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MARKETWATCHExploring The Business Case For Improving The Quality Of Health Care For Children
A recent examination of the business case for improving quality in health care found few financial incentives (and sizable barriers) for health care organizations interested in investing in quality improvement. That analysis did not consider the special case of children’s health care. To address this gap, an expert panel delineated aspects of children’s health care—such as the need for care, patterns of use, and how care is organized and financed—that differ from adult care. It then identified barriers and solutions specific to children’s health care, to ensure that children’s unique needs are not lost in the debate.
Recent reports from the Institute of Medicine (IOM) document widespread deficiencies in the quality of health care.1 However, awareness of deficiencies has not led to widespread efforts to improve care. Rather, initiatives to improve quality remain episodic and fragmented. Most of the data used by the IOM derive from studies of adults. Many aspects of children’s health care—such as the need for care, patterns of use, and how care is organized and financed—differ from adult care.2 These differences could mean that the barriers to establishing a business case for quality of children’s health care differ from those applying to adults, and that solutions that work for adult care may not result in improvement (or may cause harm) to children’s care. In this paper we seek to determine whether unique impediments to a business case for quality for children’s health care exist and, if so, what solutions might be applied to promote more widespread improvement.
In many industries, enhancing quality is an effective strategy for improving financial performance. Companies that invest in quality can eliminate waste, gain market share, or command a higher price. Experts in quality improvement have generally believed that improving quality in health care—despite the costliness of some approaches—would similarly result in improved financial as well as patient outcomes. The challenge, quality improvement advocates believed, lies in documenting this case and making stakeholders aware of the financial benefits. A recent examination, conducted under the leadership of the Institute for Healthcare Improvement (IHI), challenged this logic. By reviewing a number of well-known cases of quality improvement, researchers found that under most current conditions, one could not demonstrate a financial benefit to the investing organization.3 Although health care organizations could (and did) improve care to meet a general societal need (the "social case") and even provide an economic benefit to society (the "economic case"), the same organizations typically could not demonstrate that their own financial performance improved (the "business case"). The IHI report identified several systematic barriers to obtaining a return on investment: (1) consumers’ inability to perceive quality differences, in large part because the increasing technical complexity and rapid change of health care practice; (2) displacements of payoff in time and place, especially problematic in an environment where consumers frequently switch providers and insurers as their employment status changes; (3) disconnections between consumers and payers (administrative pricing), driven by a highly controlled third-party payment system; (4) failure to pay for quality, while paying for defects, because of standard task-based fee schedules; and (5) uneven access by providers to relevant information to support decision making. This same report identifies a series of potential solutions that might remove or mitigate these impediments and clear the path for broad-based progress in quality. Researchers, policymakers, and funders at a 2002 national conference on children’s health care concluded that convincing stakeholders of the benefit of a focus on quality was essential.4 This group highlighted the importance of understanding the "business case" for improving the quality of care. That conference, along with the recent work cited above, provided the impetus for this analysis.
To assess the potential impediments to establishing a business case for improving the quality of children’s health care and to identify potential solutions, the authors participated in an expert panel process, reviewing the literature and undertaking a series of structured policy analyses. We drew from our experiences as leaders in state and federal policy, health economics, and children’s health care. Each author served as an independent voice; none of the views expressed here represents those of the authors’ employing organizations. The panel agreed to accept the definitions developed by the IHI-led initiative. A business case for health care improvement exists if the entity that invests in the improvement effort realizes a financial return on its investment in a reasonable time frame, using a reasonable rate of discounting. This may be realized as "bankable dollars," a reduction in losses for a given program or population, or avoided costs. In addition, a business case for health care improvement may exist if the investing entity believes that an important indirect effect on organizational functioning and sustainability will accrue within a reasonable time frame. Indirect effects may include increased market share, improved staff retention, or other advantages that contribute to an organization’s financial health, but these are typically more difficult to track back to a single cause.5 The panel’s mandate was to consider whether anything about care for children would cause the business case for quality to function differently. We developed a list of key differences in patterns of health status, health care use, and organization and financing of the health care system for children, compared with adults. For each difference, the panel assessed whether it would make establishing a business case easier, no different, or harder than the case for adults. After determining the most important factors through a consensus process, the team developed five case scenarios that illuminated how these differences are manifested in the real world. The cases were designed to address the several domains of quality (safety, effectiveness, patient-centeredness, timeliness, efficiency, and equity), as well as the major categories of poor quality (overuse, underuse, and misuse). Each case proceeds from an assumption that the quality intervention achieved its stated purpose. While brief, the cases were intended to be credible and detailed enough to allow assessment from the perspective of the key stakeholders. One case was closely drawn from actual experience; the others were hypothetical, based on simplified composites of realistic scenarios drawn from the literature and panel members’ experience. For each, the panel assessed the financial value of the quality improvement intervention for the different stakeholders, identified the barriers (if any) that prevented the investing organization from achieving a financial return, and suggested potential solutions. The panel’s goal was to identify barriers and solutions that are specific to children’s health care across the spectrum of care, to ensure that children’s unique needs are not lost in the larger debate.
