Provider Performance Ranking Now Hitting Healthcare System

Even health insurers want to reward 'quality' docs

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CEO SUMMARY: When 96 big corporations, employing 28 million people and spending $52 billion on healthcare, begin publishing hospital performance measurements so their employees can make informed choices, that’s big news! THE DARK REPORT predicts this is a major step toward detailed measurement of the quality and cost performance of providers, including pathology groups and clinical laboratories. This trend will create new pressures for laboratories to improve their services.

FEW LABORATORY EXECUTIVES and pathologists know much about the Leapfrog Group. But that will probably change as a result of the Group’s new initiative.

Beginning on Thursday, January 17, members of the Leapfrog Group began to show employees of their members how 241 hospitals in six regions measured up in three performance areas. The goal is to help employees make informed choices about hospitals which get better healthcare outcomes and have systems in place to reduce medical errors.

I consider this to be a significant event and urge lab executives and pathologists to follow this story. The Leapfrog Group has clout and influence. Its willingness to begin publishing data on hospital performance is an early effort to what I believe will be a major trend within the American healthcare system.

The Leapfrog Group was formed in 2000. It has 96 members which include some of America’s largest corporations as well as some state and federal agencies. It was formed in 2000 because of concerns raised in the Institute of Medicine’s (IOM) report on medical errors. The IOM estimated that errors in hospitals play a factor in between 44,000 and 98,000 deaths annually and produces more than $20 billion per year in additional costs. These findings received national media attention.

Leapfrog Group’s 96 members— which include General Motors, AT&T, General Electric, IBM, and Boeing, among others—employ 28 million people and spend more than $52 billion on healthcare each year. To help control costs and improve the quality of care provided to its employees, the Leapfrog Group polled hospitals in six regions on three measures: 1) whether hospitals computerize doctors’ orders; 2) whether specialized doctors are employed in intensive-care units; and 3) whether hospitals have extensive experience in certain clinical procedures. (See sidebar below.)

Of the 500 hospitals offered the opportunity to participate, 241 provided information which is now available on the Web site Leapfrog’s Web site also lists the 250 hospitals which declined to participate.

This development is remarkable. During the past ten years, attempts to place information about healthcare quality measures into the public domain has triggered rancorous and intense debate. Among the most strident opponents of such efforts have been certain hospital industry groups.

That is why laboratorians will be surprised to learn that the Joint Commission on Accreditation of Healthcare Organizations (JCAHO) accepted an invitation by Leapfrog Group to become a formal partner one day before the public release of Leapfrog’s hospital information. Maybe JCAHO was feeling the sting of a study published early this month in the journal Quality Management in Healthcare.

The findings of the study revealed that a hospital’s accreditation status did not correlate to better quality and safety of patient care. The study specifically noted that hospitals with higher-than-average rates of deaths and complications often received favorable scores from JCAHO.

One observation by study co-author John R. Griffith, from the University of Michigan School of Public Health, is that the accreditation process relies almost exclusively on surveying the hospital’s organizational structure and process. He noted that little weight is given to objective performance measures, such as the rates of death and unexpected complications, as well as whether the hospital is adaptable and incorporating the latest clinical procedures and new technologies.

That is why JCAHO’s willingness to partner with the Leapfrog Group is a significant event. The timing of JCAHO’s announcement, one day before Leapfrog made its hospital data available to the public, demonstrates that it will become more responsive to the quality concerns of employers.

For laboratory executives and pathologists, this is a signal event in determining how the healthcare system will evolve in the next few years. I believe it is the first of what will become a major effort to identify, measure, and report on the quality performance of all categories of healthcare providers.

Pressure of Price Increases

The direct stimulus for measuring providers has been the news that healthcare prices increased during 2001 by the highest level in seven years. Data released by the Department of Labor show the Consumer Price Index for medical care increased 4.7% during 2001. Employer’s health premium costs jumped by more than 12% last year and this fall’s premium increases are predicted to be in the range of 15%.

Employers are concerned about the uncontrolled growth in healthcare costs. With the failure of the closed- panel HMO business model, neither employers nor health insurers know exactly what strategy will work best to control costs. But public pressure to reduce medical errors is fueling the interest in measuring provider quality and making those measurements public.

