Spectrum bundles payments

March 15, 2010
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Spectrum Health is one of four U.S. health care organizations participating in a pilot program that could eventually revolutionize the payment system for health care.

The Grand Rapids health system and the insurer it owns, Priority Health, are running a three-year pilot program based on the PROMETHEUS payment model, said Dr. John Burns, Spectrum Health’s senior vice president of quality.

Led by Bridges to Excellence, a Washington, D.C., nonprofit devoted to health care quality, the pilot program is being funded by the Robert Wood Johnson Foundation of New Jersey.

“This is an opportunity to learn about options to reform our payment system and share that learning with others so that we can move closer to a solution for our entire industry,” Spectrum Health President & CEO Richard C. Breon said. “We don’t expect this to be the definitive answer, but we believe it is essential to evaluate and explore ways to change what is currently a highly complex financial interaction between patients, insurance payers, physicians and hospitals.”

Instead of separate payments for each encounter with a doctor, hospital, laboratory or other health care provider, the pilot program uses one payment to cover an entire episode of care over 12 months. The idea is that sharing a single payment and following a common set of best clinical practices will prompt providers to coordinate better, limit costs and improve the quality of care, Burns said.

“It will encourage everyone to coordinate care in an efficient way. Right now, the opposite of PROMETHEUS is that we have a very helter-skelter payment system oftentimes that doesn’t encourage tight coordination. With that coordination, you should see improvements in quality and the speed of care delivery.”

“Bundled” payments have been discussed in the health care reform debate in Washington, Burns said. The pilot program will allow Spectrum Health to gain experience with that approach and share the lessons learned with the rest of the health care system, he added.

“The first two years, it’s a paper test, so to speak. We’re testing it behind the scenes without it having an actual impact on patients and physicians and the hospitals,” Burns explained. “We’re six months into it. Toward the end of year two, we’ll make the decision whether we actually put that model into practice and use it as the payment method around these five conditions.

“There will be a lot of testing, a lot of modeling, a lot of very intensive examination of this before we ever make the decision to go live.”

Bridges to Excellence CEO Francois de Brantes said that the hope is to eventually spread the PROMETHEUS bundled payment model outside of Spectrum Health to other hospitals, doctors and other providers that have contracts with Priority Health.

“That’s the goal: to make it an example for the rest of the country and show other hospitals and physicians around the country that things can change for the better,” de Brantes said. “It takes courage. It takes leadership. But when you have that, you can get quite a bit accomplished.”

At Spectrum Health, five health conditions will be tracked for PROMETHEUS payments: congestive heart failure, diabetes, colon surgery, asthma and chronic obstructive pulmonary disease. Burns said Spectrum now is working with its doctors to determine commonly accepted clinical guidelines for related care episodes. Other pilot programs have picked different conditions to track.

PROMETHEUS is an acronym for “Provider payment Reform for Outcomes Margins Evidence Transparency Hassle-reduction Excellence Understandability and Sustainability.” The Robert Wood Johnson Foundation in 2008 committed $6.4 million to test the model. The first two pilot sites were in Rockford, Ill., and Minneapolis. Since then, Chester, Pa., and Grand Rapids have been added.

De Brantes said Spectrum Health is the only pilot site that offers an integrated health care system, with hospitals, doctors and an insurer all under the same ownership. More common is an adversarial relationship between the hospital and insurers, he said.

“Having an organization that combines both sides gives a different perspective on the issue of revenue and cost,” he said. “Spectrum Health was chosen as a pilot site because it is an integrated health care system, and the combination of a health plan and provider organization can offer some significant insights on how to improve performance when you have different financial mechanisms and data to manage the variation in costs.”

The project also will develop public reports on performance and price. A third component enhances payment for avoiding unnecessary complications.

The two most common payment methods — fee-for-service and capitation — are both flawed, de Brantes said. Fee-for-service tends to encourage unnecessary health care, such as extraneous lab tests, while capitation rewards withholding of care that may be beneficial, he said. PROMETHEUS is one attempt to find a middle ground in health care financing, de Brantes said.

“Today, most claims systems, accounting systems in health care systems and in health plans are designed around fee-for-service. Changing that takes time,” he said. “Whenever you change compensation, you’re going to make people nervous. I would say if you try to change the health care system for the better and no one’s nervous, you’re not doing your job.”

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