Differences between health care for children and adults. The panel identified differences between adult health care and children’s health care in four areas (Exhibit 1  ). The panel judged that many issues related to children’s health status made it more difficult to establish a business case. The rarity of many chronic illnesses affecting children, the importance and underrecognition of developmental concerns, the profound impact of family health on children’s outcomes, and the greater concentration of poverty among children were all considered as major barriers to linking a health care organization’s high quality with improved financial performance. Factors viewed as making the business case easier to establish included the importance of children’s health behavior as a predictor of short- and long-term health status, the general acknowledgement of some level of public responsibility for children’s well-being (such as public education and foster care), the importance of preventive services, and the large amount of children’s health care delivered in ambulatory settings. Panel members concurred that society’s perceived moral imperative to help children has resulted in programs that pay providers to improve quality—such as vaccination programs and at least some aspects of well-child care.
The panel viewed the limited evidence base for many child health interventions as an important impediment to establishing a business case for children’s health care quality. If an organization cannot be reasonably sure that an intervention will improve care or lower cost, it is unlikely to invest. The depth of scientific knowledge and research in children’s health is disproportionately scant, compared with the scientific resources focused on adults. The existence of numerous care settings (such as school-based clinics) and multiple, discrete, and uncoordinated funding streams was viewed as an impediment. Although some thought that the prominent role of employer-based insurance could be an advantage in children’s health, by aligning employers with improved workplace performance for parents, others felt that this case was difficult to make. Similarly, some viewed Medicaid’s prominent role as a potential advantage, because of public alignment with improved outcomes and the public interest; others perceived this as a disadvantage because of the difficulties in mobilizing large public agencies to change, the challenges of operating in the public political environment with many competing interests, the fluctuations in coverage resulting from cycles of economic expansion and recession, and the immense state-to-state variation between Medicaid agencies.
Description of cases.
Here we provide a thumbnail sketch of each of the five cases, with some discussion of the financial costs and rewards to the investing organization, as well as the barriers encountered. Exhibit 2
Preventive services (young children). A busy primary care practice implements a program to screen for maternal health (depression, smoking, domestic violence) and developmental concerns, and it provides families with facilitated referral and case management to community resources. The program is popular among patients, consistent with the values of the practice, and generally based on the literature about risks and interventions. However, no mechanism exists for the practice to be compensated for identifying risk factors and helping families seek help, even though the practice invests the time of clinicians and office staff to provide the service. From a short-term financial perspective, the program loses money, because clinicians see slightly fewer patients each day. Cardiac surgery. A children’s hospital implements a comprehensive, high-cost, quality-focused program to provide expert care to children with congenital heart disease. By achieving demonstrably better outcomes, the hospital obtains a favorable reimbursement rate from its major commercial payers, although a much less favorable rate from Medicaid. Competitors respond by seeking to siphon off the less complex cases, which threatens to undermine the viability of the program. Attention deficit hyperactivity disorder (ADHD). A primary care practice creates a program to provide comprehensive care to children with ADHD. Part of the program involves establishing close linkages with schools and community mental health providers. Children in the program demonstrate improved school performance, and families report that children behave more appropriately in other settings. The practice gains market share among these high-cost patients, but physician productivity slows somewhat, which causes overall revenue to fall. This result is partially offset by an increase in staff satisfaction and retention, lowering training costs for the practice. Asthma. A major California children’s hospital and integrated delivery system, Children’s Hospital of San Diego, implements clinical pathways that shorten hospital length-of-stay and reduce hospitalizations among children with previous emergency department (ED) visits and hospital care. Although the program reduces costs to the system, the hospital and the affiliated practices continue to be paid fee-for-service. As a result, the benefits generally accrue to the insurers rather than the providers. Still, the hospital uses the program to enhance its brand identity in the community, increase its market share, improve staff morale, and promote charitable giving. Also, local school boards in southern California—which receive incentive funding based on student attendance—have discussed sharing their increased revenues with the hospital, in recognition of its contribution to keeping children with asthma in school. Chlamydia screening. This case is drawn closely from the work of Mary Ann Shafer.7 The program, developed by a staff-model health maintenance organization (HMO) and implemented in its adolescent clinic, provides universal screening for sexual activity, followed by chlamydia screening for sexually active young women. This program produces short-term financial benefit by reducing cases of pelvic inflammatory disease, and long-term benefit by reducing ectopic pregnancy rates. Moreover, it improves the HMO’s market position by communicating concern for the health and well-being of young people who will soon be responsible for their own health coverage and care. The long-term benefit to the HMO is only realized if the women remain plan members through their child-bearing