By no means is the Leapfrog Group’s hospital “performance” database unique. I can find several other surprising and groundbreaking examples of the new focus on provider quality. In California, a consortium of the state’s largest health insurers are preparing to offer a bonus to physicians who measurably improve the quality of the healthcare they provide.

Six Big California MCOs

The consortium is led by six major managed care players: Aetna, Blue Cross of California, Blue Shield of California, Cigna, Health Net, and PacifiCare Health Systems. The details of this incentive plan, called “Pay for Performance”, are listed in the sidebar at right. The idea is to pay participating physicians from a pool funded by 2% of the year-to-year increases in premiums. As part of this initiative, an independent organization would be hired to “evaluate how physician groups perform on measures using laboratory, pharmacy, administrative, and patient-survey data.”

Another particularly intriguing example of measuring and publishing the quality of healthcare comes from the National Committee for Quality Assurance (NCQA). In November, it launched a program called the “Quality Dividend Calculator.” The calculator is designed to provide employers and health plans with detailed estimates of how much money a company can save if it utilizes an accredited HMO.

The NCQA is matching epidemiological data, HEDIS scores, and cost information against research data on the costs of employee productivity and absenteeism. The result is an estimate of savings that can accrue to an employer when using an accredited HMO.

LeapFrog Group Gathers Hospital Data

INFORMATION ABOUT THE 241 HOSPITALS that responded is now available on the Leapfrog Group’s Web site. The information covers hospitals in Atlanta, Georgia; California; East Tennessee; Minnesota; Seattle/Tacoma/Everett, Washington; and St. Louis, Missouri.

During the next year, Leapfrog will collect information on up to 1,000 hospitals in another 15 regions. The effort has support from some credible organizations. “Do not send your parent to a hospital that is refusing to give this kind of information,” stated John Rother, Director of Policy and Strategy for the American Association of Retired Persons (AARP). He added that his organization would “do everything we can to make sure that people know this information is available.”

There is plenty of room for progress. Only 3% of participating hospitals have instituted computerized pharmacy ordering. About 10% have intensivists overseeing ICU care at least eight hours per day. For high-volume procedures, there was a wide range, with 31% meeting the annual requirement of 400 or more coronary angioplasties and 15% doing seven or more esophageal surgeries per year.

Compare Savings

Currently the “Quality Dividend Calculator” can only provide estimates of savings between an NCQA-accredited HMO and a non-accredited HMO. But later this year it expects to be able to allow employers to make direct comparisons between accredited plans.

From our studies here at THE DARK REPORT, all of these events have a common theme: to measure healthcare providers against certain quality criteria and make these measurements available to the public. Although in its infancy, this is a trend which will have significant impact on the way clinical laboratories organize themselves and deliver lab testing services.

I believe this is true for two reasons. First, on their own as a provider segment, clinical labs and pathology group practices will find themselves measured, and these measurements will be made public.

Second, clinical laboratory testing and anatomic pathology services are delivered in support of other segments of the healthcare system. If, for example, a primary care physician finds himself being measured on his diagnostic accuracy, he will begin to hold his chosen laboratory to a higher standard of accuracy, quality, and service.

Certainly both marketplace dynamics will get the attention of lab administrators and pathologists. How long will it be before labs see this type of “customer pressure?” My guess is that direct evidence of it will become visible over the next 24 months. That’s because clinical laboratories will not be the highest priority, since lab testing expenses are not the major component of healthcare spending.

California Insurers Create Provider Bonus

“PAY FOR PERFORMANCE” was announced in California earlier this month by the Integrated Healthcare Association (IHA), a managed care policy development group.

The objective is to create a pool of funds that would pay physicians that perform against a standardized set of healthcare measures. It would be funded by putting 2% of the increased premiums for capitated payments into the incentive pool. It is estimated that the fund could total between $100 and $150 million per year.

The IHA says “by design, this process will widen the gap between the best-performing and worst-performing groups, with the expectation that this will accelerate the consolidation or exit from the market of the worst-performing [medical] groups.”

There are plenty of critics that point out that reimbursement for physicians in California is inadequate and that problem must be addressed first. But the effort to measure physician performance has already started at individual health plans. PacifiCare, for example, currently provides information to the public about how well each of its medical groups takes care of patients.

