Private Sector Efforts in Value-Based Purchasing and Quality Improvement

The Challenge and Potential for Assuring Quality Health Care for the 2

Private Sector Efforts in Value-Based Purchasing and Quality Improvement

Employers, labor unions, and other private group purchasers have increasingly demanded higher quality care for the dollars they spend on health coverage. One official at GTE stated, "We think that improved quality inherently costs less. Improve the quality of health care and, in turn, improve the quality of life" (The Business Roundtable, 1997). GTE found that in 1995, its high performance managed care plans had hospital costs that were 11.5 percent below the national average. Risk-adjusted mortality rates were 8 percent lower than previously expected. On the other hand, low performance managed care plans had costs that were 3.6 percent above the national average and risk-adjusted mortality rates that were only 2 percent lower than expected (Sheffler, 1996). Many private purchasers are developing quality improvement programs, developing report cards and other measurement tools to help assure that they can purchase health care based on quality, not just cost and benefits. By measuring and rewarding quality, all of these purchasers have invested their resources in an effort to improve care, increase satisfaction, and reduce costs. For example:

  • GTE provides its employees and their families with financial incentives to enroll in "exceptional quality" plans (those with high ratings on quality measures and satisfaction surveys). Employees receive report cards on plans so that they can choose a plan based on cost and quality. Initial analysis of this approach showed that employees who considered making a health plan change were most sensitive to cost. However, they also relied significantly on specific quality information, with 30 percent considering GTE's designation of "exceptional quality," and 45 percent considering the quality scores based on HEDIS and participant satisfaction measures (Sheffler, 1996).
  • General Motors blends several measures of health care quality into one amalgamated quality measure and draws from direct indicators of quality from HEDIS, employee satisfaction measures, accreditation status, and impressions gained from site visits. GM also works with its plans to develop quality improvement strategies and facilitate the sharing of best practices (Meyer, et al., 1997).
  • Digital Equipment Corporation emphasizes value (which it defines as the sum of quality of care and consumer satisfaction, divided by costs) in its health care purchasing decisions. Using information yielded from its performance reporting requirements, Digital identifies the best plan in each region as the "benchmark" plan and bases its contribution to the cost of health coverage on the premium charged by that plan (Meyer, et al., 1997).
  • The Pacific Business Group on Health requires HMOs to set aside 2 percent of the premium dollar and allows plans to keep that money only if they attain the performance standards set in customer service, quality, data collection, and other areas (Bodenheimer, et al., 1998).
  • Seven leading business and employer organizations have recently announced a new initiative, the Employer Quality Partnership (EQP), to "accelerate the growing emphasis on quality in private health plans." EQP's has released informational guides and launched a Web site as part of their efforts to educate the public about the role of employers as health care purchasers.
  • The United Auto Workers labor union requires quality accreditation for all health plans offered to its members, and it is working on a strategy to provide information, including NCQA accreditation status and some quality assessment based on HEDIS measures (AFL-CIO, 1997).

Recognizing that quality health care can also lead to increased worker productivity, health plans are developing quality improvement programs that improve productivity and reduce costs. For example, the Southern California Region of Kaiser Permanente developed an "Intervention for Employment Maintenance for Members with End Stage Renal Disease." This program involves a pre-dialysis orientation for patients. Six months before beginning dialysis, patients and their families are referred to a clinical social worker and nurse educator for evaluation and education. This collaborative team effort continues throughout the periods prior to and during dialysis, and routine monitoring and education is available for the patient. As a result of this program, blue-collar workers in the Kaiser program were 2.8 times more likely to maintain employment than a control group, with these individuals working an average of 35 hours per week. According to Kaiser, "Working patients had increased quality of life, self-esteem, better health, and a more positive attitude toward work and life than nonworkers." (Kaiser Permanente, 1996).

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Why We Need a National Effort to Improve Quality

Some effective strategies have been developed to improve the quality of health care delivered to patients every day. The promising developments described in this report, along with other efforts by private industry, labor unions, States, and the Federal government, are reason for optimism. However, it is also clear that a patchwork of efforts will not lead to significant, continuous nationwide improvements in health care quality.

As the President's Commission noted, "Incentives to improve quality have been diluted by measurement efforts that vary widely in their aims and scope, and that have been, at best, only informally coordinated" (Final Report, 1998). There are many areas that have been left unaddressed by the current system. For example, there are few quality measures or quality improvement programs on chronic conditions, and little data about quality care in institutional settings, such as nursing homes or home health agencies. Moreover, there are millions of consumers and public and private purchasers that do not have access to any of this type of information.

