HMGT 420 WEEK 5

CHAPTER

291

ETHICS, COMPLIANCE, AND REGULATIONS ENABLING VALUE-BASED CARE

Learning Objectives

Upon completion of this chapter, you should be able to

• identify the ethical underpinnings that support value in healthcare delivery;

• summarize regulations in healthcare that facilitate value delivery; • discuss the various regulations that target fraud, waste, and abuse; • propose strategies to comply with such regulations; • explain how elimination of fraud, waste, and abuse helps enhance value;

and • demonstrate how regulations affect the operations of a healthcare

organization.

The transition toward value-based healthcare is driven in part by pragmatic concerns, but it also has a strong ethical dimension. Central to the debates about healthcare policy is the question of whether healthcare should be

considered a right, a social good, or a commodity. The continuing evolution of the healthcare system in the United States has been driven in large part by people’s diverse ethical approaches to this question. Value-based healthcare affects a fundamentally personal set of services for the population, and some of its components might not be appreciated or accepted by all. However, ethi- cal concepts can help explain the need to establish a system that provides effective care to everyone while eliminating its wasteful aspects. They can also help guide the development of a system that meets fundamental benchmarks while leaving open the option of more care for those who can afford it.

Laws and regulations have sought to acknowledge the ethical concerns associated with healthcare delivery while also incorporating practical concerns related to affordability, quality, and outcomes. The result is a system that seeks to protect an individual’s right to effective healthcare while also guarding against fraud, waste, and abuse. This chapter discusses the nature of these laws and regulations from a practitioner’s perspective rather than a legal perspective. It

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EBSCO Publishing : eBook Academic Collection (EBSCOhost) - printed on 11/8/2022 9:44 AM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS AN: 1838993 ; Paveljit Bindra.; The Core Elements of Value in Healthcare Account: s4264928.main.eds

The Core Elements of Value in Healthcare292

seeks to explain how issues surrounding ethics, compliance, and regulation advance the goal of delivering value in healthcare.

The Ethical Basis for Value-Based Healthcare

Healthcare is a personal good and social commodity consumed by everyone in society, and it enables people to be healthy and lead happy lives. Thus, the idea that value is an essential aspect of healthcare delivery is intuitive. Nonetheless, the shift to a value-based system often runs into controversy and disagreement. As we address the complexities of this transition, we should be mindful of the historical and philosophical underpinnings of value and quality as they relate to healthcare delivery. The concepts of distributive justice and utilitarianism are central to the discussion. Distributive justice is concerned with the appropri- ate allocation of resources in a society, with the aim of avoiding inequalities in outcomes (Armstrong 2012). Utilitarianism, as discussed in chapter 6, is based on the belief that the best actions are those that maximize the well-being of the greatest number of people (Mill 1977).

Value represents better quality and outcomes at a lower cost. When better quality leads to better outcomes, healthcare maximizes the good for all the people it affects. When the cost is reduced, the benefits can be provided to a greater number of people. The expansion of high-quality care is not only an admirable goal; it is a right that should be provided to all in society. This section will review the ideas of four philosophers who played a significant role in developing the body of knowledge around these issues: St. Thomas Aquinas, Immanuel Kant, John Stuart Mill, and John Rawls (Morrison 2011). Together, these philosophers make a strong case for the emphasis on value in healthcare.

St. Thomas Aquinas—Value in Healthcare Is Consistent with a Rational System The principle of rationality underpins the philosophy of Aquinas. Because humans can reason and wonder about the cause of issues, they are able to choose between good and evil. Aquinas explains that reason consists of two parts, one cognitive and one appetitive. The cognitive part is intellect, which enables a person to know and understand. Intellect enables a person to appreci- ate the goodness in something. The appetitive part of reason is will, which is an internal desire for the understood good. The appetite is responsive to the intellect’s appreciation for a good that is worth pursuing.

If people are true to their rational nature, they will follow their conscience. However, if they choose to work against their rational nature, they may undertake activities that hurt themselves or others. A rational approach, according to Aquinas, fulfills our natural inclination to pursue what we perceive to be good (Eberl, Kinney, and Williams 2011). This goodness should preserve life and humanity, and it should

distributive justice The fair and just allocation of resources in a society, with the aim of minimizing inequalities in outcomes.

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help people attain true happiness. People who are healthy are better able to achieve their highest potential; therefore, society should support the appropriate provision of healthcare according to the degrees of sickness that people have (Floyd 2004).

Aquinas’s concept of rationality requires that society seek what is naturally good and what preserves life. Good health preserves life, and certain acts are needed to support good health. If people are made aware of such requirements, they will choose to establish a society that delivers on them (Eberl, Kinney, and Williams 2011). Put simply, people must be aware of what is needed. In today’s healthcare landscape, this point corresponds with the concepts of patient activation and engagement, discussed in earlier chapters. Patients who are knowledgeable about their health conditions will have a choice to become more engaged and to be partners with their providers in their care; as a result, they often will have better outcomes. On the other hand, patients who are disengaged may exhibit harmful behavior and fail to make “rational” choices.

For example, patients who are overweight and inactive may choose not to diet and exercise. If they are provided information about how diet and exercise can improve their life, they might become more interested. Once they see a correlation between healthy choices and better outcomes and better quality of life, they will become more engaged. This engagement, in turn, will lead to more healthful choices and increased wellness. Engaged patients seek to act according to their rational predilection toward self-interest.

Patient engagement—with the patient being not merely a passive con- sumer but rather an active participant—is an important component of value- based healthcare. Healthcare providers have a responsibility to draw upon people’s inherent rationality to ensure that patients have an opportunity to become engaged in the care provided to them. Patient education involves a relatively inexpensive deployment of resources, but it has the potential to significantly boost engagement, quality, and outcomes.

Immanuel Kant—Good Quality and Outcomes Are Inherently Good to Pursue Kant’s philosophy is founded on the concept of duty-based ethics (Kant 1996). He presented a deontological approach to ethics, in which actions must be based on a rational and duty-bound approach to making decisions (Bowen 2015). In short, actions are taken because they are the correct thing to do. Autonomy is an essential component of ethical decision making. An autonomous decision is uninfluenced by such factors as politics, money, or self-interest; instead it is based on good will (Bowen 2015). Good will is “good without qualification” (Kant 1996), and it is the only acceptable condition. Kantian philosophy judges morality by examining the nature of actions and the intent of the stakeholders, not the outcomes that the decision achieves (Johnson 2016).

