We reviewed the empirical literature and held discussions with a small number of experts to identify what types of episodes of care or other groupings of related services have been used, tested, or proposed as a basis for performance measurement and accountability and/or payment. This review was used to inform our consideration and discussion of issues related to alternative approaches to defining an episode of care.
Our review finds that episodes of care, defined in a variety of ways, have been used or proposed for use as a unit of payment and as a unit of measurement to assess relative resource use and/or quality performance. Generally, the episode of care definitions that have been applied or tested tend to be narrow in scope—such as focusing on a single setting of care as is the case with DRG payments for an inpatient stay. An exception to this is the application of commercial episode grouper software tools that examine resource utilization across multiple settings and providers. The more recent policy literature discusses broader episode of care constructs for use in performance measurement, joint accountabilities, and payment, but there remains little detailed developmental work or actual testing of these broader episode constructions.
There is a lack of empirical work regarding how best to construct an episode for the various applications being considered, and what the potential ramifications are of various episode definitions. While not an exhaustive list, some of the unaddressed questions include: How should an episode of care be defined (how broad vs. how narrow) and would the definition vary depending on the particular application and/or type of condition? Which providers would be held accountable for an episode and how would these accountable groupings of providers be configured in a disconnected FFS environment? What types of case mix issues arise within episode of care applications, and how should differences in case mix be handled? What types of unintended consequences might occur and under which applications—such as skimping on care provided during an episode (which is reminiscent of concerns with capitation payment arrangements), the potential for gaming to maximize reimbursement (e.g. upcoding diagnoses to place patient in an episode with better reimbursement, reminiscent of concerns with certain DRGs or modifying coding or service delivery practices to increase the number of episodes assigned to a patient)—and what types of control mechanisms need to be put in place to minimize the likelihood of unintended consequences occurring? How should financial incentives or bundled payments be allocated among various providers delivering services during an episode?
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Types of Episode of Care Definitions that Have Been Proposed or Are in Use
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A broad variety of episode definitions have been used in practice or proposed in the health policy literature. Episodes of care could be constructed in a variety of ways which could encompass different parts of the continuum of care. Conceptually, health care services could be aggregated into episodes along two dimensions:
- aggregating related services over time by the same provider, and
- aggregating related services over time that are delivered by different providers of care.
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Types of Episode Constructions that Have Been Used
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(1) Services Related to a Major Inpatient Procedure. This type of episode typically bundles together the inpatient and physician services payments related to a major procedure. We found four examples cited in the literature of the use of this type of episode construction for payment and in some cases for quality measurement for coronary artery bypass graft (CABG) surgery.
(2) Services Related to an Outpatient Procedure. In the Cataract Alternative Payment Demonstration, Medicare tested an episode-based payment for outpatient cataract surgery. The episode included physician and facility fees, intraocular lens costs, and selected pre- and postoperative tests. Payment rates were determined by competitive bidding. Participation was very low, and the demonstration produced a low level of savings compared to the Participating Heart Bypass Center Demonstration, with little impact on utilization or patient outcomes (Abt Associates Inc., 1997).
(3) Contact Capitation for Specialists. This episode definition, used for payment, included specialist physician services related to treatment of a particular condition, and in some cases hospital and/or ancillary services (Frank and Roeder, 1999). Under this type of episode, the episode begins with the referral to the specialist and ends after a specified time or clinical endpoint. This payment arrangement was found to be common among large Independent Practice Associations (IPAs) in the late 1990s (Robinson, 1999); however, the system proved to be administratively complex (Frank and Roeder, 1999).
While various types of episode construction have been discussed, relatively few examples exist for how each type has been applied. The findings from the various applications of episodes suggest that the potential for using episodes and achieving the goals of episode-based payment and performance measurement will likely vary depending not only on how the episode is constructed, but also on implementation issues, such as participation rates in efforts making use of episodes.
