Summer may be winding down, but this time the usual back-to-school preparations are missing (though we don’t entirely miss the last-minute stress of buying boxloads of crayons, binders and pencil boxes). Despite it all, we continue to track important health spending-related research. This month, we look at whether hospital consolidation improves quality and efficiency, and how primary care transformation requires a focus on both spending and outcomes. Let’s dig in!

Digging Deeper

Market Consolidation Sends Prices Up, But Simple Solutions Are Elusive

This month, Health Affairs published the deliberations of its Council on Health Care Spending and Value on the topic of provider market consolidation as a driver of price. It’s a timely topic: COVID-19-related disruptions are driving even more hospital mergers and acquisitions of group practices. That should set off alarm bells, according to the Council: the data are clear that increased consolidation increases prices, and the Health Affairs review of the Council discussion provides an invaluable reading list of the research undergirding that conclusion.

But naming the problem is only the first step. The group noted the difficulty of untangling the potential for cost-savings around consolidation – from more integrated care or efficiencies – as well as the lack of evidence for that benefit. The Council also provided an overview of the difficulty of solutions, settling on the need to increase post-merger regulation but acknowledging that the tools to do so may not exist.

Why It matters: It can be stubbornly hard to find interventions that drive down health costs without tradeoffs (indeed, that is the subtext of most issues of this newsletter). But some forces that drive costs in the other direction – including market consolidation – may have a better evidence base. The Council’s most important recommendation, then, may be the group’s call to refine our understanding of the phenomenon by using pandemic-spurred consolidation as a research laboratory. By carefully assessing these acquisitions, we can better understand consolidation’s ill effects and whether there are approaches that ameliorate them.

In High-Value Care, Improving Quality and Reimbursement Go Hand-in-Hand

Relying on intuition rather than research is a dangerous approach to health policy; seemingly good ideas may not translate into slam-dunk policy solutions. That’s what makes a new study in Health Affairs that examined a shift away from fee-for-service reimbursement in Oregon community health centers so encouraging: it provided robust evidence of how changing a reimbursement approach can indeed lead to changes in spending.

Researchers from Oregon Health & Science University and OCHIN, Inc. analyzed data from the state’s 2013 introduction of the “Alternative Payment and Advanced Care Model” in Medicaid, which replaced fee-for-service reimbursement with a per-patient rate, comparing spending by community health centers before and after the model was introduced in 2013. The researchers found that the APCM model resulted in a 42.4% reduction in price-weighted traditional primary care services compared to non-participating clinics. Researchers attributed the results to a decline in imaging services, demonstrating a change in financial incentives as a result of the new payment reform.

Why it matters: While community health centers that provide a primary-care medical home might, on the surface, be thought of as a strategy for transforming care, the care approach alone isn’t enough to drive down costs. Looking more closely, the new research makes clear that the right financial incentives are critical to ensuring that high-value care is enabled. With clinics being reimbursed per visit, it exposed the additional services – common under fee-for-service – that may not have been needed. As the Oregon researchers noted, the state’s actions could inform future payment reforms for other state programs that aim to enhance quality of care in Medicaid.

What We’re Reading

  • Harrison JM, et al. Economic Outcomes of Insurer-Led Care Management for High-Cost Medicaid Patients. July 13, 2020, The American Journal of Managed Care.
    The authors examined a promising approach to curtailing spending: a care management program for high-cost Medicaid patients. But like the disappointing results from the randomized trial of “hotspotting” from Doyle et al in January, the potential wasn’t borne out by research. The paper, which used deidentified health plan claims data, found no differences in cost or utilization in patients who received community-based care management and those who did not, suggesting that better integration may not magically drive down costs.
  • Jayakumar P, O’Donnell J, Manickas-Hill O, Japinga M, Mather C, McClellan MB, Bozic K. Critical Considerations For Condition-Based Alternative Payment Models: A Multi-stakeholder Perspective. July 17, 2020, Health Affairs Blog.
    Researchers took a closer look at condition-based payments (CBPs), which are a hybrid alternative payment model. This model is intended to reward “effective specialist management of high-priority chronic conditions using interventions that improve outcomes and reduce costs over the continuum of care.” In examining the barriers to broader use of these models, they note that “effective results are most likely to come from incremental, shared efforts to standardize model concepts across the health care system in a way that ensures sustainability, transparency, and scalability.”

Dialogues on Health Spending

It’s time to plan ahead for some September events that GBTS partners are hosting, and to catch up on a low-value care discussion you might’ve missed.