Kant’s approach to ethical decision making also incorporates the concept of the categorical imperative—the belief that what is appropriate for one person

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is appropriate for all (Bowen 2015). A decision based on the categorical impera- tive is universal across time, place, and context. Kantian philosophy suggests that everyone in society has a duty to do the right thing, with the appropriate intent, while maintaining dignity and respect for others (Johnson 2016).

A value-based healthcare delivery system is consistent with the Kantian paradigm. Applied to healthcare, Kant’s philosophy would state that, when delivering care, providers have a duty to base decisions on good will (Morrison 2011). Good quality in healthcare is an inherent good with intrinsic virtue, and any autonomous person would wish for such a condition. Good quality is likely to lead to good outcomes. Although Kant would argue that expecta- tions of outcomes should not dictate whether an action is taken, good health outcomes are necessary for a healthy life and, as a result, have inherent virtue. The first two components of value in healthcare—quality and outcomes—are thus supported by Kant’s philosophy. Regarding the third component—lower cost—Kant would argue that cost considerations should not play a role in ethical decision making. However, lower cost improves access to affordable healthcare, which is an inherent good as well.

John Stuart Mill—Value Supports the Greatest Good for the Maximum Number Mill espoused the principles of utilitarianism, in which the focus of an ethical decision is on achieving the best outcomes for the maximum number of people (Morrison 2011). Because healthcare is a costly social good, resources are scarce. If society is to operate rationally, its decisions must lead to an allocation of healthcare-related resources such that the greatest number of people benefit (Mack 2004). This approach supports rule by utility, whereby the consequences of decisions determine rules for action. On average, ethical decisions should produce the greatest good for the greatest number of people, or harm the least number of people. This result justifies the means used to get there.

Utilitarianism provides a practical way to address healthcare issues (Mill 1977). It lends itself to a “balance sheet” approach to decision making, in which decisions are made after limited resources have been considered, consequences identified, and merit determined. If the value of healthcare is improved, bet- ter quality and outcomes will be possible at a lower cost, which will allow for an increase in the number of people positively affected. Thus, value-oriented concepts such as clinical integration, innovation, alignment, and patient engage- ment are all consistent with the utilitarian idea of maximizing social good.

Two versions of utilitarianism can apply to healthcare decisions: act utili- tarianism and rule utilitarianism. Act utilitarianism applies when a morally right action maximizes the good in a particular situation (Mack 2004). For instance, patient engagement to quit smoking is consistent with act utilitarianism, because, as each individual quits smoking and experiences health improvements, society

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benefits. Under rule utilitarianism, the morally right action involves identifying an appropriate moral rule that maximizes the expected social utility in similar situations (Mack 2004). As population health matures, entire populations will benefit from primary and secondary prevention, care coordination across the continuum, and other value-based practices.

Nonetheless, utilitarian thinking can raise complex issues. Because the col- lective group, rather than the individual, is the focus of utilitarian decision making, a patient in the minority can potentially be overlooked. For instance, imagine that a community is deciding between two possible health initiatives. One is a population health program to improve diet options and expand access to appropriate medica- tions for people with diabetes. The expense for this program is $1 million, and its benefits would reach more than 1 million patients. The second program would provide expensive medication for 100 patients who have a rare genetic disorder. The medication costs $10,000 per patient, making the total cost for the program $1 million—the same amount as the first program. A utilitarian approach would favor the diabetic program, because it affects many more patients. However, the needs of the minority would not be addressed, which could undermine the Kantian categorical imperative to do something that is intrinsically right.

John Rawls—Value-Based Care Helps Maximize Social Justice Rawls’s theory of social justice maintains that stakeholders are rational and self- interested when negotiating the distribution of social goods (Rawls 1971). In Rawls’s philosophy, individuals are to imagine themselves in an “original posi- tion” in which the community is coming together and people function behind a “veil of ignorance.” Behind this veil, people do not have information about their own characteristics or the characteristics of others in society; thus, anyone could potentially be in a lesser position. Under these circumstances, decision makers would be acting rationally in their own self-interest by protecting the interests of people who are most vulnerable (Morrison 2011).

Rawls’s ideas have a direct bearing on the value movement in healthcare (Ekmekci and Arda 2015). A society following Rawls’s concept of social justice would choose to protect people who are in vulnerable positions, including the poor, children, and those with conditions that affect their quality of life. Behind the veil of ignorance, people would be unable to predict their own health status or conditions, and they would be unable to predict their financial resources or access to healthcare. In this scenario, a rational person, limited by the veil, would create a system where all people would have similar opportu- nities to access services. The rational person would also want to ensure that, when healthcare services are obtained, they are of high quality, contribute to good outcomes, and have a low cost.

Value-based efforts to make healthcare delivery more transparent and efficient would satisfy the Rawlsian philosophy of maximizing social justice.

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Lean and Six Sigma processes that reduce waste and eliminate errors could allow for critical resources to be redeployed to treat rare diseases suffered by a few. Rawls’s decision makers would favor such initiatives, lest they suffer from similar rare conditions themselves. In the original position—where individuals are unaware of their health status and everyone is equally informed—people would choose to establish a healthcare system that maximizes outcomes for everyone, based on the best evidence available, with resources applied in a way that benefits both society and the individual (Rawls 1971).

Justice involves the appropriate division of social advantages (Rawls 1971), and healthcare is one of those advantages. Following Rawls’s teachings, a just society would agree that finite resources should be assigned to healthcare with the aim of yielding maximum benefit—a basic premise of value-based healthcare. Furthermore, value-based healthcare reflects the iterative nature of social justice. As the terms of the social contract are constantly modified and improved, the system can achieve a reflective equilibrium that responds to economic, social, and political conditions (Rawls 1971).

