Purchasing High Performance Archive

Purchasing High Performance is a bulletin for employers and others interested in promoting value in health care. It is produced in partnership with the National Business Coalition on Health.

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What Does Rockford, Illinois Have to Teach the Country about Health Care?

Summary
More than 100 mostly small employers in Rockford, Ill. now participate in a demonstration project to test the Prometheus payment model, which promises to reward doctors and hospitals for delivering high-quality care. However, unlike many of the pay-for-performance efforts that preceded it, the rewards don't accrue simply from delivering good outcomes, but rather from avoiding bad ones. The Prometheus model also promises to give employers the information necessary to fairly and productively negotiate reimbursement rates with providers.

Background
Not long ago, François de Brantes held a comfortable job as manager of health initiatives at General Electric. Today he heads a startup named after a mythical Greek hero who, as punishment from an angry god, gets his liver eaten by an eagle every day for 30 years. The gods have been kinder to de Brantes. In the three years since he launched Prometheus Payment, Inc., he's gained national attention for devising a new model for compensating health care that promises to do what might seem impossible: pay good doctors more, improve quality, and save money overall. The model is no longer just a good idea on paper—three pilot projects are currently under way.

What's new about the Prometheus model is not the idea of paying a flat fee to cover all treatments and expenses for a given illness (i.e., bundling payments) or promoting integration or establishing rewards tied to quality metrics -- though it does all of these -- but the practice of paying doctors for not doing something: making mistakes. According to one white paper, the real opportunity for doctors and hospitals to do well under Prometheus, according to the organization's Web site, "is to avoid making avoidable medical mistakes."

To avoid those mistakes, doctors, hospitals, and labs must improve in two areas: communication and management. The fragmentation of the medical system is frequently cited as one main source of poor quality and runaway costs. It is not unusual for dozens of providers and three or four different institutions to be involved in the care of a patient with multiple health issues. As a result, tests are repeated, contraindicated drugs are prescribed, communication between providers breaks down, and mistakes are made. In systems where data don't flow freely and where providers don't talk to one another, no one fares very well, least of all the patient.

On the Ground in Rockford

There are three ongoing Prometheus pilot projects – in Minneapolis, southeastern Pennsylvania, and Rockford. At first glance, Rockford seems an unlikely choice. The city was once the global center of the fastener industry (i.e., nuts and bolts) and it had the highest per-capita rate of millionaires in the nation. That was in 1940. Today, when Rockford makes national news, which is rare, it is typically weather-related and it is never good. It is no one's expected locus of health care innovation. Rockford is small and unremarkable, and therefore the perfect proving ground for a payment model that must work in hundreds of other small cities across the U.S. If it won't work here, it probably won't work.

Rockford is a city of about 150,000 people with few large employers of the sort that typically engage in efforts to control health care costs or improve quality. But, the hundreds of smaller employers in the region are organized through the Employers' Coalition on Health (ECOH) in a way that gives them both clout and options. Coalition member Jim Knutson, human resources director for Rockford Achromatic, a 100-employee aftermarket auto parts supplier, initially thought Rockford would make a good pilot site for Prometheus.

"Through the area business coalition, employers in Rockford have been doing direct contracting with the three area medical systems for years and we've built up a good relationship," said Knutson. "And the vendor we use to administer claims also had real interest in adapting its systems to process bundled payments. Those two things helped make Rockford an ideal site for a pilot."

Beginning in 2006, Knutson, de Brantes, and ECOH executive director, Paul Brand, began talking up Prometheus to see what sort of traction they might get.

They got a lot.

Employers were almost universally supportive, if at times skeptical that providers and health plans would agree to get along. Nearly every Rockford employer had long since come to the conclusion that fee-for-service simply doesn't work any more. According to Brand, the general perception was: "If you incent volume, you get volume." Years of escalating cost data backed the theory.

Area physicians were a receptive, if less enthusiastic, audience as well. According to Brand and Knutson, most of the medical groups in the area viewed accepting bundled payments and partnering with area hospital systems as part of their future anyway. That made participating in the Prometheus pilot an attractive, low-risk way to get their feet wet, see what kind of burden would be involved, and evaluate how they would fare financially under the new scheme. The fact that prominent members of four leading medical societies helped develop the reimbursement models also helped sell them on the Prometheus concept.

Hospitals were another story, entirely. The status quo had treated them well enough and experimenting with untested reimbursement schemes was not high on anyone's to do list. After hearing the initial Prometheus pitch, one hospital executive dryly asked, "When are you going to tell me the good part?" The reaction was not unexpected. At least on the surface, hospitals may appear to come up short under Prometheus. From the hospital's perspective, fewer mistakes translate into less to billable services, reduced revenues, and lower margins.

The hospitals quickly came around and are now among the more enthusiastic Prometheus participants. To understand why, it's necessary to look a little more deeply into how Prometheus works.