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Types of Episode Constructions that Have Been Proposed for Use
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(1) Services Related to a Hospitalization. Several proposals in the literature have focused on constructing episodes of care related to a hospitalization. In many approaches in the literature, the episode would include related care provided during a post-discharge time period, potentially including post-acute institutional, home health care, and follow-up medical and therapy services. The earlier proposals, starting before the implementation of IPPS, focused on payment only. More recently, the proposals have also included a focus on performance measurement.
(2) Preventive Care or Primary Care Episodes. Several recent articles included proposals to create episodes of care covering preventive care or primary care only, excluding specialty care, hospital care, ancillaries, etc., with the episode capturing up to a year of time (Goroll et al., 2007; Network for Regional Healthcare Improvement, 2007; Pham and Ginsburg, 2007) . To qualify for the payment, providers may be required to demonstrate that they meet criteria for an “advanced medical home.”
(3) Chronic Care Episodes. Several articles proposed bundling together services related to the management of chronic conditions, including services provided by the physician managing the condition and possibly diagnostic tests, with general primary care physician services, specialists, hospital care, long-term care, etc. paid separately (Berenson, 2007; Davis and Guterman, 2007; Network for Regional Healthcare Improvement, 2007) . An existing example is the Medicare payment of physicians for management of end-stage renal disease (ESRD) (Leavitt, 2008).
(4) Broader Definitions of Episodes. Several articles have proposed using broader definitions of episodes of care to bundle together all services related to a particular condition for the purposes of performance measurement and/or payment (U. S. Office of Technology Assessment, 1986; Davis and Guterman, 2007; Pham and Ginsburg, 2007) . Two proprietary episode “grouper” software programs, the Symmetry Episode Treatment Groups (ETGs) and the Thomson-Medstat Medical Episode Groups (MEGs), bundle claims into episodes based on procedure and/or diagnosis codes. However, a recent review found little published literature on the clinical validity of the groupers (McGlynn et al., 2008). CMS has funded a study to study the clinical validity but the study is still ongoing. Current applications using a broader episode definition have focused on profiling physicians on their relative resource use applying the commercially available grouper tools.
(5) Prometheus Payment Model Approach. The Prometheus Payment program, which has been conceptualized but not yet tested, proposes to base payment and performance measurement on episodes defined using diagnoses and clinical practice guidelines for appropriate services. The program proposes to develop an evidence-informed case rate (ECR), which would be a single, risk-adjusted, prospective (or retrospective) payment given to providers across inpatient and outpatient settings to care for a patient diagnosed with a specific condition—in effect the defined “episode” under this model. Payment amounts would be based on the resources required to provide care as recommended in well-accepted clinical guidelines. This model calls for a portion of the payment to be withheld and re-distributed based on provider performance on measures of clinical process, outcomes of care, and patient experience with care received (de Brantes and Camillus, 2007).
We discussed with the experts their views on the pros and cons of different episode definitions. Most experts professed a strong preference for episodes that cut across multiple settings because of the incentives created for care coordination. A particular concern flagged by many experts was how to approach complex patients with multiple chronic conditions, who represent a high proportion of Medicare costs. Many experts doubted whether episodes focusing on each disease separately were appropriate for these patients, who may be better managed using a more holistic approach. Alternative approaches for handling complex patients with multiple conditions included medical homes or other arrangements, in which an organization accepted accountability for performance and a care coordination payment, capitation payment, or other payment for management of multiple conditions.
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Attributing Episodes of Care to Providers
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A critical issue when measuring clinical performance and resource utilization is assigning responsibility (also called “attribution”) for the services or set of services that are or are not provided to a beneficiary. The building block approach, which illustrates that an episode can be constructed and used in various ways, implies different issues related to attribution.
