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For Truly Value-Based Care, Use Outcomes Instead of Processes

Healthcare reform efforts that hope to foster value-based care should be based on patient outcomes instead of provider processes.

- Value-based care is the goal of many of the nation’s healthcare reform efforts, yet basing regulatory changes and provider-facing metrics on checking off processes instead of achieving outcomes could be the wrong approach, states a new article in The Journal of Ambulatory Care Management.  

Healthcare reform should be focused more on patient outcomes rather than provider processes.

Focusing on convoluted and complex workflow processes is “neither effective for measuring value nor effective for controlling expenditures,” said the authors, who are affiliated with the Yale University School of Medicine, 3M Health Information Systems, and The Hesperium Group.

Instead of continuing to rely on these strategies, the healthcare system should look back to the successful outcomes-based Inpatient Prospective Payment System (IPPS) for inspiration about how to approach value-based care.

Many of the current process-driven measures are not focuses or organized, the authors said, which means they are not as effective as they could be. Additionally, using process measures for payment purposes causes a huge administrative burden of “collecting, reporting and verifying adherence to the prescribed processes,” the authors said. Also, the composite score comes from “arbitrary and complex rules” that are not clear, the authors argued.

“Adherence to processes dictated centrally by Medicare through payment adjustments is not an effective way of measuring value and controlling expenditures,” the authors said. However, although the author see the process-based payment systems as a failure, they still believe that process measures could be a useful management tool for individual healthcare delivery organizations.

Authors of the study claimed that mistakes, unneeded services, delivery system ineffectiveness and missed prevention opportunities were leading to $395 billion in annual healthcare expenditures, according to data from 2012.

The article suggests that payment reform be more like Inpatient Prospective Payment System (IPPS), which was the most successful healthcare payment reform ever implemented. IPPS did not attempt to control how medicine should be practiced by mandating adherence to numerous process measures, the authors argued. However, IPPS still recognize that the federal government should create incentives to improve quality and efficiency in healthcare.

IPPS was an outcome-based system. Under IPPS, if a provider’s production cost was lower than its price, then it made a profit. At the same time, if a provider’s production cost was higher than the price, the providers would suffer a loss. IPPS linked the financial and clinical aspects of care. This system helped hospitals control costs, according to the report.

“The lessons of IPPS are clear: focus on outcomes, set national standards, be clinically meaningful, create the right incentives and keep it simple,” the authors said. “The IPPS financial incentive for efficiency was simple and easily understood and allowed hospitals to respond in a way that worked best in their local environment and for their local community.”

The authors also believe The Incentivizing Health Care Quality Outcomes Act of 2014 offers solutions to the overly complex payment reform that bases payment adjustments on quality measures. The Outcomes Act of 2014 proposes to replace the current framework of process and outcomes quality measures with a “uniform, coordinated, and comprehensive outcomes-based quality measurement system,” the authors explained. The Outcomes Act of 2014 specifically includes potentially preventable events (PPEs) that represent most of the expenditures for preventable healthcare events.

There are five types of PPEs, which include: admissions, readmissions, complications, emergency department visits, and outpatient procedures and diagnostic tests. “By focusing on PPEs that are the end result of a quality failure, the Outcomes Act provides comprehensive financial incentives to health delivery organizations aimed at eliminating avoidable expenditure,” the report said.

Many state Medicaid agencies are in the process of implementing comprehensive outcomes payment reforms that are in line with the Outcomes Act. Some states (such as Texas and New York) are in the process of implementing comprehensive outcome-based payment that focuses all five PPEs. Other states are implementing reforms based on some PPEs. In Minnesota this was the case and the state had a hospital that had a preventable readmission project that caused a 19 percent reduction in readmissions.

“These state outcomes-based reforms are demonstrating that payment reforms based on outcomes can yield real and sustainable results,” the authors argue.

While the IPPS focus on the efficiency of inpatient hospital services, the Outcomes Act focuses on the need for both inpatient and outpatient services, the authors explained.

If implemented, both IPPS and the Outcome Act of 2014 could help providers navigate more easily through healthcare reform.  These outcomes-based quality improvement objectives are arguably less complex and confusing than the current process-based objectives.

Shifting payment reform away from processes and toward outcomes would potentially cause payment policy to create value instead of creating an overly complex system that attempts to measure value.

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