How Prometheus Works

As payment models go, Prometheus is unique in that it rewards providers for not doing bad things. "Bad things" are defined as avoidable medical mistakes, like revolving hospitalizations for patients with chronic heart failure, allowing a diabetic's glucose level to spike, or failing to prevent a postsurgical infection. If the idea of rewarding a nonevent isn't intuitively attractive, you probably haven't had one of these "bad things" happen to you or an employee. Regardless, the point of rewarding nonevents shouldn't be lost on anyone: it saves money and gives hospitals and practitioners a very powerful incentive to deliver high-quality, efficient care. In fact, under Prometheus it's the only way they make significant margin.

In practice, here's how Prometheus works:

Step 1. An expert panel establishes an evidence-informed case rate (ECR) for a particular illness or condition. This is essentially a calculation of the resources needed to deliver all the care by all providers and institutions to correctly treat an individual with that particular condition. ECRs are adjusted for severity and other factors, and exist only for conditions where robust, agreed-upon national clinical guidelines or expert opinion have been established. Thus far, 17 ECRs exist, including ones for several of the nation's most expensive and prevalent conditions. For a full list, click here. It's important to note that ECRs include a reasonable profit margin

Step 2. ECRs are calculated for a patient by 1) adjusting the fee to reflect the patient's health, 2) applying the fee schedules negotiated between the payer and the provider, and 3) creating an allowance for potentially avoidable complications. For example, a patient with chronic obstructive pulmonary disease might have a total calculated ECR of $15,000, which includes a $2,000 allowance for potentially avoidable complications. For doctors and hospitals that avoid making a mistake while treating that patient, the $2,000 is pure profit. These incentives are withheld until the end of the year when claims and care can be analyzed in aggregate.

Step 3. Participating patients, providers, and hospitals interact as usual, with providers and hospitals receiving (up front) their share of the base ECR for any patient with a condition for which an ECR has been defined.

Step 4. At a specified time, incentives are paid out, based on whether mistakes occurred and whether providers followed good clinical protocol. To get the full incentive, a provider must score high in both areas. It is important to evaluate whether guidelines were followed because it is possible, in the short run, for providers to achieve good outcomes without following good practice, essentially by getting lucky.

If the model seems complex, the bottom line for hospitals and providers is not: avoid mistakes, make more money. De Brantes and company estimate that high-quality providers will realize significantly higher margin under Prometheus than under any competing system. "A hospital is a lot better off getting an $8,000 incentive that is 100 percent margin than it would be billing $20,000 for a medical mistake that is only 20 percent margin," notes de Brantes. "You make more money getting it right than you do getting it wrong—that's the way it should be."

Prometheus in Practice

The Rockford pilot is presently limited to three ECRs – diabetes, hypertension, and coronary artery disease. Data are now flowing between providers, hospitals, and employers, but the first formal reports are not due until the fourth quarter of 2009. De Brantes expects that both bundled and incentive payments will begin in earnest in early-to-mid-2010.

Because Prometheus is still in the testing stage, convincing data and anecdotes about impact on quality do not yet exist. Those will be available in about a year. In the meantime, it is easy to see that Prometheus has been designed to favor systems that do a good job of coordinating care among all the various players.

De Brantes, though, is quick to point out that Prometheus is not, in any way, prescriptive. "Prometheus can work equally well in systems where hospitals actually own the medical groups that feed into their system; or in completely unintegrated systems, where they don't. The only thing that's required to thrive under Prometheus is a good process for coordinating care," he said.

De Brantes expects that aligning payment reform with delivery system reform will lead to meaningful change. "Changing the delivery system and hoping the old [fee-for-service] payment system will support the new model is simply naive," said de Brantes. "And changing the payment system without changing the delivery system is basically pointless. We need to do both to make real progress."

Early Lessons

With real outcomes still a year away, this much can be said: from a process perspective, it works. The first nine months of the pilot in Rockford have confirmed that data flows through the system in the expected manner and that the administrative burden for participants is very low. All the systems and software necessary to track patients, analyze care, and distribute monies already exist, thanks to grant funding received by Prometheus Payment from the Robert Wood Johnson Foundation and the Commonwealth Fund. Doctors and hospitals are required to report on various performance measures, but for the most part, Prometheus relies on measures they already use.

De Brantes is pleased to have confirmed the model's seaworthiness. "The model floats," he said. "In a year we'll be able to measure headway."

For employers, Prometheus is already delivering real value already in the form of data that will be useful for negotiating with providers and hospitals. "It's a real game changer," said Knutson. "Prometheus gives us data that show which groups and institutions are delivering value. We'll be able to negotiate our contracts accordingly."

But for all the apparent buy-in to the Prometheus concept in Rockford, in the broader health care community. the model still has the uncomfortable virtue of being not-quite-anybody's idea of the perfect reimbursement system. "That's the sweet spot," said de Brantes. "You don't want anybody to be too ecstatic about what you're doing, or you're doing something wrong."

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