How To Spot This Trend

However, for hospital laboratories in mid-sized and large hospitals, this trend will become visible as hospital administrators accelerate their efforts to acquire and implement electronic prescription ordering systems. There will also be increased efforts to hire board-certified specialists to staff critical care units.

I also think that this trend will play out in a similar way as the NCQA’s accrediting of health plans. Just a few years ago, the NCQA began requiring health plans to simply report whether or not Pap smears had been performed on women. In another year, HgA1c testing was added for diabetic patients. But in subsequent years, the NCQA has increased the detail of the reporting, to actually capture test results and determine whether, for example, an individual with high HgA1c results received care appropriate for a diabetic.

Political And Social Forces

This incremental approach is how provider quality measurements will be implemented. Notice that each of the Leapfrog Group’s three measurements are simply yes/no ratings. Does the hospital have an electronic prescription ordering arrangement? Does the hospital have intensivists in the critical care units? Does the hospital have a minimum volume of cases in technically complex procedures?

That is phase one. It will take a while to gather this data and get hospital administrators to build those resources into their institution. The next phase will be to measure the effectiveness of the electronic prescription ordering system, for example. It is a path that eventually leads to precise measurements of error rates and the quality of outcomes.

I posit that this trend to measure the quality of healthcare provider services is a direct result of the impact that quality management systems have had on the corporate world. The evolution from TQM and CQI to ISO-9000, Six Sigma, and Lean Management has taught corporate managers that it is: 1) possible to effectively measure all types of services; and 2) to use those measurements to improve the quality of the service while reducing its cost.

Healthcare “Buyers”

As buyers of healthcare, it is logical that corporate benefits managers want to buy healthcare services of a known quality (based on relevant measurements) and the ability to shop services based on the value package of quality at a specific cost. This means that purchasers of healthcare, including employers, payers, and patients, will be actively supporting efforts to mea- sure the quality of care among different providers, and have these measurements ranked and made public.

It is important that laboratory executives and pathologists recognize this newly-emerging trend. A first step is to include this factor into the strategic planning process. The next step is to help everyone in the laboratory understand that measurement—and provider performance ranking—will play a growing role in healthcare purchasing decisions made by all classes of buyers of lab testing services.

Early-Adopter Employers Moving to “Defined Contribution” Plans

Some of America’s largest corporations are offering a new type of health insurance coverage to their employees. Called “defined contribution”, it puts the employee back in total control of his/her healthcare decisions and spending.

The defined contribution involves three levels of healthcare reimbursement. First, the employee receives a medical account from the employer, say, of $2,000 per year. This money is used to pay 100% of his medical bills during that year, until it is used up. Second, for the next $1,000 of medical spending in the year, the employee pays that out-of-pocket. Third, all medical expenses in excess of $3,000 during the year (in this example), are covered at 100% by the company if the patient stays in the network.

The employee can roll any unused portion of his $2,000 medical account into the following year. It is typical of these plans that preventative services, such as mammogram screening, are fully reimbursable and aren’t counted against the employee’s medical expenses.

No Deductibles And Co-Pays

Since there are no deductibles and co-pays common in fee-for-service plans and HMOs, this defined contribution health plan puts the consumer “at risk” for the full amount of the $3,000 he spends each year on medical care. It encourages employees to ask about medical fees and even shop around to minimize their costs.

Screenshot 2016-09-16 15.40.40

Critics point out that this arrangement might encourage a patient to forego or skip certain clinical procedures in order to save money. So far, however, there is no evidence to support this claim. In fact, employers using defined contribution health plans are reporting increased employee satisfaction and decreased costs in certain areas of health services.

Last year, Medtronic Inc., a maker of medical devices based in Indianapolis, Indiana, offered defined contribution plans to all of its 10,000 employees. About 1,300 signed up for the new plan. One year later, the company reports high satisfaction by employees enrolled in the defined contribution plan.

If the structure of the defined contribution plan sounds familiar, it’s  probably because the concept borrows liberally from the existing MSA (Medical Savings Account) model. That is another type of health coverage designed to put the consumer in control of his/her healthcare choices.

Should defined contribution health plans become popular, it will fulfill another prediction by THE DARK REPORT; that the healthcare system with the highest quality and the lowest cost will be one where consumers have responsibility to make their choices about care and spend “their” dollars directly with providers, including labs.


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