Attending the IDN Summit in Phoenix today, one wouldn’t know by the relaxed atmosphere at the beautiful Arizona Biltmore that there is significant tension in the air….until you sit down and talk to a few of the supply chain executives attending. There are several big themes that are dominating the conversation, and number one on that list is theAccountable Care Act of 2010, which contains over $155B in hospital payment cuts over 10 years. As part of the reform law, a new Hospital Inpatient Value Based Purchasing Program begins soon, with 2% of Medicare payments at risk by 2016.
What is the concern? The biggest issue is a new measure of hospital quality, called “Medicare spending per beneficiary” that will penalize higher cost hospitals under a formula that could take away far more than value-based purchasing. In this environment, supply chain groups are being called upon to expand i into areas once reserved solely for physicians and clinicians – surgery, cardiac catheterization, imaging, and others. But the questions being asked, and the system requirements to be able to manage inventory and results in these area are either in legacy form, or do’t exist at all!
What frustrates people at the conference about the Accountable Care Organization discussion is the the high-flying ideals of politicians, who come up with vague terms such as clinical integration, meaningful use of information technology, evidence-based medicine, and cost efficiency, yet provide no formal methods for determining how to deploy these measures! In the 429 page document developed by the Center for Medicare and Medicaid Services (CMS), ACOs are organizations whose primary care providers are accountable for coordinating care for at least 5,000 Medicare beneficiaries, as a separate legal entity. these organizations must provide Better care for individuals, Better health for populations based on preventive services, and lower growth in expenditures, a great concept called “patient-centeredness.”
Sounds great up to now, right? Wait, it gets better. a big chunk of Medicare reimbursement is tied to something called “Comparative Effectiveness”. This means that there must be a firmer scientific basis for determining the clinical value and cost-benefit of devices, drugs, and interventions through comparative effectiveness research (CER). This is intended to avoid using technologies that are adopted into practice without sufficient evidence and that caused harm to patients, including high-dose chemotherapy, drugs like Vioxx, and bone morphogenetic protein which has a risk of sterility in men!
So how this all comes together is that ACOs are required to implement evidence-based medicine. This means hospitals are to be held accountable not only for the cost of the care they provide, but for the cost of services performed by doctors and other health care providers in the 30 days after a Medicare patient leaves the hospital.
The other issue that complicates things is around bundled payments. Under this format, a provider is no longer paid in terms of a “fee for service” while a patient is in the hospital. In a fee for service model, each member of the medical team – the radiologist, the cardiologist, the anesthesiologist, and perhaps the consulting physician who works with the patient afterwards – is paid separately based on their activity. In bundled payments, a single fee is charged for the entire procedure, including possible re-admission fees up to 30 -90 days after the patient is discharged! Combine this with the fact that today Medicare payments are about 50% of hospital revenues – in five years, they may be as high as 90% of revenues!
People I spoke with at the IDN conference are asking a lot of questions. For example:
- How do you know whether previous CERR study results remain relevant particularly if a new product with competing claims has entered the market?
- Do CER findings based on early use of a treatment truly apply to particular clinicians or facilities with extensive experience in more recent refinements?
- What is the source of CER? How are they desseminated? Can findings be extrapolated to a broader range of clinical indications and patients?
- How are supply chain leaders supposed to make decisions on procurement of these technologies, and how to gather and critique available scientific evidence?
- How do you track and manage the multiple clinical care measures, patient experience measures, and IT measures across a massive population base, and coordinate this with Medicare reimbursement?
These are questions that are leaving people shaking their heads. It’s going to be an interesting conference. And an interesting decade.