Ethical Components of Value-Based Care

The discussions of Aquinas, Mills, Kant, and Rawls in the previous section serve to demonstrate the deeply rooted ethical aspects of value-based care. By pursuing the universal delivery of an important social good, the focus on value supports Mills’s utilitarian goal of maximizing the good of society. From a Kantian standpoint, high-quality healthcare is a categorical imperative, the goodness of which is inherent. Thus, the Kantian argument agrees with the utilitarian argument, even though the decision is reached from a different standpoint. The Rawlsian school of thought, using a social justice lens, would argue that the pursuit of quality in healthcare is in the self-interest of society and the community. When a veil of ignorance is present in front of key decision makers, they have an interest to ensure that care with the maximum benefit is provided to the maximum number of people. Here, utilitarian, Kantian, and Rawlsian principles are consistent. Although the ethics and legality of healthcare policy will be debated for decades, the ethical underpinnings of value-based care are undeniable.

Beneficence and Nonmaleficence The principles of beneficence, nonmaleficence, and autonomy are key ethical components of value-based healthcare. When combined with considerations of justice, utilitarianism, and respect for the inherent goodness of an act, they provide a framework that supports many of the value-optimizing concepts and activities discussed throughout this book.

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Beneficence and maleficence are paired principles. Beneficence is the obligation to create benefit and to maximize the health of beneficiaries (Beau- champ and Childress 2012), and nonmaleficence is the ethical duty to avoid harm. Beneficence is reflected in value-based actions that bring about improved quality and outcomes. Such activities as care coordination, effective transitions, primary prevention, patient education, and population health contribute to improved wellness and reduced burden of disease, thereby benefitting both individuals and society. Nonmaleficence, meanwhile, is reflected in efforts to prevent medication errors, hospital-acquired conditions, preventable harm, avoidable readmissions, and unnecessary testing and treatment. It requires the creation of a system in which treatment can be delivered safely.

Value-based payment reforms reinforce these concepts by aligning eco- nomic and operational interests with the delivery of positive outcomes and the avoidance of harm. Payment arrangements with shared savings, for instance, provide economic incentives for providers to keep patients healthy, thereby rein- forcing beneficence. Similarly, initiatives that penalize readmissions and avoidable harm reinforce nonmaleficence. Furthermore, the use of quality benchmarks in value-based healthcare can help avoid perverse provider incentives either to overdeliver care or to withhold care (Corbett 2016). If entities perform well on quality measures such as the clinical quality initiatives, Healthcare Effective- ness Data and Information Set measures, and National Committee for Quality Assurance accreditation requirements, they stand to gain economically as well.

Patient Autonomy

The ethical delivery of care must also respect the autonomy of the individual receiving care. Without the patient’s involvement and cooperation, many of the goals of value-based care will be defeated. In bioethics, respect for the patient’s autonomy is demonstrated through the concept of informed consent (McCor- mick 2008). In providing consent and participating in decisions about care, the patient, or the patient’s agent, is assumed to have the capacity to act indepen- dently, rationally, and with understanding (Beauchamp and Childress 2012).

Patient autonomy is closely tied to patient engagement and education. An informed patient is better able to make effective decisions that are based on facts and appropriate to the specific situation. A value-based system ensures that the patient has information about relevant procedures and their alterna- tives, is aware of key guidelines, and has access to the outcomes data of a given facility. In such a situation, a well-informed patient may opt for a less invasive procedure or choose to receive care at a facility with better outcomes. When the autonomy of the recipient is respected in this manner, value-based care can be delivered ethically.

beneficence The moral obligation to create benefit and to maximize the health of beneficiaries.

nonmaleficence The ethical duty to avoid harm.

informed consent Permission given by the patient based on a clear understanding of the conditions and available options.

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Applications in Palliative Care and Hospice As people grow older, they become more likely to face difficult decisions related to treatment for complex and terminal illnesses. In these instances, the choices are not necessarily between accepting death and fighting for life; rather, they are a matter of choosing how one wants to live (Abernethy 2014). Palliative care gives patients a voice in choosing a course of treat- ment that suits their values and physiology in the face of serious illness (Pizzo and Walker 2015). It focuses on alleviating suffering and achieving the best attainable quality of life for patients and their family caregivers (Kelley and Meier 2010). Key goals of palliative care include relieving symptoms, improving quality of life, or possibly extending life.

Patients who receive palliative care are usually debilitated by chronic illness that affects their quality of life and functional capacity, and ultimately their survival. An effective palliative care program provides patients a respite from pain and enables them to live a full life for as long as feasible (Brody 2013). Research suggests that a mixed strategy of disease-directed treat- ment and palliative care prolongs survival, presumably by alleviating the patient’s pain and misery (Temel et al. 2010).

If a patient’s clinical condition worsens and basic forms of palliative care are no longer effective, hospice becomes an option. Hospice is a form of palliative care specifically for patients nearing the end of life (Abernethy 2014). A large proportion of an individual’s lifetime Medicare expenditures occur during the last year of life—particularly during the final six months (Neuberg 2009). As a result, many experts believe that significant cost savings would result if more patients had access to hospice care and were empowered to decide what kind of care they wished to receive (Hogan et al. 2001). Indeed, research indicates that hospice users, compared to patients who do not receive hospice care, account for $2,309 less spending in the last year of life (Huo et al. 2014). One study revealed that patients with metastatic melanomas who enrolled in four or more days of hospice care, on average, survived longer and had lower end-of-life costs (Huo et al. 2014).

The issues surrounding palliative and hospice care draw heavily upon the medical ethics of patient autonomy, beneficence, nonmaleficence, and justice. When patients are empowered to make decisions and have a clear understanding of the available options, they can receive care consistent with their preferences (Mohanti 2009). They can achieve a higher quality of life and avoid the risks associated with unwanted treatment. When such decisions are supported by patient engagement and an understanding of options that deliver better quality, comfort, and dignity, patients will usually opt for palliative or hospice care.

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Palliative care and patient autonomy may lead patients to avoid heroic measures that are not evidence based and that may lead to patient harm. For example, a doctor may recommend hip surgery for a 90-year-old patient who sustains a hip fracture. However, the patient might be a nurs- ing home resident who has severe dementia and is completely bedridden. When the patient’s family is advised about likely outcomes after surgery and the risk of complications, they may opt to avoid surgery and keep the patient comfortable. This discussion may include the patient’s family, the care coordinator, and a multidisciplinary team.

