JAMA: Time for Experiments With Payment Reform Is Over

An effort by the University of Utah health system created an "opportunity index" to identify areas of cost variability that would show physicians where they could find savings and improve quality.

The University of Utah Health Care system reported this week in JAMA on an effort to create and use a value-driven outcomes tool that pinpointed variations in care in 3 high-cost areas.1 As impressive as the results were, more important may be the conclusions: the time for pilots and tinkering with volume to value is over, say Michael E. Porter, PhD, and Thomas H. Lee, MD, MSc, in a commentary.2

Bundled payments are here, they say; payment reform is no longer a matter of “if” or “when” but “how.”

Some groups, including the American Hospital Association, still question whether CMS is moving too quickly on bundles in cardiac care or making another adjustment to the hip and knee bundled model that just became final in April. But others have told The American Journal of Managed Care that the need to drive value is so dire that it’s simply not possible to move at a pace that makes everyone comfortable.

That said, CMS has discussed some exceptions for implementing pieces of the Medicare Access and CHIP Reauthorization Act to accommodate small or rural practices that need more time to prepare for the new law.

For large health systems, the article in JAMA, led by Vivian S. Lee, MD, PhD, describes how physicians were given an analytic tool that allocated clinical costs and quality measurements to individual patient encounters. Physicians knew some variables that the tool would take into account, but if that drove better care, that was not a problem. The Utah system identified 3 target areas for improvement: total joint replacement, sepsis care, and laboratory utilization by hospitalists.

From July 1, 2014, to June 30, 2015, the system had 1.7 million patient visits, with 34,000 discharges. Professional costs accounted for 24.3% of total costs for inpatient episodes, and 41.9% of costs for outpatient visits. Cost variability was high for postoperative infection and sepsis, and low for organ transplants. Among the changes:

· For total joint replacement, compared with the baseline year (2012), costs were 7% lower in the implementation year, and 11% lower in the postimplementation year. A composite quality index was 54% at baseline and 80% in the first year of implementation.

· Costs for hospitalist laboratory testing fell from a mean of $138 per day to a mean of $123.

· In sepsis care, the measurement was the time from systemic inflammatory response syndrome criteria to first anti-infective agent administration. The time fell from 7.8 hours to 3.6 hours.

As the commentators noted, a key event in the process was the creation of the “opportunity index,” which identified diagnoses with high direct costs, as well as the areas of variation where savings might be found. “Many organizations have difficulty simply getting started on value improvement because they do not know where the opportunities are greatest,” they wrote. “Every healthcare leadership team needs its own opportunity index to help decide where to begin.”

In the case of the University of Utah, outcomes in joint replacement were improved greatly when physical therapists’ schedules were adjusted so that almost every patient got out of bed the day of surgery—“a change that was associated with a 9.5% decrease in average length of stay.”

This level of focus shows that changing healthcare one condition at time is challenging, long, and very possible, they wrote.


1. Lee VS, Kawamoto K, Hess R, et al. Implementation of a value-driven outcomes program to identify high variability in clinical costs and outcomes and association with reduced cost and improved quality. JAMA. 2016;316(10):1061-1072.

2. Porter ME, Lee TH. From volume to value in health care: the work begins. JAMA. 2016;316(10):1047-1048.