Paying for Value: Can U.S. Workers’ Compensation Keep Up?

At the 2016 IAIABC Annual Conference, a panel discussed Medicare’s move to a value-based payment system and how this will impact state fee schedules.  The panel was:

• Dr. David Dietz – Principle, David Dietz and Associates, LLC
• Dr. Dan Hunt – Corporate Medical Director, AF Group
• Dr. Kathryn Mueller – Medical Director, Colorado Division of Workers’ Compensation

The United States spends more of their Gross Domestic Product on healthcare than any other industrialized nation. Despite this level of spend, there seems to be no relationship between cost and quality of care. Virtually all proposals to reduce U.S. healthcare costs include mechanisms to tie payments to outcomes.

Outcome measurement is not necessarily easy. Some outcomes such as a return to work are easy to see. But process measurements are often substituted for actual outcome measurements (they received the preventative care).

Alternative payment systems include:

• Accountable Care Organizations (ACO) – Networks of providers responsible for care for a defined population of patients. The networks are incentivized based on patient outcomes and they share the risk of adverse outcomes.
• Pay for Performance – Develop metrics to measure performance and incentives to reward good performers. It is important that this is transparent and reportable to consumers.  Examples include BCBS Care Recognition Programs.
• Patient-Centered Medical Homes – This is essentially an advanced primary care practice. There are very few of these.
• Bundled Payments – A single payment for all services required to treat a certain condition (such as knee replacement surgery). This includes multiple providers in the contract. If the patient has complications or poor outcomes, the providers end up having to provide additional treatment at no additional cost.

Some question whether ACO models are just a variation of prior capitated system models. One key difference is that, under ACOs, there are goals around quality, not just financial goals. ACO use has been growing significantly since 2011.

Some Medicare ACOs are meeting goals on both quality and costs and physician-led groups are outperforming hospital-based ACOs. However, there are questions around the quality measures and the quality scores do not necessarily correlate with savings. Only 31% of the ACO programs showed savings, so to be sustainable, this has to improve. Medicare focuses on things such as 30-day readmission rates, which has been a very effective outcome measurement. Medicare admissions for preventable conditions have decreased under the ACO model.

One problem with accountability measures is push back from those who do not receive good quality scores. For example, hospitals who were ranked Tier 2 by BCBS of New Jersey filed suit disputing their ranking. In Florida, there was a case where a hospital was failing under certain quality scores and they lobbied successfully to eliminate that particular area of ranking.

How is better care being achieved:

• Evidence-based best practice guidelines.
• Investment and attention to care coordination.
• Effective use of electronic health records.
• Particular attention to transition from acute to post-acute care.
• Shared savings creates incentives to invest where necessary to achieve the above.

By 2018, Medicare expects 50% of contracts on alternative payment models and they expect 90% of traditional Medicare payments to be tied to overall quality or value. Some projections say 50% of the U.S. population could be covered by these models by 2020 if the commercial insurance market adopts them in the same manner that Medicare is.

For workers’ compensation, payment reform is critical to outcome improvement. The current fee-for-service payment models tend to lead to more care. Fee schedules may constrain costs, but they are not always effective and cannot distinguish the value of the care. One problem is that workers’ compensation only compromises less than 2% of the total U.S. healthcare spend, so providers are not focused on this area.

Bundled payment models may be an effective approach for workers’ compensation systems. Studies have shown good results with these bundled payment approaches in terms of quality of care, costs and patient satisfaction. The indemnity portion of workers’ compensation can create additional savings for a bundled payment model. If you are getting a faster return to work there is additional savings. On the down side, there are significant bill review and contracting issues associated with this arrangement. Also, they really cannot work well in states where the employee has a choice of medical care. Finally, there are fee schedule issues with how this would be done in most states.

Cost shifting to workers’ compensation is also a concern and studies have shown this is a real possibility. If providers receive significantly more compensation for classifying  a condition as work related, this will inevitably happen.

The key takeaways for workers’ compensation are:

• You cannot separate quality improvement and cost control.
• Care improvement doesn’t happen by accident.
• Payment reform is a key component.
• Measurement is essential.
• Change is not easy and it takes time.

Other Challenges:

Measuring outcomes are very challenging and patient satisfaction is NOT a good measurement of an outcome. Medicare studies show that patients with the highest satisfaction scores tended to cost the most and have the highest mortality rates.

In workers’ compensation, the big cost drivers tend to be soft tissue low back pain versus specific surgical procedures. The workers’ compensation spend on surgical costs is a small piece of the overall medical spend, thus bundled payment models would have a very limited impact.

Creating a nationwide network focused on quality is extremely challenging. It is inhibited by the availability (or lack thereof) of quality medical providers in a geographic area. Also, many states give the injured worker the right to choose their own medical provider, which completely undermines their networks.