The education of patients and families is essential. It enables them to develop reasonable expectations, understand when hospice may be appropriate, and make end-of-life care decisions that support comfort and dignity. One study revealed that many patients with incurable cancers receive chemotherapy without the understanding that the chemotherapy is unlikely to be curative (Weeks et al. 2012). This lack of understanding compromises their ability to make informed treatment decisions in accordance with their preferences, thereby violating Aquinas’s concept of rational individuals making appropriate choices.

Physicians have the ability to improve patient understanding of these issues. In some instances, however, if a physician’s recommendation of an evidence-based treatment option is not what the patient wants, the patient’s satisfaction with the doctor may erode (Weeks et al. 2012). Better patient education and engagement by the clinical team may help alleviate this issue. Ultimately, physicians must balance patient satisfaction with the Kantian categorical imperative to provide a clear understanding of the situation. Doing so can help patients clearly assess the situation from a perspective similar to Rawls’s original position, where decisions can be made to optimize the good of society.

The American Academy of Hospice and Palliative Medicine (2013) has recommended that palliative care be initiated for patients with serious illness who have physical or psychological distress, even if the patients are undergoing disease-directed treatment. Evidence supports the use of palliative care to relieve suffering, improve pain control, and, in some cases, help patients live longer (Howie and Peppercorn 2013). The use of such care is therefore consistent with utilitarian arguments about directing treatment to optimize a social good for the benefit of the greatest number of individuals (Smith and Hillner 2011). By adhering to ethical principles and allowing these principles to guide decisions around palliative care, the needs of value-based care are also being addressed.

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Transparency and Accountability The focus on value in healthcare has raised awareness about issues of quality, out- comes, cost, access, and the patient experience, and healthcare organizations are coming under ever-increasing scrutiny. If patients are to be engaged and empow- ered in the shift toward value-based care, they must have the ability to compare delivery systems against one another. Outcomes data must be made public so that consumers can make the choices that are correct for them. Measurement tools must be valid and rigorous so that the results are credible. Results adjusted for severity of illness need to be apparent so that payments for services reflect such issues. These considerations reflect the need for transparency and accountability in healthcare to facilitate the delivery of value (McKethan et al. 2009).

Historically, healthcare in the United States has operated under a pater- nalistic approach, in which practitioners have enjoyed the trust of patients and families, held sway over their opinions, and taken the lead in the delivery of care. In addition, licensing and certification requirements have enabled prac- titioners to hold a virtual monopoly. Healthcare is unique in the power that practitioners hold over consumers in matters of life and death; if this power is left unchecked, unnecessary harm and suffering may result. Society, therefore, must protect itself by ensuring that powerful stakeholders in healthcare func- tion with nothing less than the best of intentions.

As the quality discussion enters the mainstream, healthcare organizations are expected to provide cost-effective care with excellent quality and outcomes, and they are increasingly being held accountable to outside regulators and other entities. Mechanisms to ensure accountability include rules and regulations, surveys and evaluations, licensing requirements, the public availability of quality metrics, and the potential for lawsuits. With this emphasis on accountability comes increasing transparency. Provisions of the Affordable Care Act provided funding for outcomes research to make findings widely available to facilitate comparisons of treatment options for all stakeholders.1 Websites now post quality and outcomes results for payers and providers, giving consumers the tools they need to make informed choices.2 Providers are further being held accountable through contracts that link payment to performance.

Ethical Considerations for Managed Care

Managed care, as discussed in previous chapters, is a key tool for driving value in healthcare and for advancing the principles of beneficence, nonmaleficence, autonomy, transparency, and accountability. By emphasizing care coordina- tion, case management, utilization management, and disease management, managed care organizations (MCOs) can facilitate cost-effective and clinically appropriate care.

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The managed care approach is associated with the gatekeeper model, whereby a primary care physician serves as the “captain of the ship” and deter- mines whom the patient should see for specialist care if needed (Friedman 1997). This arrangement has at times led to resentment from other physicians and from patients who chafe at the perception of care being denied (Starr 1982). Nonetheless, MCOs deliver on value-based care by controlling cost escalation, standardizing care, and achieving better risk-adjusted outcomes. They have also applied market principles to improve efficiency. The National Committee for Quality Assurance (NCQA) has taken a lead in monitoring quality in MCOs through standardized assessments such as the Healthcare Effectiveness Data and Information Set (HEDIS). As patients become more perceptive about the value proposition of healthcare, they are seeking cost-effective care with choice and good outcomes (Sekhri 2000).

Managed care providers have economic incentives to ensure that care is delivered efficiently in a manner that promotes quality and cost-effective- ness. These incentives help minimize conflict between the concerns of patient autonomy, profit margins, and the overall benefit of members. The incentive programs do, however, have ethical concerns. The incentives must be large enough that they are not ignored by the providers, but they should not be so large that they take over provider judgment.

For instance, a contract might specify that a portion of the provider’s reimbursement is linked to value-based metrics. Imagine that, for every $1,000 in reimbursement, $5 is tied to metrics for patient outcomes, satisfaction, and efficiency. In this arrangement, the provider might find that the efforts necessary to fulfill the metrics are too onerous and expensive and therefore forgo the $5 payment. On the other hand, if $400 is linked to value-based metrics, of which $300 is linked to cost savings, the provider might be motivated by economic issues to withhold care. Better results are likely to be achieved through a more balanced arrangement, where $200 is linked to performance and the majority of the performance bonus is based on outcomes, quality metrics, and patient satis- faction and a smaller portion is reserved for efficiency metrics. In this scenario, the provider would be motivated to deliver high-quality care that increases value.

The gatekeeper function delegated to primary care physicians (PCPs) may also lead to ethical concerns. Although it has the admirable effect of allowing for more coordinated care, it also creates risk by placing the PCP between the patient and needed specialists. Under this arrangement, healthcare rationing can become a concern (Perry 2013; Darr 2011; Anderlik 2001). If a PCP has a capitation arrangement with an MCO, the provider’s reimbursement may be reduced when a patient needs to see specialists, because less surplus funds would be left to share with providers. In that case, the PCP could become financially motivated to avoid needed referrals to maximize the surplus, poten- tially causing harm to the patient.

