How did Premier become so deeply involved in these efforts to improve the quality of health care?
Premier has been around for a long time and, actually, three different companies came together nearly 11 years ago to really focus on how to improve quality and safety in health care and at the same time reduce the cost of health care. We could all see this challenge coming in the delivery system. The not-for-profit hospitals across the country were very focused on the question: How do we work together in a system that is sort of otherwise fragmented across the country to really improve cost and quality at the same time?
You have four divisions. What do they do?
The first division is a group-purchasing division and what we try to do there is aggregate the purchasing power of the hospitals across the country to really lower the price of drugs, medical devices, and supplies that are used in hospitals. We purchase nearly $33 billion of supplies across the country and we create contracts that allow our hospitals to save money and hopefully then be able to pass those savings along to patients in their communities.
Second, we have the nation’s largest clinical and operational databases and we gather very detailed data on our hospitals in terms of the treatment of patients, the outcomes that they achieve, and the levels of complications.
Our third division is a consulting division. We have clinical experts who really help our hospitals improve their quality and safety and also reduce their costs.
The fourth division provides excess liability coverage – an insurance company, if you will. The unique thing about having these four divisions is that we have a lot of information on the supply chain cost – the drugs, the supplies, the medical devices. We have a lot of information on the clinical practices and costs. We have a lot of information on the medical malpractice and risk costs associated with a hospital. And so we wrap consultants around that, along with experts in finance, experts in economics, and experts in clinical care, to really help the delivery system sort of fix itself, if you will, from the inside out.
Tell me more about the Hospital Quality Incentive Demonstration (HQID) pay-for-performance project.
Basically, CMS (Centers for Medicare and Medicaid Services) and Premier got together and said, you know, we really think that if we move this health care system to a value-based health care system, and by value I mean the quality and safety and outcomes of care divided by the cost of care, if we work together to really create and test some different models of paying for health care based upon the value delivered, wouldn’t that be a model that maybe could be adapted for the whole system? So we worked together to test this hypothesis: If you improve quality and you improve safety and you create some financial incentives to improve that, in other words, to reward that, would mortality go down? Would complications go down? Would the cost of care go down? And so we agreed to embark on a three-year demonstration at that time which has now been extended another three years to really test that hypothesis.
How did you get CMS interested in this? We had a lot of contacts and people that we knew there and basically we co-designed this with CMS. We then worked together to design the model. There were a couple of key things. One is that we wanted to leverage the evidence that was already out there in health care about what worked and what would improve quality and safety. So together we designed how we would measure it; how we would capture the information from a technological perspective; how we would design a system to reward our hospitals for their improvement; and then how would we measure it every quarter and how would we report it. And so, we had to go out and talk to our hospitals and ask, “Would you like to participate in this demonstration?” We got 250 hospitals that said, “Yes, we want to participate in this,” hospitals from all over the country. They were different sizes, rural and urban, teaching and non-teaching.We initially looked at the five clinical conditions that are costly to Medicare and also very significant for parts of our population. Those conditions are heart attack, heart bypass surgery, heart failure, hip and knee replacement, and community-acquired pneumonia. So we decided to test our hypothesis within the context of those five clinical conditions.
We had been in it for three years and we have gotten an extension for another three years. So we’ve actually been in it for a total of five years at this point. We’re in our last, sixth year and what we’ve learned is really very encompassing.
First of all, we’ve seen significant improvement every single quarter for the 20 quarters that we’ve been doing this, across the board, in our hospitals. So where we started out in terms of compliance with the evidence and the protocols in these five clinical conditions has improved almost 19% over these 20 quarters. If you look at every clinical condition and every quarter, you can see improvement.
We also then were able to use this clinical database to say, “OK, so we saw improvement in the compliance with the protocols and the evidence. What did that do to costs? And what did that do to mortality? And what did that do to the level of complication rates?” What we saw was that the hospitals that implemented 75% to 100% of the evidence had dramatically improved performance from the hospitals that implemented perhaps 0 to only 50% of the evidence.
Let’s look at an example – for instance, heart bypass surgery. If you looked at hospitals that implemented 0 to 50% of the evidence, the mortality rate for those patients was perhaps 11%. The hospitals that implemented 75% to 100% of the evidence had a mortality rate that dropped to 1.6%.
So when we took the performance in this demonstration and we applied it to all the patients across the country in those five clinical conditions, we discovered that it would save us and the government $4.5 billion and it would have saved 70,000 lives. And that said to us that evidence-based care works. If we can take the typical 17-year period that is the norm today that it takes to get adoption of the evidence and can get that down to a much shorter period of time, we will have a dramatic effect on the quality, mortality, safety, and cost of health care.
What you’re talking about in terms of pay-for-performance sounds as though you’re changing the paradigm by positively reinforcing wise decisions rather than punishing poor ones.
Right. There’s been a history of perhaps more punishment than reward in the system. We believe that a reward system should be created that causes people to continuously want to improve, along with a penalty system that penalizes folks who are not achieving certain threshold levels of quality, safety, and cost that need to be achieved.
The real challenge is accurately determining what is preventable and what’s not, and how much of it has to do with the health care system versus some of the other socio-economic considerations in a marketplace. Our theory is that by putting it into this value-based equation, you can test ideas. You can test them across a broad number of hospitals. You can figure out which things work, which things make a difference, which things are preventable, and which things aren’t. Then you can really manage the cost and quality of your health care system.
Do you think value based health care is the basis for changes for reform?
Our belief is that value-based health care could be the engine that would fix health care delivery. We do support the concept of accountable care organizations, where a patient has a medical home and has an ability to get their care coordinated. We agree with the management of re-admissions. We agree with the concept of bundled payment. The only thing that we worry about in terms of how to fix the system is that those things might be put out there with payment policy attached to them and there’s been virtually no experimentation and model development to determine what works and doesn’t work before you implement it.
Our theory is that value-based purchasing has already shown it can work. Let’s just take some of those measures and keep adding to them and keep modifying them so that the model can take on all the new evidence as it comes. Now, that doesn’t necessarily fix this-access-to-care problem for the 47 million uninsured. We have other fixes that we need to implement around making health information systems more efficient and interoperable, but from a delivery system reform perspective, we think if we could create incentives for doctors, hospitals, and other entities to work together, that that would make a difference in the overall cost and quality.
What you’re talking about would actually present a new kind of paradigm for providing health care.
Right; it’s not “cost plus.” It’s coordinated care that makes the care as efficient as possible and still gives the patient the accountability and the centricity in the reform. What isn’t being discussed much is that patients need to be accountable for their health. The patient needs to be involved in what the cost of the health care system is and the patient needs to have the information. So we believe in comparative effectiveness because we think it’ll give potential patients the knowledge base they need about what works and what doesn’t work and what treatments might be more effective than others.
You’ve got to think about what is good for the patient. Patients don’t want to be in hospitals. Patients don’t want to have more lab tests than they need to have. Patients don’t want to stay there for more days. Patients don’t want to die. Patients, if they are going to die, don’t want to die in hospitals – you know, hooked up to machines and all of that. So there are a lot of things that, if we create the right incentive structures, and we involve the patient in the choices, and they’re accountable for the choices, then we’ll go a long way. But that’s a big paradigm shift, as you say, from where we’ve been, which is sort of patients get anything they want, anytime they want, wherever they want it, and they don’t really feel the cost of it except perhaps through a health care insurance premium. And then the people who don’t have coverage have a hard time accessing the system. So we’ve got a paradigm shift in all areas here.
- This is an edited transcript of an interview conducted May 22, 2009.