Exploring Episode-Based Approaches for Medicare Performance Measurement, Accountability and Payment Final Report. Potential Applications of Episodes of Care Along a Continuum of Policy Reform Options


Using a building block approach, one could build an episode by starting narrowly to reflect the services delivered by one provider in a single setting for a specific illness or injury, then expand more broadly to reflect the services delivered in a single setting by multiple providers (such as the physician and the hospital during an inpatient stay), and finally encompass the entire continuum of services received across multiple settings and providers for treatment/management of a specific condition.  Other variations along this continuum could also be considered.  As one explores different types of episode constructions, it is worth noting that depending on the application, the episode constructions could be identical or differ.  How an episode is ultimately constructed will be contingent on the feasibility of the approach, the proposed application, and desired policy objectives.

There are a number of ways in which episode-of-care based approaches to performance measurement and payment potentially could be incorporated into Medicare--in the near term within existing Medicare payment and program structures as well as over a longer period of time, by building capacity and through reform of existing structures.  Although not an exhaustive list, we present some options for consideration:

  • Near Term Applications of Episodes of Care
    • Adopt a holistic, patient-based approach to measuring performance.  In the near term, there are multiple adjustments that could be made to Medicare's existing performance measurement systems to create a more holistic, patient-based approach to performance measurement.  Specific actions could include:
      • (1) Build out Medicare's performance measures to cover the entire care trajectory for patients with specific conditions as they move across provider settings (i.e., this moves measurement away from an individual setting focus to one that follows the patient as he/she is being managed across various care settings and encompasses the full range of care a patient with a given condition might receive).  The investments that CMS is making in measure development over the next five years will make an important contribution to filling existing gaps and aligning measures across settings to enable an episodic approach to measurement;-  as this work progresses, CMS could consider an episode construct as a way to frame decisions about where to invest its measure development resources.  Additionally, CMS could work to construct and add measures that address care transitions in the near term as a means to encourage greater coordination among various providers across a patient's episode, leveraging the work that is starting under the 9th Scope of Work for the QIOs.  
      • (2) Coordinate and align measurements both within and across settings for management of the same condition (in the building block approach this would include aligning measurement accountabilities for the physician(s) and hospital for an inpatient admission, and more broadly to encompass all providers and settings that are involved in care for a given episode).
      • (3) Integrate measures to address care trajectories for patients with multiple conditions to create a more holistic approach to care management. For example, ischemic heart disease is a highly prevalent condition among Medicare beneficiaries, which typically involves managing a cluster of issues/events such as hypertension, lipid levels, cerebrovascular disease, heart failure, and heart attack.  
      • (4) Bundle measures within an episode framework for a given clinical condition, so that patients and their providers can understand what appropriate care represents across an entire episode of care.  Condition specific measure maps that cut across settings would make it explicit to providers what their designated role is in affecting the quality of care for patients with particular conditions.  To achieve maximum impact in the near term, the measure development and integration work could start by focusing on those clinical conditions that represent the greatest volume and/or costs to the Medicare program.  For example, although osteoarthritis and sepsis were among the ten most expensive conditions in the hospital for Medicare beneficiaries in 2005 (AHRQ, 2007), there are no hospital measures currently reported for these conditions.  
    • Measure the totality of care delivered within an episode and provide this feedback to all providers who touched the patient within the episode.  Today, when measured, providers see only their particular slice of the "whole," and what is missing is the full picture of how the patient is managed during an episode.  In the near term, CMS may want to experiment with a small number of conditions where measures currently exist to test the feasibility of such an approach and to flag gaps in measures across the various settings where care is being delivered.  At the beginning, CMS could adopt a building block approach to this work, such as by providing feedback to both the hospital and physicians within a narrowly defined hospital admission or by providing feedback to ambulatory care physicians and hospitals who are involved in care related to a hospital admission.  Then over a longer period, as Medicare builds out its capacity to measure care more broadly to address an array of conditions across settings and works to coordinate those measurement efforts across settings, it could expand the set of conditions for which it could assess care over a broader episode construct.  The long term goal would be to develop and provide a feedback report that would encompass the totality of care processes that should occur in managing a patient's condition across an entire episode and highlight for all providers involved how well a patient was managed.  Initially, this feedback could be done confidentially and provide comparisons to how patients with similar care trajectories are being managed in the broader community.  This internal feedback would highlight variations in practice and could stimulate a discussion among providers about ways to improve quality through better care coordination, enhanced system integration, and sharing of best practices.  Such information could also stimulate the formation of more explicit relationships among providers for improved coordination and care management.