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The Core Elements of Value in Healthcare302

These concerns can largely be mitigated if incentives are properly aligned with high-quality care. Payment contracts should place primary emphasis on the quality and outcomes delivered, with a smaller yet meaningful focus on cost-effective care. Physicians should be well versed in evidence-based care and equipped with a wealth of information about the costs and benefits of treatment. At the same time, patients and families should be educated and engaged, minimizing the knowledge gap that has traditionally existed between consumers and providers in the US health system. When both physicians and patients are well informed, patients are less likely to undergo care that is of questionable value.

Regulatory Support for Value-Based Care

Given that huge amounts of public resources are devoted to healthcare, the government is extensively involved in its delivery. Healthcare is subject to numerous laws, regulations, and policies, many of which are rooted in the ethical concepts discussed earlier in the chapter. Since the 1960s, a number of efforts have sought to expand healthcare access and affordability (Starr 2011). One of the most notable efforts supporting this aim, along with other value- based reforms, is the Affordable Care Act (ACA) of 2010.

The Affordable Care Act Although the details of the law will change over time, the ACA has given substantial momentum to the movement toward value-based care. Driven by concerns about healthcare becoming unaffordable and a drain on economic resources, the ACA sought to lower costs while increasing quality and outcomes (Emanuel 2014). It aimed to expand healthcare coverage while reducing costs to fund this expansion. The law assumed that better value could help with this expansion as well (Democratic Policy and Communications Committee 2015). Major issues addressed in the ACA include access, cost control, quality improvement, preventive services, support for the healthcare workforce, revenue to finance the law’s provisions, administrative simplification, transparency, and expansion of coverage (Office of the Legislative Counsel 2010).3

Quality and Outcomes The ACA regulated that Medicare payments to stakeholders be linked to out- comes and quality—an important milestone for value-based healthcare (Rosen- baum 2011). Payments to hospitals were linked to quality performance related to common and expensive conditions. The ACA included provisions such as the Physician Quality Reporting Initiative (PQRI), incentivizing physicians to report Medicare quality data. The program was expanded to include long-term

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care hospitals, inpatient rehabilitation facilities, specialty hospitals such as can- cer hospitals, and hospice providers (Democratic Policy and Communications Committee 2015). Payment changes based on benchmarks were introduced, with bonuses provided to high-quality plans (Kaiser Family Foundation 2013b). The hospital readmissions reduction program, value-based purchasing, and hospital-acquired condition reduction programs are variants of this effort.

Payment Reform and Delivery Innovation To innovate around the concept of value-based care, the ACA established the Center for Medicare & Medicaid Innovation (CMMI). The center’s man- date was to research, develop, test, and expand new payment and delivery models. Several of the concepts discussed in this book—including account- able care organizations (ACOs) that assume responsibility for care, cost, and quality—were developed through the CMMI. The concept of shared savings was also built into the ACA, helping to improve financial alignment. The law introduced bundled payments, medical homes, and clinical alignment rubrics (Spector 2015). The ACA provided support for physician- and nurse practi- tioner–directed home-based primary care teams to deliver care to chronically ill and frail Medicare beneficiaries through initiatives such as the Program of All-Inclusive Care for the Elderly (PACE). In addition, the idea of penalizing common preventable readmissions and avoidable complications was codified. Although these regulations technically applied only to Medicare and Medic- aid, private insurance plans often follow or adopt patterns established in those programs. The influence of these provisions was therefore felt across the entire health sector (Kaiser Family Foundation 2013b).

Expansion of Coverage The ACA established insurance exchanges so that people could purchase cov- erage on the individual market. The law also led to changes in the Medicaid program that allowed more people to be covered. People up to the age of 26 years were allowed to remain on their parent’s insurance. Additional informa- tion is provided in appendix 10.

Coordination of Care Delivery The ACA expanded Medicaid eligibility and recognized federal responsibil- ity for this expansion. It expanded the Children’s Health Insurance Program (CHIP) and simplified enrollment into Medicaid and CHIP. The law codified improvements in Medicaid services, coordination for dual eligible beneficiaries, quality requirements, and new options for long-term care. It also provided support to help people stay within their communities as they age or develop significant care needs. Under the ACA, Medicaid beneficiaries are given the option of using community-based attendant services to reduce the need for

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institutionalization in a hospital, nursing facility, or intermediate care facility (Kaiser Family Foundation 2013b). The law also established federal incentives to encourage states to provide home- and community-based services to help keep beneficiaries out of institutions.

The ACA required the establishment of the Federal Coordinated Health- care Office by March 2010, so that people who are eligible for both Medicare and Medicaid could receive better coordinated care (Democratic Policy and Communications Committee 2015). The act authorized increased funding for federally qualified health centers (FQHCs) and the expansion of trauma and emergency care. In addition, grants were established to integrate physical and mental healthcare through the colocation of primary and specialty care in mental and behavioral health programs.

Health Promotion The ACA provided resources for health promotion and disease prevention. It funded evidence-based public health interventions and support for people with chronic disease or associated risk factors. The ACA supported preventive services through school-based health clinics, Medicare and Medicaid coverage without cost sharing for preventive care and immunizations, and wellness and tobacco- cessation programs (Democratic Policy and Communications Committee 2015).

Transparency and Accountability The ACA created new requirements for transparency to ensure public access to meaningful information. Based on the assumption that informed consumers will likely opt for services that have the best chance of delivering value, the law required that quality metrics for payers and providers be made public on the internet. Through websites such as “Physician Compare,” consumers are able to more thoroughly assess their options for receiving care.

The ACA mandated the disclosure of ownership in hospitals and nurs- ing homes, the disclosure of relationships between vendors and providers, and participation in compliance programs. The Patient-Centered Outcomes Research Institute (PCORI) was established to conduct comparative clinical outcomes research, so that data about clinical effectiveness could be publicized to inform consumer decisions (Fleurence et al. 2013). A competitive bidding program sought to compel vendors, such as durable medical equipment sup- pliers, to provide more value through their services.

The ACA and Value The ACA greatly accelerated the transition toward value-based care. Medicare and Medicaid had previously been payers of care delivered, but the ACA con- verted them into health delivery systems. The programs were now mandated to increase quality, improve outcomes, reduce cost, and expand accessibility.

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A marketplace developed whereby providers had an appetite to assume more risk for clinical care, with the possibility of financial reward. Regulatory guid- ance created an environment in which a variety of innovations—many of those discussed in this book—could occur.

