--2 4 - - q disseminated. Private firms have little incentive to expend the resources to are clincluding early related the co cha ncngin epts.g Viewed demograph inics this way of thit e becomes workforce,,clear the that laborhealth intensive uncertainty, the logic of medical decision making is an important EBRI Patient satisfaction is an outcome measure that is relatively easy to care cost inflation and health care quality are inseparable issue,';. All effective develop nature of quality health assessment care services, methodologies and the introduction if other organizations of new technology, can freely even determinant of quality and cost effectiveness. Process measures are used by i ! collect. There have been a number of studies attempting to assess patient health care cost management strategies must assess the quality of health care. make if the us market e of those for health methodologies. care services However functioned , to establi perfectly. sh their Thecredibility market for with Peer Review Organizations (PROs) in reviewing the quality of care received This statement is written in an effort to help the Committee assess the satisfaction and its relationship to the structure and process of care. In providers and patients quality assessment firms must reveal their health care services fails in that the mix of services provided is not necessarily by Medicare recipients and by organizations that perform utilization review. need for The Medical Care Quality Research and Improvement Act of 1989 reviewing this literature Cleary and McNeil note that, "The most consistent Health methodologies. Care Quality Facing this paradox many third party utilization review firms the mix fully informed consumers would wish to purchase, and the services Generally examining the process of care involves assembling a panel of (H.R. 1692). Below it is argued that the inability of consumers, payors, and finding in the satisfaction literature is that characteristics of the provider or will provided under supply are not quality producedassessment at minimum even cost. in the presence of heightened physicians who review medical records to determine the appropriateness of providers of health care to assess quality of care is a major contributor to demand the organization for it. that make care more 'personal' are associated with higher Defining and measuring health care quality are controve:sial and costly health the care care received. cost inflation. A number Without of studies objective employing information this method evaluating have indicated levels of satisfaction. ''9 endeavors. Quality of care is a multidimensional concept: it can be viewed The failure of the market for health care services is the inability of that a significant proportion of the treatment provided to patients is alternatives, medical treatments are adopted on the basis of provider narrowly (as clinical effectiveness) or broadly (as all the attributes of medical The challenge for public policy is to promote both the research inappropriate. consumers of health 6 care to evaluate the quality of the services they purchase. preferences, aggressive marketing, or unsuitable criteria (i.e., "If it costs more Satisfaction of course, is subjective. Attributes of care which some care that patients value). The difficulty with any multidimensional concept is necessary The widespread to evaluate availability the quality of health of careinand surance the incentives coupled with for providers the to it must be better."). There presently is little economic incentive for providers patients find satisfactory others may find unacceptable. The HMO industry weighting the disparate components. Even if individuals agree on the adopt characteristics cost effective of the practices. provider The reimbursement cost management policies initiatives of private that and have (since been As with structural measures of quality of care the relationship between to practice cost effective medicine in large part because purchasers of health regularly reports survey results which indicate that their enrollees are very attributes of care that determine its quality, they may disagree about the process the introduction and outcomes of Medicare) is not well public established. insurers has The reduced info::mation or eliminated needed to the implemented provide incentives to purchase and provide cost effective care care services can not differentiate low (high) cost providers from low (high) satisfied with the care they receive. However, at least two studies have found relative importance of each attribute. While any definition should include but incentives determine do not affect the to weigh effect the majority the of process benefits of on insured of outcomes common persons. procedures is not More yet available. importantly and practice Researchers the patterns quality providers. high levels of dissatisfaction among HMO enrollees who were assigned, but the efficacy of treatment its importance relative to other components of market examining against cannot theirthecosts. provide