years. Lessons from the cases. Two of the three primary care–based improvement efforts would result in an adverse business impact under the current system (that is, as investing organizations, the practices would lose money from the intervention). The third primary care intervention, chlamydia screening, would result in a financial benefit to the investing organization, since it was funded by a staff-model HMO, as long as members do not switch plans frequently. The cardiac surgery improvement program clearly results in a favorable business case for the hospital. The most complex case, asthma care at Children’s Hospital of San Diego, demonstrates the conflation of factors that affect a hospital operating within an integrated delivery system, negotiating higher rates from insurers, and managing a complex array of providers and consumers. While the immediate financial return was negative, indirect benefits likely made this venture at least neutral to the organization. By design and assumption, each of the cases resulted in improved outcomes for the child and family and was broadly beneficial to the community or society. Private payers actually benefited from three of the programs. For example, the HMO reduced costs and increased market share through the chlamydia screening program, and both private and public payers in San Diego reduced their costs resulting from asthma. The ADHD program resulted in increased costs because the use of costly medications increased. The main benefits of the program—reduced special education costs and improved results on academic outcomes measures, such as standardized testing—were reaped by the school system. The case approach illuminates the array of factors influencing health care organizations that must balance scarce resources and secure their own financial viability. While each case is different, most of the time the organization cannot reliably assume that financial benefit will accrue. The case is further weakened where local competition is limited—either by limited availability of providers or by dominance of a single managed care plan. A second lesson gleaned from the analyses, and particularly the process of developing the analyses, is the critical role played by credible data about effectiveness in assessing the business case. For this analysis, the project team simply assumed effectiveness in order to proceed with the further assessment. In the real world, the lack of data on effectiveness of child health care interventions certainly slows the pace of investment in quality improvement.
The Leatherman framework. An analysis prepared by Sheila Leatherman and colleagues identified five specific impediments to the business case in health care and proposed specific solutions for each one.8 Most of these impediments apply to children’s health care, although the remedies may be different. Failure to pay for quality while paying for defects. The preventive services, ADHD, and asthma cases illustrate situations in which reimbursement is not predicated on the quality of services. In these situations, provider organizations receive the same payment regardless of the appropriateness or quality of care. Consumers’ inability to perceive quality differences. In three of the hypothetical cases—preventive services, ADHD, and asthma—consumers could perceive differences in quality and shifted their use accordingly. In the cardiac surgery case, third-party payers perceived quality and steered families to the right source. Only in the chlamydia case were consumers unaware of the quality advantage of the program site. This pattern illustrates consumers’ general ability to recognize service quality more easily than technical quality. Although our case methodology did not probe this barrier specifically, the lack of a strong evidence base in children’s health care further undermines consumers’ ability to understand technical quality—consumers certainly cannot perceive what science has yet to prove. Displacement of pay-offs in time and place. The long delay between intervention and outcome in child health makes this barrier prominent among the obstacles to a business case for quality in children’s health care. This is especially true because effective preventive and developmental care yield benefits throughout a person’s life and in all aspects of a person’s existence: in school, at work, and within family and community. The impact may also reverberate through a family in ways that are not immediately obvious. Many employers recognize that in the employer coverage market, improved health care for employees results in improved productivity, and the benefit accrues directly to the employer. Employers may not recognize the financial value of reducing "presenteeism"—when employees are physically present but distracted from their work by outside concerns such as the health of a child. Even more important, the benefits of good child health care accrue most directly to the school system and indirectly to other aspects of society. Experiments with capitation to date have encompassed only health care, not the broader societal costs and benefits. Disconnection between consumers and payers (administrative pricing). The prominence of Medicaid as a source of payment and the provision of health insurance through employee benefit programs divorced from the individual needs of particular families amount to a sizable barrier for children’s care. It was particularly prominent in the preventive services case. Uneven access to information among clinicians. The final impediment raised in the Leatherman analysis was uneven access to relevant information among clinicians. This impediment was generally viewed as a contributor to the failure to execute or spread desired improvements; by design, this impediment was not present in the specific children’s health care cases reviewed. Widespread data about variability in practice affecting children and documented gaps between desired and actual practices suggest that this impediment does operate in children’s health care. Beyond the Leatherman framework. The team also identified other barriers that may particularly affect children’s health care. Fragmentation. The most prominent impediment identified is the fragmentation of the health care system across a variety of dimensions: children’s health care financing mechanisms (Medicaid, private insurance, Title V, mental health carve-outs); service delivery sites (schools, day care, tertiary and primary