Under the ACA, the focus shifted away from simply addressing people’s health problems toward a broader goal of keeping populations healthy. Qual- ity and low variability were identified as key value drivers. Stakeholders had to anticipate the needs of the population and ensure that the services delivered were consistently patient centered. Financial reform provided incentives to encourage efficiency and eliminate substandard care. Clinical integration, ACOs, medical homes, managed care expansion, penalties for readmissions and harm, and incorporation of the patient experience into reimbursements helped drive this paradigm shift (Blumenthal, Abrams, and Nuzum 2015).

The changes wrought by the ACA forced stakeholders to become more efficient. Providers became more motivated to adopt evidence-based medicine (Blumenthal, Abrams, and Nuzum 2015). Care coordination and the manage- ment of patients through transitions of care became important drivers of savings, satisfaction, and quality. Many organizations, hoping to gain economies of scale, sought consolidation via acquisitions and mergers. The increased transparency and reporting of results fostered greater accountability.

As organizations develop value-based competencies, they are increasingly delivering care that optimizes outcomes in a cost-effective manner. However, further care model redesign requires the development of an infrastructure that supports patient-centered value. Practices should be accessible, they should consolidate services at convenient centers, and they should employ models of intensive intervention for chronic disease patients to proactively anticipate issues. Infrastructure redesign will involve both people and information technology. Pharmacies are deploying health coaches in their facilities to educate and effect behavior change. Patient care advocates will proactively call patients to engage them with the health system. These changes will also need to be accompanied by payment system redesign.

Value-based systems will be patient centered in their approaches to infra- structure, technology, training, innovation, reimbursement, and operations. Consumer engagement will be a major focus. Developments in communication technology, including mobile devices and social media, will create opportuni- ties to better monitor patient behavior and incentivize wellness. Furthermore, the availability of genomic information will also allow for an evolution from general therapeutics toward more individualized care.

Regulations to Reduce Fraud, Waste, and Abuse In addition to the ACA, a number of other laws and regulations aim to support value in healthcare. Fraud, waste, and abuse can quickly erode value and are

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a major focus of regulators. Anticompetitive activity also can diminish value. This section will review several key regulations, including the False Claims Act, the physician self-referral law, the federal Anti-Kickback Statute, the patient safety organization program, and antitrust laws. A number of innovations in healthcare have exciting potential but also have significant implications for laws related to antitrust issues, self-referrals, and quality oversight.4

The False Claims Act Initially, the False Claims Act (FCA) was passed in 1863, during the Civil War, to combat fraud being perpetrated by contractors to the Union Army. The contractors had been providing bullets filled with sawdust instead of gunpowder. The FCA allows relators or whistleblowers to bring lawsuits on behalf of the government against individuals or entities that submit or cause the submission of false or fraudulent claims (Bookman and Richardson 2015). Such cases are known as qui tam cases, whereby private citizens can bring a lawsuit on behalf of the United States when they have knowledge about false claims being made to the government.

Violations of the FCA might occur when a hospital submits an inac- curate cost report that entitles it to an unfairly large share of reimbursements, or when a physician upcodes for services to receive a higher reimbursement. A durable medical equipment company might be liable under the FCA if it bills for services not provided. Antikickback violations, discussed later in the chapter, and the provision of unnecessary services may also be liable under the law (Moseley 2015; Bookman and Richardson 2015).

Parties guilty under the FCA may be suspended or disbarred from federal programs such as Medicare and Medicaid. They may also be liable for damages and even treble damages, whereby penalties are tripled. If a hospital submits false claims in 1,000 cases at $5,000 per claim, the damages could amount to $15 million, along with a penalty that could range from $5,500 to $11,000 for each false claim (Moseley 2015). In 2014, the Office of Inspector General reported that nearly $6 billion had been recovered under the FCA, of which $2.3 billion was in healthcare (United States Department of Justice 2014). Violators of the FCA may also be liable for criminal penalties.

The FCA protects value in healthcare delivery. It can help ensure that ACOs report truthful quality outcomes in the Medicare Shared Savings Pro- gram, and it can help guard against underutilization in the delivery of care to managed care patients. The law holds providers accountable for the delivery of services. If a service is billed for but not delivered, value is being diminished.

The Physician Self-Referral Law Passed in 1989, the physician self-referral law, also known as the Stark Law, prohibits a physician from referring Medicare patients for designated health services if the physician has a financial relationship with the entity providing

qui tam case A type of case in which private citizens can bring a lawsuit on behalf of the United States when they have knowledge about false claims being made to the government.

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Chapter 13: Ethics, Compliance, and Regulat ions Enabl ing Value-Based Care 307

those services. The law was developed out of concerns that physicians might make referrals driven by financial incentives, leading to inappropriate overuti- lization of services, increased costs, and unnecessary care. If Medicare is billed in this type of situation, significant penalties can be applied, including up to $15,000 per violation (Bookman and Richardson 2015).

The law has evolved since 1989, becoming more complex and encom- passing a wide variety of health services. Some of the services considered sus- ceptible to this type of abuse are clinical laboratory services, physical therapy services, occupational therapy services, outpatient speech pathology services, radiology and imaging services, radiation therapy services, durable medical equipment services, prosthetic services, home health services, outpatient pre- scription drugs, and inpatient as well as outpatient services (Moseley 2015).

Exceptions to the Stark Law fall under two broad categories related to ownership or investment interests and compensation arrangements. The exceptions require arrangements to be in writing for at least a year and at fair market value, and compensation cannot be tied to referrals. Referrals to other doctors within a group practice, or under supervision of a physician in the group practice, are exempted. Physician recruitment by a hospital or sponsored by a hospital on behalf of a medical group is exempted if the physician moves her practice at least 25 miles from the previous site or if at least 75 percent of the physician’s revenue comes from new patients. The physician must not be required to refer to the supporting hospital and must be able to join multiple medical staffs (Moseley 2015).

Penalties under the Stark Law are imposed under strict liability. Viola- tions of the law resulting from ignorance of its mandates are not excused. Each noncompliant service can be penalized up to $15,000, with attendant exclusion from public healthcare programs. Money paid for the services must be returned, and the physician may also be liable under the FCA (Moseley 2015; Bookman and Richardson 2015). The Stark Law has significant implications for clinical integration, as well as for the operations of a value-based healthcare system. When the rules for ACOs were passed, several waivers were promulgated with regard to various aspects of the law.

