The time period from 2004 to 2006 was not that long ago. It will be remembered in future years as the beginning of something that changed the game for how health care is practiced in the United States.


CMS Five Star Quality Rating System, Centers for Medicare and Medicaid Services, CMS, pay-for-performance system, patient outcomes, Robert Coopman, Robert Coopman Consultants, Patient Protection and Affordable Care Act, Mark McClellan, Hospital Reimbursement Incentives: An Empirical Analysis, pharmacy practice, pharmacy chains, Pharmacy Quality Alliance, PQA, Laura Cranston, bonus payments, health care spending, health care costs, health care cost escalation in the United States




































































































































































































































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Inside This Issue - News

Ratings add incentive to improve outcomes

January 20th, 2014

The time period from 2004 to 2006 was not that long ago. It will be remembered in future years as the beginning of something that changed the game for how health care is practiced in the United States.

Dr. Mark McClellan was then administrator of the Centers for Medicare and Medicaid Services (CMS). He had previously been commissioner of the Food and Drug Administration, knew his way around Washington and, as a practicing internist, was familiar with the inner workings of medical care delivery. He also knew particularly well the motivators and incentives driving health care costs and impacting health care outcomes.

In 1997 he published an article titled "Hospital Reimbursement Incentives: An Empirical Analysis." Among his previous academic accomplishments were a Ph.D. in Economics from M.I.T. as well as a Masters in Public Administration from the Harvard Kennedy School of Government.

Seeing future health care cost escalation as unsustainable, it was during McClellan’s tenure as CMS administrator that he began an initiative to develop a pay-for-performance system to incentivize quality patient outcomes. Simply paying for procedures, as was the practice then, incentivized more and/or higher-cost procedures that may, or may not, improve patient outcomes.

The intellectual pursuit of that initiative led to what has become the CMS Five Star Quality Rating System.

Quality measures are now being used to rate the quality of health care practices for hospital systems, nursing homes, managed care and other health care entities. A five-point scale has been devised and is being used to create a bell curve comparing a particular hospital system, managed care organization, nursing home or other health care delivery entity against all others in their domain. Those achieving a rating above the average 3.0 will receive bonus payments, while those below the average will receive less. Bonus payments began in 2012, increased in 2013 and will increase further in 2014.

Thus, there is an escalating financial incentive for producing superior patient outcomes over time. As well, there exists a financial penalty for underachievement. Furthermore, the Patient Protection and Affordable Care Act embodies the Five Star Quality Rating System in its payment for services.

What’s more, the achieved ratings will be published on the Medicare.gov website so that individuals or families can easily see and compare one health care delivery entity against others. It is envisioned that underachieving providers will have difficulty retaining and/or attracting patients, and that superior performers will enjoy the fruits of their performance.
Pharmacy practice and the nation’s pharmacy chains are in the game.

Supporting the CMS Five Star Quality Rating System, the Pharmacy Quality Alliance (PQA) was created and is under the highly competent direction of executive director and pharmacist, Laura Cranston.

PQA has developed quality measures for best patient outcomes in the areas of diabetes medication dosing, adherence to non-warfarin oral anticoagulants, antipsychotic use in children under the age of five, medication therapy for persons with asthma, use of high-risk medications in the elderly, cholesterol management in coronary artery disease, completion rates for comprehensive medication review, antipsychotic use in persons with dementia, drug-drug interactions and appropriate treatment of hypertension in patients with diabetes.

As well, proportion of days covered for selected important therapeutic classes of medications is included.

Performance by contracted pharmacy chains in the above measured areas impact overall five-star ratings for health care delivery entities such as managed care and hospital systems. Will bonus payments for superior performance be shared with those chains contributing to the performance? One would expect so.

It must be mentioned that the CMS Five Star Quality Rating System currently applies to only those health care entities servicing Medicare Advantage enrollees. That said, the impact of the system is driving the way all patients are being cared for.

Pharmaceutical and medical device salespeople with whom this writer is familiar have all stated they are being queried about how the products they are presenting will inure to the enhancement of the five-star rating for the entity to which they are selling.

To be sure, there will be some pain in this new scheme of bonus payments for superior outcomes. After all, the system is envisioned to save billions in health care spending.

Those not achieving an average or higher rating will feel a negative result in their financial performance as well as their marketing efforts to retain their existing patients and gain new ones.

Most would agree that the nation’s decades-long health care cost escalation was unsustainable. Being hurt were individuals, companies straining to rein in health care costs for their employees, our competitiveness in the world and economic growth at home.

Was a change in incentives necessary? The answer is assuredly yes. Are pharmacy and pharmacy chains in the game? Definitely.

Total health care cost escalation in the United States in the last couple of years has significantly declined. Was it not time for a little capitalist incentive to produce superior patient outcomes? Maybe the real question is, what took so long? The impact of this game changer is being felt.

ROBERT COOPMAN is president of Robert Coopman Consultants, which is based in San Antonio. He can be contacted at rcoopman67@gmail.com.

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