New Research Finds Quality and Cost Equally Important in Health Care Reform Efforts

In a first of its kind study, researchers from Brigham and Women’s Hospital (BWH) and the Harvard School of Public Health, examine new methods for compensating doctors and hospitals that encourage accountability for not only the cost of care but also for the quality of care they provide to their patients.  Overall, researchers conclude that in order to be successful, health reform initiatives will need a multipronged approach and that both care providers and insurance companies are equally focused on delivering high quality care while simultaneously reducing costs.  This research is published in the September issue of Health Affairs.

The authors of the study were Joel Weisman, deputy director and chief scientific officer of the Center for Surgery and Public Health at BWH, Michael Bailit of Bailit Health Purchasing, Guy D’Andrea from Discern and Meredith B. Rosenthal from the Department of Health Policy and Management at the Harvard School of Public Health. 

The researchers found that changes to both the payment systems and care delivery models need to happen in tandem in order to be effective. New models of care, such as Shared Savings Arrangements, accomplish this goal by allowing physicians and hospitals to share in any monetary savings that may be achieved from improvements to care processes.  This strategy is a cornerstone of health care reform under President Obama’s administration and it is also being rapidly adopted by private insurance companies. Shared savings arrangements are used in a variety of new models of care delivery such as medical homes, alternative quality contracts, and accountable care organizations (ACOs). However, the authors found that important details of such payment models can vary widely.

“The methods for sharing savings strategies can be complicated and confusing to physicians.  Depending on how rules in new care models are negotiated, the insurance company can end up keeping the bulk of the savings.  In an effort to explain some of the details about how this strategy plays out in practice in the real world, we surveyed early adopters to see what they were doing” said Weissman, who is also an associate professor of Health Policy at Harvard Medical School. 

The researchers also performed a detailed case study of the Massachusetts Patient Centered Medical Home Initiative, a program organized by the Massachusetts Executive Office of Health and Human Services in 2008 and implemented in 2011 that included 45 primary care practices from throughout the state. Dr. Weissman and co-author Michael Bailit served as advisors to the process.

After analyzing the results of the case study and the survey, which included responses from 27 organizations throughout the United States comprised of medical homes, ACOs, and commercial insurance companies, the researchers concluded that both care providers and insurance companies believe that reducing health care costs need not come at the expense of reducing the quality of care. Virtually all of the programs surveyed included a quality “gate” that required the physicians meet a certain level of quality before they were eligible to share in any cost savings to ensure this. 

A common theme of the research was that well intentioned goals of both the care providers and the insurance companies were frequently in conflict with each other.  Weissman and his coauthors cite the following examples and offer recommendations:

  • Physicians prefer to be held accountable only for what they can control in their own practices or their group. But small practices, those with less than 5,000 patients, may appear to save money purely due to statistical chance. It may be necessary to group physicians together in order to determine whether savings were real or only due to chance.
  • There is concern that over time doctors may favor uncomplicated patients that are less expensive to treat, however, risk adjustment can be used to protect against this.
  • Shared savings arrangements are one-sided in nature, meaning that providers win if they save money, but don’t lose if they spend too much. Therefore, it is necessary to build in protection for the insurer. Insurance companies are generally risk adverse and many build in a very high savings threshold, a dollar amount that must be achieved before those savings are distributed to the care providers. The research suggests that if the threshold is too high then physicians are discouraged from working to achieve the other goals that are defined in these models including improvements in the quality of care and patient satisfaction.
  • Insurance companies who are in competition with one another often have differing incentive programs. This means that physicians face an array of goals to meet depending on the insurer which creates bureaucracy and distracts the physician from the needs of their patients. The researchers suggest that it is best to include as many payers (insurers) as possible and to make sure that their programs use consistent measures of performance.

“We encourage the many private insurers and government payers to join together in “multi-payer” arrangements to pool their efforts, including their data and the measures they use to indicate success, to ease the burden on doctors,” said Weissman. “It is also essential that care providers understand how the shared savings work.  The rules must be transparent and widely disseminated and insurers should share data on high cost patients to help doctors and nurses figure out where they can do the most good,” he added.

 “At the end of the day, we are hopeful that these findings will serve as a guidepost for doctors and other providers who venture into shared savings arrangements to achieve success in their particular programs,” said Weissman.  “Pilot programs for early adopters are small and experimental and should be designed with more attention paid to testing the reform, and less so on protecting the insurer’s financial risk.”

This research was funded by a grant from the Commonwealth Fund.