The Anti-Kickback Statute The federal Anti-Kickback Statute was enacted in 1972 to protect patients and federally funded healthcare programs from fraud, waste, and abuse. The law prohibits the exchange of anything of value to induce the referral of federally funded healthcare program business (Bookman and Richardson 2015). Viola- tions are often associated with overutilization of services, increased program costs, adverse effects on quality of care, reduced patient choice, unfair compe- tition, and compromised medical decision making (Moseley 2015). Violators may be subject to criminal penalties, including fines and imprisonment, and civil monetary penalties of up to $50,000.

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The Anti-Kickback Statute is broad and sometimes may implicate seem- ingly innocuous activities. A number of “safe harbors” provide exceptions to the law’s provisions in such areas as referral services, group purchasing organi- zations, waiver of beneficiary coinsurance and deductible amounts, increased coverage, reduced cost-sharing amounts, reduced premiums by health plans, referral arrangements for specialty services, price reductions offered to eligible managed care organizations, price reductions offered by contractors with substantial financial risk to managed care organizations, and electronic health record items and services (Moseley 2015).

Patient Safety and Quality Improvement Act of 2005 The Patient Safety and Quality Improvement Act (PSQIA) of 2005 was passed in response to the Institute of Medicine’s (2000b) To Err Is Human report,

The Anti-Kickback Statute and Accountable Care Organizations The Anti-Kickback Statute has significant implications for accountable care organizations because many of the ACA provisions involving ACOs seem to violate antikickback elements. These apparent violations may involve aspects of the ACO’s infrastructure, network development, clinical man- agement, information technology, and provider and supplier participation agreements (Bookman and Richardson 2015).

Effective November 2, 2011, an interim final rule established waiv- ers of the application of the physician self-referral law, the Anti-Kickback Statute, and certain civil monetary penalties to specified arrangements involving ACOs ( Federal Register 2011a). The five available waivers are (1) the preparticipation waiver, (2) the participation waiver, (3) the shared sav- ings waiver, (4) the compliance-with-Stark-Law waiver, and (5) the patient incentive waiver (Advisory Board Company 2013; Bookman and Richardson 2015; Moseley 2015).

The preparticipation waiver enables an ACO participant or a provider, such as a hospital, to fund the development of an ACO for the benefit of the ACO participants, such as physicians, without running afoul of the Stark Law or the Anti-Kickback Statute (Advisory Board Company 2013). The par- ticipation waiver relates to ACO arrangements during the term of the ACO’s participation agreement and for a specified time thereafter. The shared sav- ings waiver applies to the distribution and use of shared savings payments earned under the shared savings program. The compliance-with-Stark-Law waiver prevents arrangements that meet a Stark Law exception from being liable under the Anti-Kickback Statute. The patient incentive waiver allows an ACO to offer certain nonmonetary incentives to encourage preventive care and compliance with treatment plans (Merritt 2013).

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Chapter 13: Ethics, Compliance, and Regulat ions Enabl ing Value-Based Care 309

and it seeks to accelerate healthcare quality improvement and improve patient safety. The law encourages the voluntary reporting of adverse patient events to Patient Safety Organizations (PSOs), which then aggregate the data for analysis to identify trends and underlying causes of harm (Bookman and Richardson 2015). These findings are then shared with the participating organizations. The PSO system aims to provide a protected environment in which providers can report near misses and unintended adverse events while minimizing fears that this information will be used against them by trial lawyers, regulators, and others.

The PSQIA provides federal confidentiality protections to the informa- tion that is reported by providers to a PSO, as well as to the information that is developed by the PSO for patient safety activities. The process of gathering, analyzing, and reporting information allows for the identification of patterns of failures and errors and the development of ways to reduce the risk of harm. The law refers to this information and analysis as the Patient Safety Work Product (PSWP). The PSWP includes any patient safety or quality information that is assembled or developed for reporting to a PSO, as well as the discussion and evaluation conducted within a patient safety evaluation system (PSES) (Book- man and Richardson 2015).

The quality improvement system under the PSQIA is voluntary and not federally funded. However, regulations delineate the manner in which PSOs should be established and certified. They also state that the PSWP is privileged and not subject to discovery. Value-based efforts to improve quality and eliminate harm require information, analysis, and dissemination of insights. The PSQIA provides an avenue through which healthcare organizations can pursue these activities and improve their processes in a safe and just environ- ment without undue fear of penalties or lawsuits.

Antitrust Laws As pressures mount to improve efficiency and value, healthcare organizations are facing tremendous pressures to consolidate. Collaborations through clini- cal integration and ACOs can provide a number of strategic, operational, and financial advantages, but they can also lead to anticompetitive activities that violate antitrust laws.

Antitrust laws prohibit arrangements that unreasonably restrain free and open competition. Section 7 of the Clayton Antitrust Act of 1914 focuses on mergers, acquisitions, joint ventures, and other arrangements between entities, and it prohibits transactions that substantially lessen competition or create a monopoly in a defined market (Moseley 2015). Some anticompetitive activities are so inherently harmful to competition that they are deemed per se illegal, meaning that they are illegal regardless of their actual effects. Such actions may include price fixing, dividing markets, boycotting stakeholders, and tying arrangements (Bookman and Richardson 2015). Other activities are

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evaluated by a regulator using the rule of reason. In this analysis, the regulator determines whether the activity is likely to have an anticompetitive effect and whether it introduces any procompetitive efficiencies that might outweigh the anticompetitive effect. If the anticompetitive effect is large, the efficien- cies expected from the collaboration will need to be much higher to survive scrutiny (Federal Trade Commission 2011).

In the era of clinical integration and value-based delivery, a number of activities can potentially raise antitrust issues. Generally, such activities are allowed if competitors are financially or clinically integrated and do not control a significant portion of the relevant market (Bookman and Richardson 2015). Such financial integration can be achieved through risk-sharing agreements among competitors, which can take the form of capitation or risk-based with- holds on fee-for-service payments. Typically, the withheld funds are paid out upon achievement of agreed-upon metrics related to quality and cost contain- ment. Collaboration among competitors may also be an option when clinical integration is pursued through programs of clinical management that influence providers’ practice patterns (Bookman and Richardson 2015). When legisla- tion dealing with ACOs was approved, the Federal Trade Commission (2011) released a document providing guidance to help the entities avoid running afoul of established antitrust legislation.

