Paying for coordination: how financing mechanisms can improve coordination of care

1. Paying for coordination: how financing mechanisms can improvecoordination of care Jonathan Cylus and Rachel Irwin LSE Health, London School of Economics

2. What is coordination of care? • Examples • Integration of primary, secondary and tertiary care • Disease management programmes • Integrated care models

3. Why is coordination important? • Rise in chronic conditions • Improving patient safety • Improving patient outcomes • Improving efficiency and lowering costs

4. How is coordination achieved? • Non-financial structures and incentives • Promoting coordination role of primary care • Role of nurses • Use of IT • Political will • Financial structures and incentives • Primary care payment mechanisms • Hospital payment mechanisms

5. Coordination in Europe • Overall, care is fragmented across levels of provision • GP is first point of contact in most countries • Increasing shift of services to primary care (i.e laboratory tests) • General trend towards increased role of nurses • Trends towards polyclinics in some counties

6. Coordination in Romania Non-financial structures and incentives • GPs as gatekeepers • Nurses generally underutilised • Electronic patient records used, but mainly for reimbursement • Lack of communication between primary and secondary/tertiary care Mixed structures and incentives • Disease management programmes generally non-existent Financial structures and incentives • Primary care level: some early systems of financial incentives for managing diabetes, cardiac failure and hypertension at primary care level • Across levels levels

7. Financing Mechanisms to Improve Care Coordination • Different systems -> different needs -> different financing mechanisms • Generally: • Encourage providers to supply appropriate level of services • Encourage providers to supply cost-effective services • Encourage providers to supply quality services

8. Example: Bundled payments • Reimbursement based on expected costs for clinically-defined episodes of care • Providers (or groups of providers) are reimbursed a flat rate for a specified episode of care • May include additional payment to act as a warranty to discourage readmissions • Must accurately represent the entire episode of care

9. Why does it make sense to bundle payments? • Encourages providers to supply appropriate level of care • No dumping onto other providers • Encourage quality to avoid readmissions • Related interventions may otherwise be reimbursed at more expensive rate

10. Recent lesson from US Medicare: ESRD Bundled Payments • ESRD reimbursed under DRG system since 1983 • Erythropoietin to treat anemia associated with chronic renal failure • Pre-1989 treated with routine blood transfusions • Dialysis facilities earning more money from epoetin than from dialysis and related services • 2005: $7.9 billion for dialysis, of which: • $2.9 billion for medications, of which: • $2 billion for epoetin

11. Erythropoietin Spending Increasing More Quickly than Dialysis Steinbrook, R., “Medicare and Erythropoietin” NEJM 2007

12. Recent lesson from US Medicare: ESRD Bundled Payments • Decision to include reimbursement for all ESRD services, including drugs, in ESRD DRG • Providers in dialysis unit paid a fixed, case-mix adjusted price for each dialysis patient regardless of epoietin/drug use • Encourage use of drugs only where appropriate

13. Recent lesson from US Medicare: ESRD Bundled Payments • Potential Advantages • Cost-savings for Medicare • Reduce over-utilization • Potential Disadvantages • Demand for blood transfusions may rise, threatening blood supply • Dialysis centers may reduce epoietin for patients who need it • Small dialysis centers may be more affected by fluctuations in case mix

14. More recent lessons: the Netherlands • 2007: Introduction of bundled payment approach for chronic care • 2010 approved nationwide • Single fee to principal contracting entity to cover range of chronic diseases for specified time period • Price is negotiated; services free to patients • Provider group bears financial risk

15. More recent lessons: the Netherlands • Some preliminary results: • Almost all care providers reported improvements in care delivery process • Providers take on clearly defined activities at specified prices • Transparency of care increased as a result of improved record keeping • No noted change in outcome measures Struijs, J., Baan, C. “Integrating Care through Bundled Payments – Lessons from the Netherlands, NEJM, March 2011.

16. Applying lessons to a Romanian Context • Could bundled payments be used to achieve better coordination of care? • Increase communication across primary, secondary, tertiary care • Improve disease management programs • Increase efficiency for specific health programs such as HIV/AIDS, diabetes, oncology • Difficult to define episode if patients are sometimes expected to purchase drugs themselves

17. Conclusion • Bundling payments for some types of care can encourage efficient use of resources and more care coordination • But... • Reimbursement rates must be sufficient and case-mix adjusted • Episodes must be accurately defined and covered by reimbursement rate • Must ensure quality does not suffer

18. Acknowledgements • Part of the research for this paper was conducted by Christina Masseria, Rachel Irwin, Sarah Thomas and Marin Gemmil and Elias Mossialos for the Health and Living Conditions Network of the European Observatory on the Social Situation and Demography, funded by the European Commission. Reports can be found here: http://ec.europa.eu/social/main.jsp?catId=676&langId=en • We are particularly grateful to Victor Olsavszky, WHO Country Office in Romania, for his expert contribution on coordination of care in Romania