Austin Frakt, "Changing How We Pay for Care" webinar, 3.19.15

Why quality?

Austin Frakt, PhD

TheIncidentalEconomist.comA focus on research, an eye on reform.

School of MedicineSchool of Public Health

Views expressed are my own and do not necessarily reflect the position or policy of the Department of Veterans Affairs or Boston University.

Why measure/pay for quality?

• If it’s so simple, why is it a (relatively) new idea?• Medicare has cut payments to providers before• Bad things can happen• When hospitals are paid less, they cut something.

Is it the right thing?

For more, see Frakt, NYT, 5 Jan 2015.

Medicare is cutting again

For more, see CMS, 13 May 2011.

Can hospitals keep up?

For more, see Frakt, TIE, 12 July 2013.

This time is different (?)

• ACOs (are they just HMOs all over again?)• Quality measurement• Value-based purchasing• Bundled payments• Penalties and bonuses tied to quality• New IT capabilities• Private-side innovations (e.g., AQC)

For more, see Frakt, NYT, 19 Jan 2015 and Song and Chokshi, JAMA, 6 Jan 2015.

But, consolidation isn’t a good sign

• Consolidation is rampant– More hospital mergers & acquisitions– Physicians coalescing into larger groups– More hospitals employing more physicians– More integrated delivery systems offering

insurance products• Consolidation pushes prices up and rarely

improves quality

For more, see Frakt, NYT, 23 Jun 2014 and Frakt, JAMA, 11 Nov 2014.

Source: The Health Care M&A Information Source, Dec. 2014 (via Leemore Dafny)

Hospital consolidation

Does higher quality justify higher prices?

• Our analysis of Medicare Advantage plans offered by providers suggests not– Even accounting for quality increase, premiums

were 70% above what could be justified

For more, see Frakt, TIE, 1 July 2013 and Frakt, TIE, 16 March 2015.

The US delivery system runs on markets

• Spending growth is driven by price growth– IOM: 70% of spending variation due to markups– Recent spending growth driven by prices

• Signature of consolidation• Compromises public and private efforts

For more, see Frakt, NYT, 23 Jun 2014 and Frakt, JAMA, 11 Nov 2014.

Skeptic or optimist?

• I find much of this troubling• Yet, I’m cautiously optimistic– Present is different enough from the past that we

might get different results– David Cutler & Peter Orszag are smarter than I am

• But, we must not guess• We must do the research

For more, see Frakt, TIE, 15 Oct 2014 and Herzlinger et al, NEJM, 4 Mar 2015.

Cause for celebration

For more, see Romley et al, Health Affairs, Feb 2015.