Care practices that don't benefit and may even harm patients account for about 35 to 45 percent of health systems' total costs, Glenn Steele, MD, former CEO of Danville, Pa.-based Geisinger Health System, wrote in Harvard Business Review.
Questionable or unjustified treatments, unproven variation in the delivery of treatment, repetitive or otherwise unnecessary testing, and reimbursement for services that result from poor health outcomes drive hospital and health system costs way up. At Geisinger, where Dr. Steele served as chief for 15 years, changing the model for physician reimbursement was one strategy the system employed to combat such harmful, expensive practices and achieve value-based care, he wrote.
Dr. Steele, who retired from Geisinger in May and now serves as chairman of xG Health Solutions, described Geisinger's physician reimbursement model and the underlying elements that make it successful.
1. Geisinger uses an 80/20 compensation model. Since 2002, Geisinger has followed an 80/20 compensation model for its employed physicians, in which 80 percent of total cash compensation is based on the usual piecework metrics, including panel size, the number of patients seen and number of work units performed, according to Dr. Steele. Twenty percent of total cash compensation is tied to how well physicians improved quality and reduced costs. To measure this, Geisinger tracks both hospital-based care as well as improvements in health outcomes for outpatients with multiple chronic diseases.
In 2010, the health system extended its pay-for-value 80/20 model to physicians it doesn't employ. For Geisinger-insured patients with multiple chronic diseases, private practitioners' could receive a 15 percent increase in their total compensation if they achieved Geisinger's version of chronic disease management redesign. Within one year, patients with multiple chronic diseases were hospitalized 30 percent less.
2. It determines innovation targets each year. Each of Geisinger's 28 areas that provide intervention services in its hospital-based care and community-practice service line choose a specific innovation target each year, and 20 percent of their compensation is linked to achieving that strategic goal, according to Dr. Steele.
Within the first several years of offering this mixed-payment incentive to physicians, outcomes improved and costs fell for 18 common treatment interventions as a result of lowering unjustified variation in hospital-based care through care redesign and innovation. In its outpatient community-practice service line, optimizing management of high-risk chronic diseases resulted in 30 percent absolute declines in the need for admissions and readmissions to the hospital, according to Dr. Steele.
3. Geisinger emphasized changing physician behavior. These successes weren't the result of compensation changes alone. There were six essential elements of Geisinger's reimbursement model for physicians, according to Dr. Steele.
- Geisinger encouraged its insurance side and providers to work together to increase value for patients whose healthcare traditionally incurred high costs and resulted in poor outcomes.
- The health system shared specific data from both the insurance company and patients' EMRs with providers at the point of care. This data also let the system identify which physicians and practices were achieving the best results in chronic disease management.
- A substantial amount of physicians' total compensation (15 to 20 percent) is tied to value-based outcomes improvements, not volume of services.
- The clinicians on the frontlines were involved in the decision-making regarding which care processes would change, garnering buy-in and making success possible.
- Patient care metrics were tracked in real time, and quality- and cost-of-care outcomes were monitored on a yearly basis.
- Although cost reduction was a consequence of practice redesign, the goal of improving patient outcomes was the fundamental motivator for physicians. Engaged physician leadership was a significant aspect of driving care redesign.