quality Thecost ofresult medical effective is that evidence care new until technology argue it ca that, n be is"...for determined introduced at least what with some little care did not chose, that style of care. 10 quality is subjective. or important no evaluation practicesof , its thebenefits existing relative evidenceto costs. is of such Providers poor quality adopt practices that it is is cost effective and what exactly the tradeoffs are between cost and quality. Research into the outcome, effectiveness, appropriateness, and other T-68 based on personal preferences. Patients lack the information necessary to H.R. virtually 1692, impossible The Medical to care determine Quality even Research what and effectImprovement the practice Act has of on 1989 aspects of the quality of medical treatments is needed not only to promote The above discussion indicates that there is no single measure that Third party payers are beginning to use a definition of quality care that, may patients, evaluate provide the much the quality less necessary whether of carefirst they that step receive effect in con isbefore, spreferable tructingduring an to , efficient the or after outcomes health an episode which care of good health care, but also to assure the efficient functioning of the market for adequately captures all the dimensions of quality of care. The definition of illness. Medical researchers have had little or no incentive to assess the at least implicitly, requires not just that care be efficacious but also cost would have occurred with other options. ''7 delivery system. health care services. Quality assessment must go beyond merely determining quality is at least in part subjective, but even the measurement of the effective. In a sense, if two U. treatment S. House C regimes ommitteeprovide on Ways the and same Means level of relative benefits of the procedures they developed; to be adopted, new the efficacy of a given procedure, it must also determine the efficacy of the Subcommittee on Health characteristics One list of of outcome care over measures which individuals could be described might disagree as '"the five is incomplete. Ds': patient satisfaction and yield the same outcomes, the lower cost treatment is procedures did not have to be more effective or less expensive than existing procedure relative to its alternatives. This is important regardless of how Moreover, the information necessary to determine if a .limited set of easily Hearing on H. R. 1692 judged to be higher quality. Utilization review is an example where the payer procedures. death, disease, disability, discomfort, and dissatisfaction. ''8 Outcome measures health care is financed, but if we are to continue to have a private health care observable characteristics, such as mortality rates, nurse to bed ratio, or board The Medical Care Quality Research and Improvement Act of 1989 determines quality care as the least expensive care. have intuitive appeal in that they can be relatively inexpensive to collect and delivery system we must provide information which allows individual certification, could serve as indicators of quality is not yet available. The appear Medical to be easy research to interpret. has produced For example, a rapid HCFA expansion has begun in treatment a programoptions which purchasers of health care to weigh the costs and balances of their health care result is that it is unclear what exactly our health care dollar is purchasing. choices. Measuring health care quality is atMay least 24, as 1989 difficult as defining it. releases without hospital concurrentmortality research rates on the in an relative effort efficacy to provide of each consumers option. with This has Donabedian classified attempts to measure quality of care as studies of prevented the formation of a medical consensus on the proper treatment of a information on hospital quality. Hospitals indignantly, and correctly, pointed Policy Implications structure, process, and outcome. 3 Structure refers to the attributes of care: the out giventhat set the of problem symptoms. with It has simple beenoutcomes well documented measures that is that large good variation quality in care A public-private partnership is needed to finance, perform, and qualifications of the care givers, the resources available at the site of care, and may not prevent a poor outcome and that providers treating sicker patients practice patterns exists among physicians practicing in the same geographic disseminate the results of research on the measurement of the quality of other attributes.There Evaluation are underlying of the process causes for of care health examines care costtheinflation activitiesother of than area are more 1. Thelikely paucity to have of research bad outcomes on medical regardless outcomes of the results quality in the of care practice they of health care services. The private sector cannot supply all the needed market failure. 