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Robert Wood Johnson Foundation Awards PAMF Research Institute $100,000 Grant for Unique Study of Health Care Payment

Research may inform policy to improve U.S. Health Care System

The Palo Alto Medical Foundation Research Institute (PAMFRI) has been awarded a $100,000 grant from the Robert Wood Johnson Foundation (RWJF) Program on Changes in Health Care Financing and Organization for a unique study of health care payment, according to Harold S. Luft, Ph.D., director of PAMFRI.  The Robert Wood Johnson Foundation Program on Changes in Health Care Financing and Organization supports research that may inform policy to improve the health care system in the United States.

With this grant, a team of researchers led by Dr. Luft will be exploring the question of what resources and what types of physicians are involved in treating episodes of care commonly seen in outpatient settings, and seek to determine how “bundled payments” might be implemented.

The concept of  “bundled payments” is one of the new approaches to encourage greater coordination of care among physicians, and greater efficiency in the delivery of medical services. Instead of paying separately for each service rendered, an amount would be paid for an episode of care that covers all the necessary services.  The focus on the episode of care also makes it easier to assess overall quality. This idea has been used for decades by Medicare in paying hospitals, but is only beginning to be applied to physician services.

Dr. Harold S. “Hal” Luft, Director of the PAMF Research Institute

“We will examine some episodes that have a clear beginning point, such as ankle fracture, and others that are ongoing chronic problems, such as diabetes, in which the ‘episode’ is continuous,” Dr. Luft explained. “Our study is made feasible by our access to hundreds of thousands of de-identified electronic health records of Palo Alto Medical Foundation patients. The results will help inform the national discussion of how to improve health care delivery.”

The traditional model of health care payment is “fee for service.” A person goes to the doctor and pays according to what services are received. This is the conventional health care payment structure for most doctors in the United States.

“The inherent flaw in the fee-for-service system is that it pays doctors much more for what they do than for what they don’t do,” Dr. Luft said. “Patients are seeking help, relief and reassurance – they are not asking for a specific treatment, shot or diagnostic test. Bundling payments around an episode of care could make more sense than fee for service because it can allow physicians and other personnel, such as nurses, to spend more time listening to patients and thinking about what services they need, and don’t need.

“The initial portion of this project will be digging into data. We have to determine what portion of the total patient care dollars go toward physician effort versus toward things the doctors order, including laboratory tests, imaging and pharmaceuticals,” Dr. Luft said.

PAMFRI researchers will use computer software called a “grouper” that collects information on all the services used in an episode of care. Then they can look at which doctors should be at the table to decide how to allocate the resources for that type of care.

“There are several potential benefits from bundling,” Dr. Luft explained. “Patients could have more time with their doctor and by better understanding their treatment options, have less testing. Many conditions get better with little or no treatment—time, coupled with good communication, may be as effective as lab work and imaging. Liberated from the fee-for-service model, doctors could have more time to follow up with patients outside of the exam room.”

“I think this PAMFRI study was attractive to this arm of the Robert Wood Johnson Foundation because it asks, ‘If one wanted to make changes in payment, how would we do so effectively and how do we move forward?’ They recognize there’s a disconnect between broad policy concepts and what one needs to make something work in practice,” said Dr. Luft.

“This research is different from most studies because it informs future decision-making, rather than looking backwards to assess what has happened,” Dr. Luft said. “To drive forward, we need to do more than look in the rear view mirror. The results will indicate how the bundled payment model can be implemented. We’ll publish our results and see if medical groups around the nation pick it up and run with it.”

The study starts in June 2012 and will take at least six months to collect the data.