Healthcare organizations and their leaders are continually searching for ways to improve their strategic position, gain market power and negotiating strength, and build clinical alignment and operational efficiency. In doing so, however, they must remain vigilant about compliance with antitrust laws, proceeding in a thoughtful manner and seeking outside guidance if necessary. Particular caution should be exercised in matters relating to mergers, joint ventures, collective provider negotiating, and contracts with payers (Moseley 2015). Penalties for violations can be significant, with prison terms as long as ten years and fines as high as $100 million for an organization.

Summary

The transition toward value-based healthcare has gained significant momentum, and the ethical justification for the transition is strong. The moral underpin- nings of the movement can be found in the ideas of such thinkers as St. Thomas Aquinas, Immanuel Kant, John Stuart Mill, and John Rawls. Healthcare is a commodity used by everyone in society, and it enables people to be healthy and lead happy lives. When better quality leads to better outcomes at a lower cost, healthcare maximizes the good for all the people it affects.

The government plays a major role in financing, delivering, and regulat- ing healthcare in the United States. A variety of laws—including the False Claims Act, the physician self-referral law, and the federal Anti-Kickback Statute—have

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set out to minimize fraud, waste, and abuse, and a number of initiatives have sought to protect consumers and ensure value. The Affordable Care Act of 2010 represents a key step in the movement toward value-based care, as it provides a framework within which ACOs, clinical integration, and financial alignment can occur. These and other innovations will facilitate the delivery of value, and market forces will ultimately help sustain the innovation. As the movement continues to pick up speed, the vision of better quality and outcomes and a lower cost can become a reality.

Notes

1. For more details related to patient-centered outcomes research, visit www.pcori.org/get-involved/join-advisory-panel/advisory-panel- improving-healthcare-systems/research-prioritization.

2. For information on websites that provide comparison data about providers, visit www.cms.gov/medicare/quality-initiatives-patient- assessment-instruments/physician-compare-initiative/.

3. A detailed analysis of the Affordable Care Act is available at www.dpc. senate.gov/healthreformbill/healthbill52.pdf.

4. This section is derivative of several legal texts and publications related to health management law. It does not intend to provide legal advice; such advice should be sought from competent counsel.

Discussion Questions

1. Is value-based healthcare delivery ethical? Support your response with the ideas of two philosophers discussed in this chapter or elsewhere.

2. Do regulations facilitate or erode the delivery of value? Provide examples of cases where regulations have had a positive or negative effect.

3. How did the Affordable Care Act accelerate the delivery of value in healthcare? If the ACA is significantly altered in the future, do you think the movement toward value-based care will halt, reverse, or continue on its course?

4. How are the laws related to fraud, waste, and abuse relevant to the delivery of value in healthcare? Identify two such laws, and discuss elements in them that help enhance value.

5. Consider the following case: You are the chief compliance officer at CypressHealth, a managed care organization that contracts with Medicare and Medicaid to provide services to beneficiaries in two states.

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Revenue is $5 billion annually. A recent investigation by regulators has raised concerns that Medicare and Medicaid have been overbilled by health plans by more than $500 million. Health plans, meanwhile, have argued that revenue is not covering their expenses. Consumers have been complaining that their access to providers and care has been constrained.

CypressHealth wants to ensure that it is in compliance with its contracts with Medicare and Medicaid. It also wants to ensure that its internal operations are being conducted ethically and efficiently. You have been put in charge of conducting an internal audit of the organiza- tion’s operations, finances, and care delivery. a. Draft a memo to the organization. You should communicate the

rationale for a robust compliance plan, the steps that need to be taken to ensure compliance, and the role that all employees will play in this initiative.

b. Develop a compliance program that comprehensively addresses issues related to fraud, waste, and abuse. Include a work plan to outline how key goals will be achieved.

c. Provide a dashboard that will be presented to the CEO and the board of directors on a quarterly basis. The dashboard should highlight such activities as internal audits, compliance events, and potential breakdowns in compliance. For instance, the dashboard might report frequency of violations related to patient record confidentiality.

d. Draft a memo identifying potential areas of concern and specifying steps to mitigate those issues. Your memo should incorporate the ideas presented in this chapter, as well as concepts from other publicly available materials dealing with compliance breakdown. Once you have identified the major issues, tabulate the strategies that CypressHealth will use to minimize the chances of future breakdowns.

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APPENDIX

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STRUCTURE OF A PAY-FOR-PERFORMANCE PROGRAM

A pay-for-performance (P4P) program can be structured using a variety of measures. The Centers for Medicare & Medicaid Services (CMS) administers a P4P program known as value-based purchasing (VBP),

and key aspects of that program are discussed in this appendix (CMS 2011). The measures used in the VBP program are replaced over time as organizations reach a higher level of achievement.1 New measures are selected from national quality organizations such as the Agency for Healthcare Research and Quality (AHRQ) and the National Quality Forum. The AHRQ’s National Quality Measures Clearinghouse lists more than 1,000 quality measures from which CMS can choose (AHRQ 2018). The examples presented here demonstrate the level of detail used in the process measures.

Clinical Process of Care

The measures in the list that follows have been used in the VBP program for the evaluation of clinical processes of care (CMS 2011; Federal Register 2011b). These measures incorporate best practices based on evidence.

The first measures listed are related to acute myocardial infarctions (AMIs) and geared toward optimizing processes of care to enhance cardiac outcomes.

1. AMI-2: Aspirin Prescribed at Discharge. This measure monitors the ratio of patients who are prescribed aspirin upon hospital discharge. It is included because evidence indicates that aspirin therapy reduces the risk of adverse events and mortality in patients after an AMI by almost 20 percent. Studies also support the use of aspirin in secondary prevention.

2. AMI-7a: Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival. This measure monitors patients presenting with an ST-elevation AMI who are prescribed fibrinolytic therapy at a hospital if a percutaneous intervention is not feasible. Such intervention has been shown to have a significant mortality benefit. The measure requires therapy to be administered within 30 minutes of presentation.

1

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