1. Contracting Value:
Shifting
Paradigms
Nuffield Trust European Health Summit
24 January 2012
Marc Berg

2. Challenges health care policy makers: same the world over
Ageing
demographics
Healthcare
cost inflation The economic
downturn
How do we achieve better
Technology outcomes and control the Health
advances cost curve? inequalities
Rising patient Unhealthy
expectations lifestyles
Rising chronic
diseases
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3. Major opportunity: bending cost curve through better outcomes
The safety, patient centeredness and effectiveness our health care systems deliver is
highly variable:
• Care is too often too little, too much or sometimes just wrong
• From the perspective of the patient, our care systems are highly fragmented and poorly
coordinated
Cost
In a fascinating reversal of common
sense economics, improving health
care quality more often than not
makes the delivery of health care
less rather than more expensive.
Quality
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4. Example: Acute Stroke Care
Saving more lives saves significant money as well...
Total cost of care (all health care costs, incl. home care, long term care, excl. informal care)
Percentage of patients
living at home 365 days
after stroke
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5. Why do healthcare systems not deliver high value care efficiently?
Because we pay providers to do so...
We get exactly the results we ask for (Paul Batalden)
Producing high quality health care efficiently is not rewarded by higher
revenues for providers. There are often substantial perverse incentives:
• We pay for individual activities, or for the existence of a building or an
organization...
• We pay whether things go right or wrong; we often actually pay extra when
things go wrong...
We do not pay for the integration of all these individual activities, nor do we pay
for the results that all this work delivers
We pay for disjointed and non-coordinated inputs, not for integrated
outcomes
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6. The Quest for the Holy Payment Grail: a Payment System that Produces
High Value
↓ Price of care
delivered
(per unit)
↑ Quality
Right Volume
outcomes of care
of care delivered
delivered
=
↑ Value
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7. Payment systems: the early classics we can live without…
Payment system Desirable Perverse Macro effect
incentive incentive
Fee for Service Productivity Overproduction, lack Escalating costs,
of integration fragmentation care
delivery
Block grant Cost control Reduced innovation, Waiting lists
budgets reduced productivity
Creeping costs
escalation due to lack
of disruptive
innovation and
creative destruction
FFS
block grant
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8. Payment systems.. next steps
Payment system Desirable Perverse Macro effect
incentive incentive
Fee for Service Productivity Overproduction, lack Escalating costs,
of integration fragmentation
Block grant Cost control Reduced innovation, Waiting lists &
budgets reduced productivity Creeping costs
escalation
DRG – like Stimulate innovation, Volume incentive Possible volume
systems productivity and explosion
efficiency along the Negative quality
patiënt’s path within creep through cost- Possible cost shifting
the hospital cutting within DRG
Capitated payment Population- and Underuse Cost shifting
for general prevention-oriented (referring difficult
The first rudimentary step to redesign payment systems towards delivering ‘value’ but
practitioners focus Negative quality patients)
still ultimately input based creep
Stimulus for efficiency
FFS Cap. GP
block grant DRG
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9. Payment systems: P4P
• Explicitly link the quality of care delivered to the payment of the provider.
• Payment is no longer solely tied to ‘input’, and undoing the negative effects of
fragmentation can actually be rewarded.
Composite Quality Score (CQS) increase
Hip and knee replacement
Pneumonia CMS: Premier Hospital Quality
Heart failure
Incentive Demonstration project
Coronary artery bypass graft
Chronic Care Management Quality
5
AMI (heart attack)
Optimal quality 
4
0% 10% 20% 30% 40% 50%
3 2007
2 2008
2009
Blue Cross Blue Shield 1
Massachusetts (BCBSM) Alternative 1.1 2.0 3.2 2.0 2.2 2.2
0
Quality Contract (AQC) ACQ Non-ACQ
FFS Cap. GP
P4P
block grant DRG
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10. Payment systems: P4P
Is often merely a sweet topping on a sour base...
• P4P initiatives run into severe limitations, because the underlying payment structures
remain unchanged
• The institutional boundaries that all too often hamper overall quality rather than
strengthen it remain untouched
• Mostly based on process and structure measures – working to rule often does not
improve outcome yet improves income...
FFS Cap. GP
P4P
block grant DRG
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11. Payment systems: Contracting Value
What would contracting value look like?
What should be done differently?
FFS Cap. GP Contracting
P4P
block grant DRG Value
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12. Contracting Value: the building blocks that make it work
Three principles that are much more within our reach than we tend to think:
1. Define integrated care ‘services’ or ‘products’
2. Define meaningful and measurable outcomes for these services
3. Contract these outcomes with provider or prime contractor
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13. 1. Define integrated care ‘services’ or ‘products’
No longer see the historically grown institutions as the default…:
these boundaries only sometimes coincide with entities of care relevant to the patient
Primary care Specialty care
Pharmaceutical care
Nursing home care
Physiotherapy
Disabled care
Hospital care
Revalidation
Dietary care
Dental care
Home care
GPs
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14. 1. Define integrated care ‘services’ or ‘products’
The unit of care to be contracted should be an integrated care product or service
Acute trauma care
Acute cardiovascular care
Maternity care (pregnancy & delivery)
Continuous: focus on
integrated, pro-active care; on Dental care
secondary prevention; the
focus on lifestyle, and so forth Mental health care
Chronic care
Basic
medical Oncological care
care &
gatekeeper Multimorbidity / frail elderly care
Non-continuous: focus on
function
patient-centered, rapid care
Care for people with a handicap
delivery, active patient decision Elective care
making
‘Primary care’ ‘Secondary care’ ‘Tertiary care’
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15. 2. Define meaningful and measurable outcomes for these services
Measuring quality is seen as an almost unsolvable problem…
… yet the complexity of the problem evaporates largely when we look at
health care through the lens of these services
The question is: What matters most to the patient?
‘Value’ is produced when these goals are met – and this will vary per
domain of care
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16. 2. Define meaningful and measurable outcomes for these services
The unit of care to be contracted should be an integrated care product or service
• Healthy mother, healthy baby
• High rescue rates Acute trauma care • High patient satisfaction
• Low 3 months mortality
• Low 3 months morbidity Acute cardiovascular care
Maternity care (pregnancy & delivery)
• Many high-quality life years
• Quality of Life Dental care • No exacerbations, no complications
• Low (re-)admissions rate
• High patient satisfaction
• Patient empowerment, self management
Mental health care
• Patient-empowerment, self management
Chronic care
Basic
medical Oncological care
care &
gatekeeper Multimorbidity / frail elderly care
function Care for people with a handicap
Elective care
‘Primary care’ ‘Secondary care’ ‘Tertiary care’
• High patient satisfaction
• High quality referrals
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17. 2. Define meaningful and measurable outcomes for these services
Data at our hands
Clinical
Billing data
registries
Patient Provider
Questionnaires Questionnaires
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18. 2. E.g. acute cardiovascular care: Stroke – 1 yr outcome
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19. 2. E.g. acute cardiovascular care: Stroke – value of care
Total cost of care (all health care costs, incl. home care, long term care, excl. informal care)
Percentage of patients
living at home 365 days
after stroke
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20. 2. E.g.: elective care - total hip replacement
% significant improvement
PROMs effect score
Provider delivering higher
value
Provider delivering lower
value
Practice variation score
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21. 3. Contracting these outcomes - there is not one answer
Per case
Per year of Per year of
care care
(population-
based)
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22. 3. Contract outcomes in the right way
The potential reductions in cost are enormous:
- avoiding non-value added care (‘waste’)
- increased efficiency in the delivery of value-added care
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