    • Implement performance-based financial incentives (i.e., pay-for-performance) within Medicare for individual provider types and/or settings that include measures of care transition and coordination.  Medicare could create setting specific P4P programs that include a focus on care coordination and care transitions between settings. Such programs could use existing measures as a foundation, with additional measures of coordination and transition added as they are developed.  This approach does not have any requirements for the types of provider organizational structures that could participate, so could be implemented in the current FFS provider structure.
  • Mid-Term Applications of Episodes of Care
    • Educate Medicare beneficiaries about consensus-based "right care" pathways in management of conditions. - Patients and their families can be advocates to ensure that the right care is delivered.  CMS is investing considerable resources over the next five years to increase the number of performance measures that are available to assess the quality of care across a larger number of conditions, provider types, and settings of care and make this information available to Medicare beneficiaries.  As the capacity to identify what the right care looks like for an entire episode of care for a given clinical condition increases, such consensus-based information (i.e., "right care" maps) could be shared with patients and their family members to enable them to advocate for and hold the system accountable for delivering high-quality care.  
    • Create public accountability for performance by making results transparent.  Medicare's current public reporting efforts could be consolidated and synthesized to report on the quality of care delivered within an episode of care for patients with selected clinical conditions.  Spotlighting the performance of virtual groupings of providers within a community that excel in delivering the right care to patients would strengthen signals to other providers to improve.  
    • Implement episode-based financial incentives (i.e., pay-for-performance) within Medicare, tying together two or more provider types and/or settings.  To strengthen join accountability and care coordination, Medicare could tie a small proportion of payment to performance for care delivered across some portion (i.e., using a building block approach) or the entirety of an episode.  Preceding this type of application, work would need to occur related to measure development and coordination, constructing an episode-based framework for performance measurement, and determining how accountabilities would be assigned.  Aligning financial incentives along an episode-of-care construct could encourage providers to be more explicit about their relationships with each other and their respective roles in ensuring that the right care is delivered in a coordinated fashion.  
    • Share savings for delivery of care within an episode with groups of providers to incentivize efficiency and performance. This approach would assign accountability for episodes of care across a group of accountable providers.  If a group met its quality and cost savings targets, a portion of savings between a benchmark spending level and actual spending would be shared with the accountable unit of providers.  Again, this application could start using a building block approach, such as by grouping providers within the ambulatory setting, then linking ambulatory physicians to hospitals, and finally linking physicians delivering care within the hospital and the hospital.  Additional work would need to occur to define virtual groups that could serve as the unit of accountability.  Building joint accountabilities and shared savings into the Medicare program might encourage health care providers to organize into virtual or actual integrated delivery systems, which tend to be more advanced in their use of information technology and other systems that facilitate coordination and information exchange across providers (Enthoven et al., 2007).
  • Longer-Term Applications of Episodes of Care
    • Change the unit of payment for some services to episodes of care, with adjustments for performance.  To fully align payments across providers, with the goal of increasing coordination and encouraging increased efficiencies in delivery, "bundled payments" could be made for certain episodes of care, building on the model of the Medicare Acute Care Episode Demonstration. A small number of episode types could be used at first, building in additional episode types over time.  A building block approach to episode definition could be used, beginning with bundled payment for hospital-based services only (as in the Acute Care Episode Demonstration), then building out to include care in other settings (e.g., post-acute care).  The bundled payment approach could also be applied to episodes of care that do not involve hospitalization, such as outpatient surgery, Medicare post-acute care or chronic care.  This approach could also consider adjusting the payment based on performance that occurs within the management of the entire episode. Virtual and actual integrated delivery systems are likely better positioned to be able to accept such payments in the near term; over time, episode-based payments may encourage health care providers to arrange into these structures.

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