An episode-based approach that cuts across the continuum of care would require that accountability for the episode to be assigned to an entity or group of entities. The accountable entities would then assume responsibility for performance (i.e., quality and/or resource use pertaining to the full set of services provided (or not provided) during the episode). Accountability could be reinforced in a range of ways, including, but not limited to, measurement and providing feedback to providers on performance and resource use for episodes of care, public reporting of performance results within an episode of care construct, financial incentives for performance and/or resource use for episodes of care, or episode-based payment adjusted for performance.
In reviewing the literature, we sought to understand how attribution has been addressed either in practice or in concept within the area of performance measurement. Some of the approaches focused on assigning accountability to a single entity, while other approaches jointly attributed an episode to multiple entities. Depending on how an episode of care is defined, the accountable entities accountability could be individual providers, integrated provider groups such as physician group practices or integrated delivery systems, or “virtual groups” of providers that create a formal relationship for the purposes of episode-based payment and/or performance measurement (Davis and Guterman, 2007). A paper by Fisher et al. (2006) calls for the construction of Accountable Care Organizations (ACOs) by defining virtual groups that comprise physicians and the hospitals where they work or admit their patients; the researchers assert that this approach is feasible because Medicare beneficiaries receive most of their care from relatively coherent local delivery systems. Some of the experts interviewed favored beginning by allowing integrated provider groups to accept accountability for episodes, while others expressed concerns that such an arrangement would reward existing organizational structures; instead allowing attribution to virtual groups would foster more innovation in health care delivery and may move providers towards forming more cohesive group arrangements.
Specific entities that have been used or proposed as the basis of attribution include:
- Individual physician(s). Commonly proposed criteria for assigning responsibility to an individual physician include a count of Evaluation and Management (E&M) visits or costs, physician specialty type, or some combination thereof (CCHRI, 2008).
- Individual physician – hospital care only. One approach that has been tested is to attribute acute inpatient episodes to the attending physician for the hospitalization.
- Hospitals. Another strategy is to hold hospitals accountable for episodes of care that include a hospitalization in addition to physician services and/or services from other providers, such as skilled nursing facilities (Jencks and Dobson, 1985; Welch, 1989) .
- Integrated Delivery Systems and Physician Group Practices. Existing integrated provider organizations are likely to have the greatest ability to assume responsibility for episodes of care because of the defined relationships between providers (Davis and Guterman, 2007; MedPAC, 2007a; MedPAC, 2007b; MedPAC, 2007c) .
- Hospital medical staff. This model would assign accountability for acute care episodes to the entire medical staff of a hospital (holding the hospital accountable as well).
- Virtual Groups. Some have suggested the possibility of using virtual groups – that is, groups defined by geographic areas or other characteristics primarily for the purposes of episode-based performance measurement or payment (Davis and Guterman, 2007).
Assignments could be made prospectively or retrospectively under any of these scenarios. Prospective designation allows for some choice by physicians and patients about which providers should be responsible for which patients’ episodes of care (Davis, 2007; Pham, Schrag et al., 2007), but it also creates the possibility of risk selection (i.e., incentivizing providers to assume accountability for healthier, more-profitable patients). Prospective designation is easier in environments, such as managed care plans, where patients are already assigned to primary care physicians (PCPs). In a FFS environment, when patients may use multiple PCPs, the assignment could prove more challenging. Retrospective attribution is methodologically challenging because physicians frequently bill under multiple tax identifiers and these tax identifiers may be at a group level thereby precluding attribution to a specific physician.
Both approaches to attribution raise policy considerations because different assignment methods can lead to substantially different results on various criteria. In a previous study, RAND found significant variation in both the fraction of episodes that could be assigned to a physician and the level of agreement to which a physician was held responsible. RAND researchers (Mehrotra et al., 2007) examined 13 retrospective assignment rules in assigning episodes of resource utilization constructed from Symmetry’s ETG tool. This study applied the assignment rules against an aggregated claims database from four commercial health plans in Massachusetts . The 13 rules differed on characteristics such as the basis of assignment (e.g. costs versus visits) and whether only one or multiple physicians were assigned to an episode. Comparing the results of two different rules found that 50 percent of the episodes were assigned to different physicians, illustrating that different assignment methods using different criteria can lead to substantially different results regarding which provider would be held responsible.
