Transforming Delivery Systems—It’s All About Alignment

Sep 1, 2014 | Christopher F. Koller, President

How does systemic restructuring happen in health care delivery systems?

It’s a given among the health policy intelligentsia that to improve the value of health care in the United States, delivery systems need to “restructure”—to change the people, technology, and processes used to provide medical care. The conventional wisdom is that this restructuring is an even bigger policy challenge than increasing the number of people with access to health care, and that this task will grow even more significant as the US’s bill for expanded access comes due. Fine—so far. But how?

For groups of providers to reorganize and meet the goals of delivering better population-based care more efficiently and in patient-centered ways, the signals sent to providers and patients must be consistent with these goals. Economists have it right: there is no stronger message than finances—we get what we pay for, and in the US, we have rewarded volume and procedural complexity.

So our signals—our payments and our benefit rules—have to change. But the signals need to be complementary, not canceling. This is particularly true for payment methods. Most providers see patients with many different sources of insurance coverage. Usually, no one payer has a large enough share of a provider’s payments to send a dominant financial signal by itself. Differing payment reform efforts by multiple payers—Medicare, Medicaid, and private insurers—are a boon for consultants and researchers, but for few others.

Inconsistent payment reform efforts—that use different measures of quality and efficiency, and different payment methodologies—do not facilitate delivery system reform. They succeed only in sending conflicting messages to providers, frustrating them and their patients, and adding to administrative costs.

In the face of this, policymakers have three choices:

  • Leave it to providers and payers to define alignment;
  • Create all-payer models of payment reform; or
  • Wade into the world of consensus-building without formal legislation.

While leaving this issue alone is tempting, providers and payers are unlikely to agree on payment methodologies, and the result is the slow pace of delivery system change. Payers consider payment methodologies proprietary. Large purchasers can sometimes bring providers and payers to heel, but have limited leverage without Medicaid or Medicare at their side. Providers large enough to command alignment across payers are unlikely to use economic power for the public good—or at least will rely on their own notion of “public good.” Meanwhile, consumers are left with little knowledge about payment amounts or the ways in which provider payments might influence provider treatment recommendations.

Creating all-payer models of payment reform is not for the fainthearted. There are significant barriers: complex negotiations between Medicaid and Medicare, private payers’ intransigence, provider concerns about viability, and the public’s skepticism about the ability of government to define and administer such a system. Maryland and Vermont are notable exceptions to the rule that most political climates will not countenance a governmental-structured all-payer financing model.

Efforts to find a third way—navigating between government fiat and benign neglect to achieve alignment across payers—continue in local communities, and the Milbank Memorial Fund has supported their development and documentation:

  • An Issue Brief released this summer documents state-led efforts to align quality metrics across public and private payers.
  • A Milbank Report released last month studies the work of the Multi-State Collaborative — a collaborative of 10 state-based efforts, each of which focuses on developing consistent policies, practices, and resources across payers and primary care practices to transform primary care.

In addition, our peer-reviewed journal, The Milbank Quarterly, also recently covered efforts of this kind. A study in the September issue looks at the lessons for alignment on both quality and payment from the work of provider/payer coalitions in the Robert Wood Johnson Foundation’s Aligning Forces for Quality program.

The work documented in these publications is both challenging and inspiring. It shows how our multi-payer financing system breeds complexity and inhibits developing, embedding, and rewarding innovations to improve population health. But in spite of this, alignment across payers can be achieved, and population health can be improved.

The work of improvement usually involves a “collective impact” model—multiple stakeholders, clear goals and measurement, good leadership, and well-staffed backbone organizations. It often requires strong state government leadership, primarily to deliver Medicaid and to help with anti-trust concerns and regulatory authority. Medicare can be slow to the party, and large self-insured groups can be even more resistant.

Change is possible, but it’s slow.

Consensus is hard to define—what constitutes sufficient alignment?—and even harder to maintain. The work requires an upfront investment of financial and human capital, and some participants expect a quick return on that investment. Policies that address transparency, competition, and proprietary information can compete and collide. Data needs are enormous. Multi-party governance can be a fearsome prospect—the bar for success can be lowered to keep all at the table. Changes in project leadership and state participation can derail a project.

More significantly, projects that align payers continue to struggle with how to achieve the goal of “patient-centeredness.” Population health is not at the top of most patients’ priorities. They don’t shop for their doctors based on preventive care screening rates or pick their hospital during an acute event. Consumers who are accustomed to employers buying their health insurance don’t know how to evaluate or use benefit designs that encourage high-value providers.

Finally, if these alignment projects promote improved population health, should leaders acknowledge the inevitable and do the hard work of seeking the necessary public laws to establish the practices that will further them? Or is too little known about what works for public laws to be created? Is the voluntary nature of the projects essential for program innovation?

How best to achieve meaningful alignment across payers to promote delivery system reform will remain a critical question. The second round of State Innovation Models funding from the Centers for Medicare and Medicaid Services, scheduled to be announced this fall, offers additional resource
s for state-based coalitions to do this work. As attention in much of the US health policy environment shifts ever so slightly from the work of access enhancement and insurance market reform to delivery system restructuring and how to align payers and providers to accelerate improvements, the lessons from the efforts so far bear scrutiny and application.