11 A growing, and aging, population and advances in health care provide. givers, the decisions made at each step in an episode of illness, and the medicine as an art rather than a science. Malpractice proceedings, which are information alone. Utilization review firms which presently review the Written Statement of care technology increases the demand for health care services. The increased appropriateness of the care provided. Outcome measures the effects of care on intended to punish incompetent providers, instead force lay juries to decide existing literature for information of this kind are reluctant to share this demand drives up costs as the health care industry competes with other health status and patient satisfaction. the appropriate Simple outcome medical measures practice for must a given be adju condition. sted to account The threat for facto of rs other information even with providers whose cases they are reviewing: it is their William S. Custer, Ph.D. sectors for resources. As a matter of public policy these increasing costs would stock malpractice thaninthe trade; quality suits theirof may investment. carelead which physicians In might orderaffect to for perform the outcomes. market more These for procedures health factors care than include they Research Associate not be troublesome if more health care were actually being provided. One These measures of quality are interrelated. As Donabedilan and others 4 deem necessary or cost effective. Reynolds, Rizzo, and Gonzalez estimate that the types of cases a provider treats (casemix), the severity of illness, and services to function properly this information must be widely available. definition of economic growth is more people purchasing more products. have pointed out measures of structure and process are only important as the combined costs of malpractice insurance premiums, settlements and patient characteristics. A number of systems have been developed to measure Moreover, the concepts and terminology of this research must be indicators of quality if they are related to outcomes, and measures of defensive medicine may be as high as $14 billion per year.leading some case mix and severity. Diagnosis Related Groups (DRGs) classify inpatient standardized so that all participants are speaking a common language and the The problem is that the market for health care services fails. The risks outcomes are important only if they can be related back to the structure and physicians to stop performing some high risk procedures. 2 admissions by diagnosis. They can be used to determine a hospital's casemix results from one project can be directly compared with results from another. from the uncertainty in the efficacy of treatment have largely not been born process of care, and not to environmental or other factors. and are used by Medicare to reimburse hospitals. There are a number of The public sector can, and should, help achieve this objective. by either providers or patients. There is not a market mechanism which The sources of health care cost inflation relate back to the allocation of systems such as APP, CHE and the Medical Illness Severity Grouping System evaluates the benefits of new, or existing, treatments against their costs. Structural measures of quality have historically been employed in the The remainder of this statement reviews the causes of health care cost risk. (MEDISGRPS) Tax policy which not only use encouraged physiological the indicators spread of to health measure insurance, a patient's but aided risk Instead, competition among providers encourages the adoption of new various accreditation processes used by both private agencies (the Joint the accommodation of health care cost inflation as employees were pushed by inflation, of dyingthe to measurement determine theofseverity health care of thequality, patient'sandcondition. the need for research Commission practiceson in theorder Accreditation to offer a of wider Health range Care of potential Organizations services. (JCAHCO) Providersfor who general price inflation into higher marginal tax brackets. The spread of health on quality measurement. offer cost effective practice are not rewarded by the health care market in the insurance and the characteristics of health insurance in which the insurer example) and public agencies (such as the Health Care Financing These and other similar systems have been used by providers and absence of information justifying that style of practice. In most other markets Administration Health Care Cost (HCFA)). InflationAs an example, in reviewing a hospital JCAHCO bears the risks associated with the uncertainty in the efficacy of treatment, insurers to evaluate the quality and cost effectiveness of care. For example, a price and quality rise together. Patients lacking any other information on increased the demand for health care services and stimulated the looks at a long list of structural measures such as the physical plant of a hospital can assign a severity measure to each patient within a DRG. Then the quality may see no reason to move to a less expensive provider. hospital development and medical of new staff procedures. organization. Hospitals The