Nov 20, 2011

Evaluating Supply-Side Approaches

The resources required to significantly change provider behavior, whether at the level of the physician, hospital, or MCO, make it unlikely that relatively small purchasers of health care (e.g., individuals and small businesses) acting alone will be successful in driving this approach to quality improvement. However, by banding together in purchasing or policy making, a supply-side quality improvement agenda can be advanced. Business coalitions on health care have proliferated throughout the United States, most with a focus on controlling costs. Many, however, also have addressed issues of quality of care, with some effect. In Michigan, for example, the Southwest Michigan Healthcare Coalition championed the adoption of a uniform hospital database for analyzing severity of illness, health care outcomes, and cost. The information derived and published from the database has been used to identify deficiencies in quality and to inform and monitor quality improvements in area hospitals. The coalition is also active in promoting the concept of a statewide uniform provider database.
Providing feedback on hospital and medical staff performance, with encouragement to initiate quality improvement activities, can produce significant results. This approach was applied by Medicare in its Cooperative Cardiovascular Project, yielding improvements in the use of state-of-theart care for acute myocardial infarction and reducing mortality for this condition.
Large employers and purchasing coalitions can use quality data to selectively contract with providers. A survey of business coalitions found that 35 percent directly contract with providers, and 20 percent contract with "centers of excellence" for high-cost and/or high-risk conditions or procedures. The value of such contracts may be enhanced by incorporating pay-for-performance provisions. JCAHO has published principles that are instructive in designing pay-for-performance programs. These principles can be found
While guidelines can be a useful tool in quality improvement, a number of concerns have been raised about the ways in which guidelines are currently developed and implemented. A study of clinical practice guidelines found that fully half of those published did not adhere to established methodological standards.
For information on business coalition activity in your area, contact the National Business Coalition on Health at
Larger businesses and health care purchasing cooperatives may have the ability to influence quality of care more directly through their managed care purchasing decisions. By increasing the numbers of covered lives at stake in a managed care bid process, large employers and purchasing cooperatives can generally enhance the responsiveness of MCOs to the quality evaluation described above. This can help ensure the selection of an MCO with superior quality. Ensuring that the MCO will maintain or improve quality of care, however, may require the purchaser to take additional steps.
When contracting with an MCO, the following approaches to promoting CQI are recommended:
  • Identify key deficiencies in the MCO's QA/CQI and stipulate that they be remedied in a specified reasonable period. Failure to remedy deficiencies in the agreed-upon period should result in financial penalties to the MCO. In a self-insured, administrative-services-only arrangement, this penalty may be a significant portion of the MCO's administrative fee (e.g., 10 percent). In a fully insured arrangement, the penalty may be cost sharing by the MCO in noninsured, employer health-related costs (e.g., worksite health promotion/disease prevention).
  • Specify reliable and valid measures to be used to track MCO quality over the life of the contract. Ideally, these will be measures already tracked by the MCO and will include appropriateness of care, excellence of care, and satisfaction. It may be necessary to stipulate that the MCO adopt new measures, or to hire an independent organization to do the MCO quality measurement.
  • Require periodic reporting of the above quality measures and track the MCO's performance. Arrange to meet with key MCO staff to review the reports. Financial penalties and rewards should be specified in the contract for failing to meet or exceeding agreed-upon targets for improved performance, respectively.
By monitoring MCO performance in routine reports, providing feedback in periodic meetings, and reinforcing CQI with financial rewards and penalties, employers can continue to enhance the value of their health care expenditures over the life of an MCO contract. This approach has been taken by the Pacific Business Group on Health in negotiating more than two dozen performance guarantees with 13 California HMOs. Of more than $8 million at risk for meeting performance targets, nearly $2 million was refunded for sub-par performance. Eight of 13 plans missed their targets in the area of childhood immunization. Most plans met or exceeded their targets in such areas as satisfaction, cesarean section rates, mammography, Pap smear, and prenatal care.


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