When accountability is assigned to individual physicians, small sample sizes could lead to substantial risk for costs and/or quality outcomes given that the estimates of costs and performance based on a small number of cases will be noisy (i.e., highly variable)—which is one reason thaThe discussions with experts found sharp differences of opinion on the relative merits of these two approaches. Some experts strongly believed that providers would not “buy in” to episode-based approaches unless they had prospectively identified the patients/episodes for which they were accountable. Other experts expressed a concern that very few providers were organized into formally linked groups of providers to be able to accept accountability for episodes, and that strong incentives would be required to drive them to organize themselves to do so. Some experts expressed doubt that many providers would voluntarily accept accountability for episodes.t Fisher et al. (2006) recommended assigning accountability to larger units. However, the risk would also depend on the variability of the outcome in question and potential safeguards against risk that could be used. Given the degree of dispersion of care across multiple providers for a typical Medicare beneficiary, fostering a sense of shared accountability across providers and settings for an episode of care may prove challenging. This may be particularly true whself as primarily responsible for delivering the recommended care (e.g., a cardiologist may not view her/himself as responsible for ensuring that a woman receives a mammogram).
- Individual physician(s). Commonly proposed criteria for assigning responsibility to an individual physician include a count of Evaluation and Management (E&M) visits or costs, physician specialty type, or some combination thereof (CCHRI, 2008).
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Risk Adjustment of Episodes of Care for Payment and Performance Measurement
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Most proposals in the literature acknowledge the need to risk-adjust (i.e., adojust for differences in patient populations across providers) episodes of cre for payment and some en a provider represents only a small fraction of all the care delivered and/or does not view her/himtypes of performance measurement, particularly for outcome measures. Hwever, little detail on the spaecific risk-adjusters that should be used is provided. Most of the experts also believed that risk adjustment is very important to episode-based approaches—whether the application is for payment or performance measurement. They felt that risk adjustment was necessary to prevent risk selection by providers and/or insurers.
The risk adjustment literature indicates the results of risk-adjustment are sensitive to the specific patient characteristics included and data sources used (Stuckenborg et al., 2007; Shahian et al., 2007). Some articles stated that when the focus is on cost/resource use, it is appropriate to use adjusters that explain variation in the time and costs of services provided (Goroll et al., 2007; Network for Regional Healthcare Improvement, 2007) , while in the context of performance measurement for intermediate and long-term outcomes of care, adjusters should focus on differences in the severity of illness. This suggests that two separate sets of risk adjustment may be required if jointly assessing episode-based clinical quality and resource use.
While there is general agreement about the use of risk-adjustment for payment and outcome measures, there is less of a consensus around its use for process of care measures. Some have argued that some process and intermediate outcome measures are influenced by disease severity as well as patient behavior, such as nonadherence, and that social, cultural, and economic factors influence decisions to seek care and to comply with recommended actions. Absent a method to address differences in the mix of patients treated across providers, this could create incentives for providers to avoid such patients ( Institute of Medicine Committee on Redesigning Health Insurance Performance Measures, 2007). However, the issue of risk adjustment needs to be carefully balanced against reducing incentives to providers to reduce health care disparities, which could occur if the risk model adjusts out the undesired variation (differences in care that could be influenced by provider behavior). The IOM identified risk adjustment and its appropriate use as an area requiring additional research in its report Rewarding Provider Performance (Institute of Medicine Committee on Redesigning Health Insurance Performance Measures, 2007). In our discussions, many of the experts emphasized the difficulty of risk adjustment for care provided over the course of an episode of care, often in multiple settings. For this reason, other methods for minimizing risk, such as special treatment of outliers, were identified as necessary by several experts.
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