Michael Chernew, "Value Based Health Care Payments"

Michael Chernew

Jan. 29, 2016

Scope of Accountability

Contingent on Savings

Budget Neutral

MIPPS Service No Yes

Medicare Advantage/ ACO

Patient Yes No

Bundled Payments for Care Improvement

Episode No No

Mixed/Inconclusive ◦ Many studies found no effect of P4P on quality

Of studies w/ positive effects, the effect sizes were small

◦ Low generalizability, design features differ

Size of incentives:

generally, larger incentives = larger improvements

Time: effects decrease over time

Quality measures chosen

Source: Eijkenaar et al (2013). “Effects of pay for performance in health care: a systematic review of systematic

reviews.” Health Policy 110(2-3): 115-130.

Convey information ◦ How much consumers value goods and services

◦ How much it costs to produce goods and services

Provide incentives to producers and buyers

Divide “surplus” between producers and sellers

Perfect competition

Imperfect competition

Monopoly

(under a series of assumptions)

Price regulation can attempt to remedy market failures in health care

In health care we worry that markets do not work well and quality is under provided ◦ this motivates paying more for “value”

Definition 1: Quality relative to cost ◦ Loosely synonymous with cost effective

◦ This is circular in payment models because value depends on payment.

◦ If you pay for value, value falls

Definition 2: Synonymous with quality ◦ Patient perspective (willingness to pay)

Sovaldi is a novel treatment for Hepatitis C ◦ Better quality

◦ Cost effectiveness was estimated at $47,304/QALY

Should we pay more

Source: http://nvhr.org/sites/default/files/.users/u27/Clin%20Infect%20Dis.-2015-Rein-cid_civ220%281%29.pdf

If we want to pay for value we should expect to pay for value ◦ Budget neutrality could be counter productive

◦ Access issue may arise for low value locations or providers

Contingent payments are likely sub optimal

In FFS providers do not capture downstream savings

ACOs do capture downstream savings

If primary care lowers spending higher payment may be needed in FFS but maybe not in ACOs

Measures need not be aligned across programs