procedures to avoid the failure in the future
  • Whether the hospital took corrective action before being caught by the IRS

 

The proposed regulations also modify and clarify the IRS’s earlier guidance on implementing the community health needs assessment requirements.

 

To date, the proposed regulations have been received favorably because they provide hospitals with some flexibility and discretion when conducting community health needs assessments.  Public comments must be received by July 5, 2013.  The final regulations for all of Section 501(r) are expected to be issued later this year. (Mayer, “An Overview of Proposed Rule on Community Health Needs Assessments,” Health Lawyers Weekly, May 03, 2013 Vol. XI Issue 17)

 

iProtean subscribers, please note the new advanced Mission & Strategy course in your library, Affiliation & Consolidation Strategies, Part Two, featuring health experts Marian Jennings, Dan Grauman, Lisa Goldstein and Monte Dube. The experts discuss how to analyze alignment, regulation implications and the ratings impact of a consolidation.

 

 

For a complete list of iProtean courses, click here.

 

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Barry Bader (Bader & Associates), Ed Kazemek (ACCORD LIMITED).  For more information, click here.

 

For more information about iProtean, click here.