Mark E. Lutes, Chair of the firm’s Board of Directors and a Member of the firm’s Health Care and Life Sciences practice, in the Washington, DC, office, was asked to respond to the following question: “What are the greatest challenges in implementing and expanding value based purchasing initiatives that CMS faces for Medicare, as well as that health plans and employers face in the commercial sector?”
Following is an excerpt of his answer:
No payor can “snap its fingers” and put forth value based payment methodology that is fair and “administrable.” Hard work goes into discerning the methodology for determining the scope of the episode, the derivation of the price, the particulars of the payment, any quality “checks and balances,” and the appropriate patient incentives.
For instance, a episode can play off of a major diagnosis, a medical event or a chronic condition over some period. It can be initiated by a claim, encounter or some other event. It can include inpatient events only, or prior tests, and post-acute care of some duration. Readmissions can be included and intervals between episodes need to be defined.
The determination of price comes from agreement as to relevant prior period to compare against. Are the provider groups involved analogous? Are the patient groups comparable? How should case mix adjustment work or will patient severity be deemed a constant to guard against gaming via coding improvement alone? Will the price account for inflation or step down over the term? How will it be adjusted to account for new technologies or changes in the care path?
Obviously, with this range of factors (and more not listed due to space considerations!)—getting it “right” is neither easy or quick. When working on these deals, the data needs to be good, a range of professional expertise is brought to bear as well as the good will and fair play of the parties. To complicate matters further, the attention or even motivation of the parties may not be in balance.