Also, the current system is often burdensome and redundant. For example, health plans and providers often have to collect excessive data to satisfy the variety of different reporting requirements and information needs of purchasers and consumers. Testifying before the President's Advisory Commission, Dr. Steven Udvarhelyi of Independence Blue Cross of Pennsylvania characterized the development and application of performance measures as essential to improving quality. However, he also noted that to report separate versions of HEDIS 3.0 required for commercial, Medicaid, and Medicare populations and for each of three states, Independence Blue Cross had to file nine different reports with a total of 675 indicators. State-by-State mandates for ad hoc performance measures add to the quality measurement burdens facing his organization.

Moreover, at present, employers, labor unions and other group purchasers do not have a central repository for learning about best purchasing practices, nor do they have affordable access to the technical assistance that would permit replication of the practices of pioneers (Meyer, et al., 1997). Therefore, a program that has proven effective in lowering mortality following cardiac surgery in New York hospitals or a model asthma program that has improved health outcomes and saved purchasers money may never be borrowed by others interested in implementing similar initiatives.

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Proposing a Forum for Health Care Quality: Measurement and Reporting

It is clear that directing attention to measurement gaps, reducing the burden of multiple reporting requirements, and encouraging the sharing of best practices will require much greater coordination across sectors of the health care industry.

In its Final Report to the President, the Advisory Commission on Consumer Protection and Quality in the Health Care Industry recommended a Forum for Health Care Quality Measurement and Reporting that would:

  • Develop a comprehensive plan for implementing quality measurement, data collection, and reporting standards to ensure the widespread public availability of comparative information on the quality of care furnished by all sectors of the health care industry.
  • Establish measurement priorities that address the national aims for improvement and that meet the common information needs of consumers, purchasers, Federal and State policymakers, public health officials, and other stakeholders.
  • Periodically endorse core sets of quality measures and standardized methods for measurement and reporting.
  • Make recommendations regarding an agenda for research and development needed to advance quality measurement and reporting, and sponsor research and development activities if resources are available.
  • Develop and foster implementation of an effective public education, communication, and dissemination plan to make quality measures and comparative information on quality most useful to consumers and other interested parties.
  • Encourage the development of health information systems and technology to support quality measurement, reporting, and improvement needs.

To be effective as a private sector entity, the Commission noted that the Forum must be broadly representative of key stakeholders in health care. Such participation will draw upon public and private group purchasers; individuals and organizations focused on representation of consumers and patients; health care providers; labor unions; experts in quality assurance, improvement and measurement; quality oversight organizations; health care researchers; and public health experts. This broad participation will enable the Forum to be attuned to the changing needs of the health care system, and as a private sector entity, afford it greater flexibility to respond. Substantial representation of purchasers and consumers in its governance will also position the Forum to marshall market forces needed to drive this initiative forward. By coming together, this wide range of private and public purchasing power would be able to use their combined market power to assure they receive the information they need.

At the same time this effort would reduce the burdens on providers and health plans who would be able to collect a consistent set of data, reducing the duplication and burdens in the current system. Health care providers would also be able to use this information to develop targeted ways to improve their own performance. Moreover, by collecting and making this information publicly available, consumers, employers, and other purchasers would be able to make meaningful comparisons on the quality among plans and providers. For the first time, health plans and providers would compete on the quality of services not just costs and benefits.

Developing and disseminating these consistent measures of quality would also enable individuals to track the health care industry's progress in achieving national quality improvement aims and to guide public planning and policy making.

As the examples in this report demonstrate, collaboration does occur among providers, health plans, consumers, employers, and other health care purchasers, but these examples are far too few and often too isolated. It is no longer fair or sufficient to depend on these leaders to carry the full weight of this effort. There is a clear need to coordinate and build upon these leading edge efforts, so that many more Americans can benefit from this critical work to advance the quality of health care.

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Planning for a Forum

To launch a Forum for Health Care Quality Measurement and Reporting, the Quality Commission recognized the need to resolve important issues of governance, organizational structure, and financial support under the auspices of a neutral convener. The first stage of this process will be a 6-month period where a planning committee will work to lay the groundwork for the operations of the Forum, recruit stable funding, and ensure broad representation of stakeholders. Private and public purchasers, consumer groups, health plans, and healthcare accrediting organizations have welcomed the efforts to create this private sector entity and affirm the need for collaborative and coordinated efforts.

Building on the work of the Advisory Commission, this report highlights some of the best examples of what the public and private sectors can do to improve health care quality. Their leading edge efforts tell us that we can do better. By moving from a patchwork of public and private efforts to systemwide changes, we can bridge the gap between actual practice and best practice. Creating a Forum for Health Care Quality Measurement and Reporting is a critical step in this direction.

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Page last reviewed July 1998
Internet Citation: Private Sector Efforts in Value-Based Purchasing and Quality Improvement: The Challenge and Potential for Assuring Quality Health Care for the 2. July 1998. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/professionals/quality-patient-safety/quality-resources/tools/21st/21st-century-challenges3.html