The Potential of Linking Quality of Medical Care with Payment Structures in the German and U.S. Health Care Systems

June 27, 2012

On June 27, 2012, AGI hosted a conference on the “Potential of Linking Quality of Medical Care with Payment Structures in the German and U.S. Healthcare Systems,” generously supported by the Robert Bosch Stiftung. Present at the conference were a number of representatives from the German and U.S. governments, insurance companies, academics, and other specialists in the field. The morning keynote was delivered by Ulrike Flach, a Member of the Bundestag and the Parliamentary State Secretary in the Federal Ministry of Health (Parlamentarische Staatssekretarin beim Bundesministerium für Gesundheit). She stressed the need to develop health care models that increase financial incentives to improve quality. The Ministry of Health is actively researching ways of developing these models and a report will be published later this summer with their findings.

The first panel addressed the German payment system and quality assessment. One organization charged with assessing health care is the BQS Institute for Quality and Safety in Health Care. They measure quality of health care by using over 200 quality indicators in 26 areas and have been able to show that projects combining pay-for-performance (P4P) models with education work, but there is very little evidence that financial incentives alone increase quality. Pay-for-performance is a change of payment patterns for the improvement of health care by seeking to modify the behavior of health care providers. In P4P, payment correlates with the results of performance measurements. It emphasizes a “retrospective” form of payment, as opposed to “prospective” payments. A BQS survey, however, indicated that pay-for-competence was the most prevalent P4P model, although the researchers believe that non-pay for non-performance is the most prevalent P4P model in Germany. Speakers stressed the point that P4P models still require the health care provider to regain their primary personal motivations for providing quality care. Their arguments for increasing the use of the P4P model is to better monitor patient care, to correct deficiencies in patient care, to support excellent quality of patient care, and to increase efficiency.

Further questions need to be addressed before moving forward in increasing the number of P4P models. Are all diseases suitable to be treated in a P4P model? Where can the money come from? Will it only affect quality or the costs of insurance as well? And finally, should the results be made transparent? Flaws exist within the health care system, including the high volume of bureaucracy in ambulatory care. Germany should use P4P as an additional incentive on top of encouraging health care providers’ personal motivations. The U.S. consists of a fractured set of P4P models while the OECD records show Germany with no examples (although the BQS study shows that they exist).

Coordination of health care models is a large problem in the U.S. In Germany, the same problems exist, especially in selective contracting. The participants asked a number of questions addressing growing technology in the health care field, growing costs of health care and the desire for profit, data protection, and measurement of quality. There was an agreement that stakeholders will continue to seek profit with any new model. The P4P model does not shape the ownership of health care systems, but rather adjusts incentives. The goal of P4P in Germany is to change the quality of care, while in the U.S. the goal seems to be to control the cost curve. Panelists remained hopeful that the P4P model will gain traction and will play an increasingly important role in the future, but that there will be no change without pain.

The second panel analyzed pay-for-performance in the American health care system in light of the Affordable Care Act (ACA) of 2010. The ACA is designed to alleviate some of the issues in the U.S. health care system: The high number of un- or underinsured, the continually rising health care costs which drain the U.S. economy, and the low scores on key health indicators such as infant mortality and obesity, despite rising health care spending. Additionally, the number of people that are re-injured while in a hospital is quite high in the U.S. The ACA builds on the existing health care market while creating a more transparent and competitive version of it. The law is designed to hold insurers accountable and reduce fraud and waste. Key aspects of the law include a focus on prevention and wellness by improving the quality of health care at a lower cost. The implementation of the bill takes place in three phases, the second phase from 2011-2014 focuses on a reform of the delivery system by implementing Accountable Care Organizations (ACOs), founding the Center for Medicare and Medicaid Innovation, and other voluntary delivery system reforms such as reducing hospital acquired conditions and avoidable readmissions.  The Center for Medicare and Medicaid Innovation, which has included a health care innovation challenge, has generated a great deal of enthusiasm among providers. Part of the innovations in the health care system has included the increased use of technology, which allows for more sharing of health care records and bundled payments for episodes of care rather than doctor visits or tests.

Even though the ACA has begun to dramatically change the health care system in the United States, many challenges in implementing the law as well as in providing quality health care at low costs remain. The key linchpin of the health care reform is to create a business case for providers to coordinate and improve care. Providers and insurers can share the profit generated if the amount of dollars spent on actual care delivery is lower after a reform of the delivery system than the amount which would have been spent with a business-as-usual case of care.

Four key parts play a role in implementing the ACA: First, health care technology needs to be integrated in a physician’s workflow; it is not enough to just provide the technology. System compatibility among supplies of the technology is important to allow for information sharing and standards for information exchange have to be implemented without impeding innovation. Second, accurate measurement of quality, analysis, and feedback are crucial for the success of the ACA. Questions of how to measure cost-drivers especially in specialty care, how to effectively provide feedback to providers, and the development of accurate measures remain a challenge. Measurement of quality, however, should be a by-product of effective health care; it should not be the end-goal. Third, in terms of organizational development, it is important to ensure a healthy, regulated market place that keeps costs low and supports innovation. Work force development such as the training of primary physicians and nurses, and education in new skill sets is also needed. Fourth, it is crucial that pilot projects and initiatives are rapidly evaluated so that “best practice cases” can be disseminated. Understanding the question of the causes of success, i.e., under what conditions does a P4P initiative work best, will be key for achieving a successful reform of delivery systems.

While the Supreme Court ruled on federal legal framework this week, U.S. states have already been a laboratory for key provisions of the ACA before the health care law was even enacted and many states informed central aspects of the ACA. Minnesota, for example, is one of the most progressive states when it comes to health care. The state has been at the forefront of implementing managed care and as a result the health care providers in Minnesota are dominated by large, fully-integrated care systems of hospitals, primary, and specialty care physicians. Additionally, all health insurers and hospitals have to be a non-profit entity. About 80 percent of providers use electronic medical records in Minnesota and the medical loss ratio is usually exceeded. Many states such as Minnesota will continue to focus on initiates to provide quality health care while lowering costs.

View Stephanie Stock’s full presentation here

View Joachim Roski’s full presentation here

View Julie Brunner’s full presentation here

View Christof Veit and Dagmar Hertle’s full presentation here

View Liz Fowler’s full presentation here