Grant Description: The researchers examined some of the underlying assumptions of episode-based payments, which are hypothesized to encourage more clinically and economically efficient practices by primary care physicians (PCPs). Specifically, they assessed whether episode-based measures of resource use at the individual PCP level, rather than the physician group or medical staff level, are statistically reliable and appropriate. Using data from the Palo Alto Medical Foundation (PAMF), a large multi-specialty physician group that uses electronic medical records (EMRs), the researchers examined whether some PCPs have practice patterns significantly more (or less) expensive than the average at either the episode level or with groups of acute or chronic episodes. The researchers explored the role of components, such as PCP office visits, referrals, imaging, lab tests, and drugs, in any differences. They also studied clinicians’ explanations for differences in practice patterns, such as unmeasured severity, location, or other factors. They compared PAMF-based patterns of care with overall patterns at an episode level (but not physician level) from a large national data set. The objective of the study was to determine whether consistent styles of practice across PCPs within a large medical group can be detected, which would help inform policymakers about whether physician-oriented incentives are worth pursuing.
Policy Summary: Episode-based payment is increasingly under discussion as a way to increase efficiency in care delivery. Although conceptually attractive, the definition of an episode is challenging because units for payment should be both economically and clinically meaningful. This is especially true in the realm in which expenditures are greatest—chronic illnesses that occasionally include expensive inpatient care. The researchers have shown that separating the inpatient episode from the rest of the chronic illness management markedly reduces the variation in the latter. This separation will make it easier for primary care and outpatient-based specialists managing patients with chronic illness to accept the financial risks of doing so. Hospital-focused teams can then manage the inpatient component of care with a separate bundled payment. Detailed analyses suggest that the “boundaries” for the inpatient episodes will need to be tailored to the specific condition.