Contracting value - Building blocks | KPMG | GLOBAL

The building blocks that make it work

The building blocks that make it work

So what would a payment system that is built upon realizing value actually look like? How can payers (whether insurance companies or governments) pay for outcomes rather than for inputs? There are three core building blocks here that, when grasped fully in their synergy, bring this ‘Holy Grail’ surprisingly within reach.


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The first is about delineating the care services that are paid for in a smarter way. Stop paying providers along the traditional dysfunctional lines, and start paying for care services or products that make sense from the patients and the clinical perspective. In other words, start paying for integrated care services or products. The second building block is to define and measure the core outcomes that patients and professionals aim to achieve by delivering the care. The third is contracting these outcomes in the right way.

Each building block is discussed in turn, emphasizing how each might have seemed a mirage only a decade ago, but is currently within reach. As pressure builds in healthcare systems as a result of uncontrollable growth rates, demands for quality and an increasingly frustrated healthcare workforce, the perfect storm might be there to put these building blocks together.

Where value is created: the integrated care for a patient's problem

As noted, a core limitation of DRGs and capitated GP payment systems is the fact that they are segmented along traditional providers' lines which, in many cases, makes little sense from the perspective of the patient's problem. This critique is now rather well-known, yet the question remains what it would mean in practice to put the patient's problem central in an alternative payment system? Given the broad scope of problems that patients may present with, it seems a baffling challenge to define what the proper 'beginnings' and 'ends' of patient care processes are.

Yet it only seems hopelessly complex because we are not used to thinking in this way. Our provider system is deep-rooted in payment and regulatory systems. Yet from the perspective of types of patient problems, it is actually not all that complicated. There is a reasonably simple way (without the pretense of being either exhaustive or definite) in which we can order the types of patient care so that they form meaningful wholes based on the nature of the patient's problem, the types of goals aimed for, and the nature and form of the care given (as shown below). 

For example, the care for chronic conditions (diabetes, rheumatoid arthritis, Parkinson's disease, cardiovascular risk management and so forth) shares some core characteristics such as the need for continuous, integrated, pro-active care; the importance of secondary prevention (preventing complications and exacerbations); and the focus on lifestyle.

Similarly, the care for acute cardiovascular patients revolves around proper handling of an acute event, optimal stabilization and intervention (PCI, cardiovascular surgery, thrombolysis in the case of stroke, acute aneurysm surgery), and optimal postintervention care. This kind of care is non-continuous: after immediate follow up, the patient becomes a chronic cardiovascular risk patient.

Elective care (hip replacement, hernia repair, back surgery) is also non-continuous, as is acute trauma care. Care for people with a disability, on the other hand, is continuous, as it is largely focused on patient well-being and quality of life rather than cure.

The category 'basic medical care' is a bit of an outlier in the categorization, since it still seems rather provider focused: it is what is delivered by GPs and home nurses in many countries. Yet we include it here because it stands for a clear patients' need: it is essentially continuous, population-based care, which aims at preventing (the worsening of) conditions in the high-risk parts of the population, and the treatment, support and, where necessary (after adequate diagnosis where possible), referring of people to specialty care.

Finally, multi-morbidity or frail elderly care is a rapidly growing category where most healthcare systems fail dismally. For most people with chronic conditions, there comes a time when the goal of the care shifts from a focus on disease-specific treatment and secondary prevention to a primary focus on relieving symptoms and maintaining or improving quality of life (palliative care).5 Secondary prevention is still crucial, but it becomes more about preventing falls, pressure sores, medication errors and so forth, rather than preventing long-term complications from diabetes, for example. This kind of care is essentially about coordinating the various needs of the patient in an integrated way; supporting the patient's family with the gradual reduction of cognitive abilities and loss of self-management that might co-occur, and so forth.

The integrated care for the diabetic patient, for the hip replacement patient, for the pregnant patient or for the patient with breast cancer should be the 'unit' of payment. So while parts of the care can be delivered by different providers, it is critical that there is one clear point of responsibility identifiable by patients, (subcontracting) providers/professionals and payers. This has the potential to all but end fragmentation and the loss of effectiveness and safety problems that arise from this, and to stimulate the efficient use of resources along the patient's care trajectory. Just how this works out in the contracting of care will be addressed in the third building block. First we look at what should be contracted: outcomes.

Define meaningful outcomes for these patient problems

The importance of measuring the quality of care delivered is clear to policymakers, providers, professionals and purchasers alike. Indeed, there are already thousands of quality indicators available in clearing houses, national indicator projects and so forth, covering a myriad of care domains and care sectors such as pharmacies, hospitals and individual doctors; ICUs, nursing homes and complete healthcare systems.

However, the usefulness, validity or reliability of many of the indicators are hotly contested. Just as it seemed baffling to define meaningful categorizations of care problems, the quest to define the measures that matter among the thousands of possible options seems equally daunting.

But once care problems are categorized in the way delineated in the previous subparagraph, we can start to cut a clear path through this complexity. For every type of care, after all, it is rather clear what types of quality measures are important. For maternity care, for example, the core outcomes are a healthy baby, a healthy mother, and a care process that is patient-centered and self-empowering. For chronic conditions, the outcomes are a high quality of life and freedom (as far as possible) from short- and long-term exacerbations and complications. Here as well, the experience of the care process is a crucial outcome measure. For elective care, the core outcomes are the alleviation of symptoms and the care process experience. And for basic medical care, high quality can be measured by appropriate and safe medication use, by the appropriateness of referrals, the relative absence of acute admissions, and – again – the patient's experience while in the provider's care. And so forth.

Adhering to the 80/20 principle, we can start with what is most important first: the largest patient groups, and the main outcomes that are feasible to assess per patient group. Several data sources are (and can be) used for these purposes such as administrative data, clinical registries and the so-called patient reported outcome measures. Especially in their combination these become highly relevant and reliable sources for measuring outcomes.

It is interesting to note, however, that due to the similarity in types of relevant outcomes, the different care categories outlined above each tend to gravitate towards a rather clear-cut and limited selection of the most relevant data sources. As a result, this will reduce the complexity of outcome measurement even further.

Data sources for measuring outcomes

There are at least four sources to be considered here:

  • Administrative data (e.g. billing data), which can be linked with national or community statistics on social economic status, date of death, and so forth. Administrative data will often yield diagnostic and therapeutic information that, when combined smartly and risk-adjusted, can deliver (partial) insight into intermediate and long-term outcomes.
  • Clinical registries (detailed data registered by professionals), widely used for measuring outcomes of ICU care, cardiothoracic surgery, or varying types of cancer.
  • Patient questionnaires: patient satisfaction and the experience of the care process have been measured for decades, but historically, these measurements have focused primarily on the 'service' aspect of quality rather than the medical outcomes of care. However, the patient has recently been 'rediscovered' as a core source for this data as well. After all, it is the patient who is best able to report whether symptoms are alleviated after an elective surgery, or how well a chronic disease's symptoms are relieved. The design of instruments to do this is now well developed.
  • Questionnaires for providers, which require providers to aggregate the information available in patient records (such as the percentage of myocardial infarction patients that leave the hospital on Beta-blockers). When this data is not registered specifically for a quality or monitoring purpose, the reliability tends to be poor while the retrospective gathering of this data often represents a significant administrative burden. 

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