Changes to the Delivery Side of Health Care Under the PPACA

February 14, 2011, 3:17 PM

The Patient Protection and Affordable Care Act (PPACA) has the goal of expanding health care access to 32 million people while it also seeks to contain the growth in health care spending through the establishment of new public programs in addition to the imposition of new coverage mandates. The financial cost structure has been the focal point of much of the PPACA discussion over the past year. However, the delivery side of the healthcare reform equation is of utmost importance as well, and deserves adequate if not equal consideration and discussion.

The quality initiatives in the PPACA are understated in terms of importance. Many of the new initiatives set forth in the PPACA will help to manage program costs on the front end. However, it is the shift toward quality based reimbursement that could very well result in the largest impact on the system in the long term.

A number of demonstrations have been carried out suggesting that financial incentives to improve the quality of care result in increased quality of care and reduced costs to Medicare. The Hospital Quality Incentive Demonstration improved quality across the board in hospitals in 38 states that were paid based on quality metrics. In another demonstration, the Medicare Management Performance Demonstration, over 500 participating small practices experienced quality improvements across the board. Most strikingly, the Physician Group Practice Demonstration examined 10 practice groups over 4 years and reported that all 10 practice groups showed marked improvement in at least 29 of 32 quality performance measures over such period. In the final year alone, the total savings to Medicare from just 5 of the 10 group practices amounted to $38.7 million, with those 5 group practices sharing $31.7 million of such savings as incentive payments for providing quality care and in so doing reducing program costs.

In addition to the quality initiatives set forth in the PPACA which will be a large factor in harnessing healthcare spending, transforming the service delivery system will also pay its dividends. The main vehicle for transforming the delivery system will be Accountable Care Organizations (ACOs), which will be the topic of the next blogstay tuned.
--Christopher L. McLean