care, mental health centers); and family care providers (internists, pediatricians, obstetricians, mental health specialists). On a societal level, this fragmentation is exacerbated by sizable regional differences affecting children’s health care—between states, by region, and in urban versus rural areas. There are many potential solutions to this fragmentation, although most entail major reforms in the financing or organization of children’s services. A state might specify a common "children’s budget" within the public sector—a budget that includes education, child welfare, juvenile justice, nutrition, and mental health services. States also could arrange transfers across sectors, such as those being considered in San Diego, to better recognize shared responsibility and impact. This approach is being evaluated in the United Kingdom, where local "Children’s Trusts" are being considered to organize all services related to children and families.9 Developing greater consistency between state Medicaid budgets and making clearer delineation of coverage and services across multiple programs that serve children would be an intermediate strategy. More measured ideas include creating a mechanism for coordination of benefits, a mechanism for coordination of services, or some combination of these. Even narrower suggestions might include enabling child health providers to bill for appropriate services for parents (such as smoking cessation counseling or depression screening) and enabling primary care providers to function and bill as mental health care providers, particularly for common behavioral health conditions such as ADHD and depression. Limited evidence base. Another unique defect is the limited evidence base underlying children’s health care in general and improvement in care for children in particular. The root causes for this include the generally limited costs of children’s health care, the relative rarity of many illnesses and adverse outcomes, the complexity of child outcome measurement, the long delay in obtaining meaningful results, and the ethical and logistical issues related to research affecting children. Nonetheless, continued investment in clinical and health services research in children’s health care remains a priority, as reimbursement decisions increasingly are based on evidence. Such research will also promote the development of useful outcomes measures and targets, so that better quality can be rewarded and consumers can begin to perceive technical quality differences. The role of parents. The definition of "health care" itself is constantly evolving—for example, pediatricians screening for domestic abuse, counseling parents to stop smoking, and asking adolescents about their sexual behavior are all common practices that would have been considered invasive and inappropriate a generation ago. This evolution is sensitive terrain in children’s health care, because Americans have a bias toward protecting the primacy of the parental role, especially concerning mental health. Efforts could be undertaken to reframe issues related to quality of care for children that, while acknowledging parents’ central role, also builds a professional role for supporting families and addressing broadly defined health care needs. Public discourse about the rising incidence of certain childhood health problems, such as obesity, ADHD, and autism, could promote public support beyond the model of "parental responsibility" and develop structures to assist in improving quality for such issues. Better training is warranted for clinicians in how to communicate with adolescents, especially in sensitive topics such sexuality and risky behavior. Concluding Comments This assessment was not built on a rigorous study of real-world examples. Rather, it was built on an analysis of hypothetical cases constructed by the authors based on their experience in children’s health care. Our objective was to illuminate and explore the factors that have slowed the pace of improvement in children’s health care. With the lack of an accessible and well-documented evidence base as one of the key factors that impedes progress, we hope that this work will help direct a research agenda that will ultimately promote a quality agenda. In the current health care system, investments in quality—while producing net economic benefit for society—do not routinely translate into improved financial performance. Leatherman and colleagues offered an array of policy changes—expanding public access to performance data for different providers; consumer education; refining insurance payment methodologies, both private and public, that use elements of capitation and "pay for performance"; and public support for broad implementation of electronic patient records—to better align the financial incentives of the system with improved patient outcomes. We found that additional changes will be needed to make the business case for improving quality of care for children. The major unique modifications we identified are as follows: (1) take steps to create a less fragmented system of financing and delivery of services, (2) expand the emphasis on clinical research, and (3) educate the public concerning the importance of high-quality health care for children, and, in so doing, redefine the scope of what is included in excellent, family-centered care. Harking back to the differences that make it "easier" to promote quality improvement in health care for children, we may need to fall back on our shared sense of public stewardship for children’s lives in order to find the will to cross the quality chasm.
This paper resulted from the work of an expert panel convened at a conference sponsored by the Agency for Healthcare Research and Quality in February 2002. Members of the Child Health Business Case Working Group are listed in the acknowledgments. The paper’s lead author, Charles Homer, can be reached at chomer{at}nichq.org. Members of the Child Health Business Case Working Group are Charles Homer, Debra Iles, Denise Dougherty, Foster C. Gesten, Paul Kurtin, Sheila Leatherman, James M. Perrin, Stephen C. Schoenbaum, and Lisa Simpson. The work presented here was supported by a grant from the Commonwealth Fund. The views expressed are those of the authors and not necessarily of the Commonwealth Fund or its directors, officers, or staff, or of any of the employing organizations of the authors.
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Background
Study Methods