relationship, and physicians however, in competitive between hospital National can evaluate health care each expenditures physician's rose outcomes, by 8.5% using in 1986 mortality and 9.8% or in some of these factors and health outcomes seems tenuous at best. 5 markets The views are quick expressed to adoptin new this statement technology, are raising solely their thosecosts. of the Providers, author. They 1987. morbidity The United rates States (such as now length spends of hosp overital 11.5% stay). of its Within Gross each National DRG Product the The market is unable to produce the amount of quality assessment should not be attributed to the officers, trustees, members, associates, (GNP) given on a longer health list care.of The potential effect procedures of health care thatcost could inflation be performed is similar for to a a given tax physician with the most severely ill patients should have the highest rates of necessary to ensure the provision of cost effective care. Cost management Process contributors, is an important or subscribers component of the of Employee quality assessment Benefit Research because Institute, it its condition, provide more intensive and more specialized care. The increased on bad labor. outcomes In the long and the run, highest most economists costs. The accuracy agree thatoflabor this style bears ofthe quality full requires that quality assessment methodologies be developed and widely costs of health care services increases consumer demand for health insurance. focuses staff, directly or its on Education the uncertainty and Research in the efficacy Fund. of treatment. Given this burden evaluation of health depends care cost upon inflation; the degree in the to which nearer the term severity employers and casemix face higher labor costs and lower returns on investments due to heaIth care cost inflation. measures capture the effects of factors other than quality on outcomes. 9 Cieary, Paul D. and Barbara J. McNeil, "Patient Satisfaction as an Indicator if Cost management strategies can be viewed as attempts to limit moral Health benefits have grown into a major component of labor costs; in 1970 Quality Care" Inquiry, Vol. 25, No. 1 (Spring, 1988) pp:25-36 3 Donabedian, Avedis, "The Quality of Care: How Can It Be Assessed?" Journal of hazard and to force patients and providers to assess the expected cost and health benefits comprised 2.4% of total compensation and 23% of total the American Medical Association, Vol 260, No. 12 (Sept. 23/30, 1988) pp: 1743- 6See benefits for ofexample, each treatment "Does Inappropriate decision. The Use benefits Explain of care Geographic and the Variations quality of in care benefits. By 1987 health benefits accounted for 5.4% of total compensation and 1748 10 See for example Welch, W.P., and Richard G. Frank, "The predictors of HMO 33% theofUse all benefits. of Health Care Services?" Journal of the American Medical Association, Enrollee Populations: Results for a National Sample," Inquiry, Vol.23 No. I pp: Vol. 258, No. 18 (Nov. 13, 1987) pp: 2533-37 16-22 (Spring, 1986) and Garfinkel, S.A., W.E. Schlenger, K.R. McLerory, F.A. 4Wyszewianski, Leon, "Quality of Care: Past Achievements and Future 1 For a good review of the evidence see Wennberg, John, and Alan Gittelson, Public and private purchasers have adopted a number of health care Bryan. B.J.B. York, G.H. Dunteman, and A.S. Friedlob, " Choices of Payment Plan Challenges" Inquiry, Vol. 25, No. 1 (Spring, 1988) pp:13-24 "Variations in Medical Care anmng Small Areas" Scientific American, Vol 246 7Eddy, David M,, and John Billings, "The Quality of Medical Evidence: in the Medicare Capitation Demonstration," _Medical Care, 24 (7) pp:628-640, cost management initiatives in an attempt to restrain the growth in their (1982) pp: 120-135 Implications for Quality of Care," Health Affairs, Vol 7, No. 1 (Spring, 1988) pp. (July, 1986) health care costs. The stated goal of these initiatives is to restrain costs 19-32 5 JACHCO is moving toward adopting outcome measures of quality in addition to their without structural reducing measures. the quality See O'Leary, of care. Dennis, All health "Thecare Joint cost Commission managementLooks to 2 Reynolds, Roger A., John A. Rizzo, and Martin L. Gonzalez, " The Cost of l l See Ginzberg, Eli, "A llard Look At Cost Containment," New England Journal the Future" Journal of the American Medical Association, Vol. 258 (Aug. 21, strategies 8 Medical Lohr, are Kathleen Professional therefore N., Liability" attempts "Outcome to The Measurement: correct Journal for the ofConcepts the failure American and of the Questions" Medical market for Inquiry, of Medicine, Vol. 316, No. 18 (April 30, 1987) 1987) healthpp:951-52 care. Health care costs will continue to rise for a number of reasons Association, 1987: 257; pp: 2776-2781 Vol. 25, Np. 1 (Spring, 1988) pp: 37-50 EMPLOYEE BENEFIT RESEARCH INSTITUTE/EDUCATION AND RESEARCt| FUND _121 K Street, NW / Suite 600 / _,Va,_hingto,. I)C 2_X_7.li21 Telephone ZOZ-6_g-0670 FAX 20Z-77_-6HZ _01 (_}(I) tax exemp! _'tl_gqT_41_801