Are pediatric hospitals ready to embrace value-based payment models?

Although pediatric (children’s) hospitals are not yet mandated (as are their general population counterparts) to participate in value-based contracts (VBCs), as competitive medical institutions they are very cognizant of the market changes toward value-based payment models while tirelessly seeking to increase value in pediatric health care delivery.

The push towards better alignment of payers and hospital systems continues to change the landscape of competitive health care. Children’s hospitals “are the backbone of the nation’s pediatric health care infrastructure, training the nation’s pediatricians and pediatric specialists, researching cures for diseases that affect children and providing the highest quality of care for children who require hospitalization or routine primary care,” as stated by the Children’s Hospital Association. Pediatric hospitals account for about 35 percent of all days spent within a hospital for children on Medicaid and 53 percent for children with complex conditions. Unfortunately, engaging pediatric hospitals in VBCs has not been a priority because these institutions comprise less than 5 percent of the nation’s hospitals, serve a smaller cross-section of the population and represent a lesser portion of the overall total cost of care. A main driver for value-based contracts is Medicare and the management of costly chronic conditions that largely impact the adult population. However, pediatric hospitals, much like their general population counterparts, are similarly compelled to reduce the total cost of care and to improve the care of the population they serve. According to Jeff Lagasse, “many of the nation’s top institutions are embracing value-based reimbursement, not because they have to, but because they see the model as best for the health of their child patients and the financial success of their organizations.”

Just as “children are not little adults,” where medical treatment warrants specialized training and experience, value-based contracts with children’s hospitals must address the uniqueness intrinsic to these institutions’ care of the pediatric population. Using “off-the-shelf” value-based contracts designed for general population/adult hospital systems won’t address the specific needs of pediatric hospitals. To begin with, a majority of pediatric chronic medical conditions are congenital in nature versus conditions that are more often brought on due to adult lifestyle choices, such as heart disease, obesity, and Type 2 diabetes.

This type of educated assessment results in an understanding that quality metrics used for adult conditions do not easily translate to the pediatric population. It also does not help matters that the available pediatric quality metrics are usually drawn from either the National Committee for Quality Assurance’s HEDIS measures set or from the Medicaid/CHIP programs “Child Core Set,” neither of which were designed with value-based contracts in mind. Deciding which quality metrics determine “value” in pediatrics has also been extremely challenging due to limited research, a general lack of consensus and non-existent data standardization. It is critical to note that Medicaid (different from federally-funded Medicare), which is administered at the state level and funds over 50 percent of patients at children’s hospitals, does not have a centralized data set. Data silos are preventing children’s hospitals from understanding the continuum of pediatric costs of care, limiting improvement in pediatric patient risk stratification, and thereby hindering the ability of pediatric hospitals to engage in risk-based VBCs.

Another important consideration when defining and measuring “value” in pediatrics are the fundamental differences between pediatric and adult health care. Although many can agree that pediatrics is primarily prevention-oriented, measuring the long-term impact of pediatric health care can be challenging within the current framework since preventative care is an investment rather than an immediate cost-saving.

Unfortunately, the traditional quality metrics used in value-based contracts are built around 12-month cycles that don’t reward the type of long-term investment that prevents negative health events in children with strong potential to mitigate the development of adult chronic conditions as patients mature. The irony here is that the exclusion of pediatric preventive health measures in the current VBCs, disincentivizes providers to address behaviors that directly impact the development of the same costly adult chronic conditions that are the focus of today’s VBCs. In other words, the industry has the opportunity to impact the development of chronic conditions but lacks the structure to take advantage of the opportunities early. This is the greatest potential and power of the pediatric providers and children’s hospitals in the health care industry that must be strategically harnessed and implemented.

Another fundamental difference between adult and pediatric health care is the lower number of high-cost/high-need patients that children’s hospitals treat when compared to their general population counterparts. It is also important to realize that pediatric conditions and illnesses often differ across age groups. Statistically speaking, consistently differentiating the impact of a provider’s care from random variation is difficult with a smaller number of chronically ill patients. Identifying specific outcome measures when aggregating small groups of pediatric patients with different conditions into a single “special health care needs” group is extremely challenging and must be carefully considered when designing value-based contracts. It is of vital importance that pediatric hospitals work to ensure that all patients having special health care needs continue to receive high-quality care while aligning incentives to reduce the cost of care.

Children’s hospitals early adopters of value-based contracts have emphasized the importance of collaboration between hospitals, local pediatric providers, and specialists in achieving positive clinical outcomes. By aligning providers, in both inpatient and outpatient settings, unnecessary variation, duplication, and costs in clinical practice patterns are avoided while creating a coordinated health care experience. The sharing of best practices, development of policies and clinical practice guidelines, electronic medical records optimization, and real-time data reporting are all key aspects to the success of value-based pediatric pioneers.

Children’s hospitals have developed a competitive advantage by gaining the expertise that addresses a focused patient population while not facing the same federal mandates that have required adult hospitals to advance into value-based arrangements quickly. Pediatric hospitals have thus experienced a level of flexibility, with the opportunity to pace their entrance into value-based contracts, while learning from the challenges and mistakes of their general population/adult counterparts.

As more children’s hospitals choose to evaluate the options related to engaging in value-based arrangements, it is important for these institutions to continue to leverage the strength of their various networks. They must position themselves to manage better the utilization and overall health of the specific pediatric populations they serve. A firm understanding of quality within the framework of pediatric health care and a clear strategy for VBCs are both crucial to the venerable mission of keeping children healthy while educating and protecting their growth into adulthood.

Johanna Vidal Phelan is a pediatrician and vice-president and medical director, The Care Centered Collaborative at The Pennsylvania Medical Society.

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