How reforms are changing health care risk management Featured

10:31am EDT November 1, 2011
How reforms are changing health care risk management

The Patient Protection and Affordable Care Act is well named, as its aim is to make health care providers accountable for delivering better care. As a result, the reforms make skilled health care risk management even more vital.

“The Patient Protection and Affordable Care Act has initiated a fundamental shift in the manner in which health care providers are going to be paid,” says Ron Calhoun, managing director and national health care practice leader with Aon Risk Solutions. “We are beginning a transition from volume-based methodologies to outcome-based methodologies. Prior to this, we have been on a fee-for-service model, as health care providers were compensated for volume.”

Smart Business spoke with Calhoun about how risk management integrates with health care in an age of reform.

What effect is health care reform having on the health care delivery system?

One of the consequences is that reform is creating the need for delivery systems to more fully integrate and provide a broader continuum of services. To take a bundled reimbursement, as opposed to the old pay-for-volume model, health care providers will be compensated based on outcomes. That creates a need for them to more fully integrate. On the front end, they will need to build out their ambulatory capabilities, and on the back end, they will need to improve post-acute capabilities.

How will the shift to outcome-based compensation affect providers?

The Centers for Medicare and Medicaid Services has implemented a compensation mechanism called the value-based purchasing program for providers to measure quality. There are 12 clinical process measures and nine patient experience measures. This program, which takes effect in fiscal year 2013, is about 70 percent weighed toward the 12 clinical processes and about 30 percent weighed toward the nine patient experience measures.

If health care providers have Medicare or Medicaid reimbursements in 2013, they can participate in this program. Then, those measures will have a real impact on their reimbursement thresholds. The measurements, plus the overall shift away from volume toward getting paid for outcomes, makes risk management programs even more critical than their historical place in patient safety.

How can a risk management program help with those measures?

Nationally, our health care delivery system does not have a standardized, systemic quality measuring process. When The Institute of Medicine issued its 1999 report, ‘To Err is Human,’ it started the patient safety movement.

Risk management has been proactive in patient safety since 1999, but we still have negative outcomes in our health care delivery service. After a six-year decline, we are starting to see an increase in the frequency of health care professional liability claims.

What factors affect the frequency and severity of health care liability claims?

From 2000 to 2006, there was a decrease in the frequency of health care professional liability claims, driven by three factors. One was the proliferation of tort reform. Second, there was an investment in patient safety systems at the provider level. Third, the provider community did a good job managing the perception of there being an availability-of-care crisis because of malpractice costs. Those have contributed to a downward pressure on health care professional liability claims.

From 2007 to the present day, there have been continued investments in patient safety initiatives, but we are seeing an increase in claims because of two factors. The first is tort reform erosion. In some states, tort reform bills have been either reformed or weakened. The second factor is economic stress.

There is an interesting correlation between the unemployment rate and an increase in health care professional liability and medical malpractice claims frequency. For every 1 percent increase in the unemployment rate, there is a corresponding 0.3 percent increase in health care professional liability and medical malpractice claims frequency, with a three-year lag. We are starting to see the post-2007 unemployment rate as a contributing factor to increasing claims frequency.

Unlike claims frequency, claim severity has increased at a steady rate, 4 percent over the past six years. That is cause for concern.

What can be done to improve outcomes and reduce medical claims?

One of the biggest barriers to improving risk management and patient safety is the ability to measure outcomes and the speed with which outcomes can be measured. One feature of the Patient Protection and Affordable Care Act is providing financial incentives to hospitals and physicians to further the meaningful use of electronic medical records (EMRs). The proliferation is dramatic, but it is still a fractured business.

There are three levels of sophistication in EMRs. The first level is simply making a paper file electronic. The second is computerized physician order entry, or CPOE. The third and most complex level is platforms with clinical decision support data. That third level will be necessary going forward to drive down the incidence of preventable medical errors.

More sophisticated EMRs will improve outcomes because physicians will have clinical decision support to help them adhere to clinical protocols at their fingertips. This is important because one of the biggest variables for integrated delivery systems to manage as they make the shift from volume-based to outcome-based methodologies is their ability to narrow physician practice pattern variation.

This technology comes with liabilities. If physicians have clinical decision support at their fingertips and depart from protocols, and an adverse event occurs, these errors could have a greater financial consequence than in the absence of such technology.

Ron Calhoun is managing director and national health care practice leader with Aon Risk Solutions. Reach him at (704) 343-4128 or ron.calhoun@aon.com.