Getting the Incentives Straight

Good policy is about getting the incentives straight. My post yesterday on the recent paper in JAMA looking at differences between For Profit and Non Profit hospice providers noted that adding quality of care to discussions of cost was needed to make the best policy.

I think the overall goal of health care is to extend people's lives and/or to improve the quality of their life (QOL). Since everyone dies, there are eventually diminishing returns on the productivity (here defined as extends life and/or improves QOL) on what we spend to forestall death and improve QOL. It is hard to determine when this takes place, and harder still to decide what to do when this point is reached. But, it is inevitable. Hospice is one option when patients begin to move into this murky territory when treatments may no longer be 'worth it' as defined by them and their doctor(s). However, by improving QOL, hospice is most certainly still productive care as I have defined the term.

QOL is hard to measure on a prospective basis, meaning as you move through time. Using retrospective quality assessment, especially family members saying hospice helped my loved one and me through a hard time, hospice passes the market test as around half of all Medicare beneficiaries who die do so while using hospice. We know that. However, we need better measurement of quality of hospice care if we are going to get the incentives right in Medicare hospice policy. How quality changes and improves by length of hospice use is very important if we are going to determine the optimal period of hospice use from a QOL perspective.

The worries about increasing length of hospice in the Medicare program are focused on the long periods of use, which is understandable because hospice has long held out hope (and some evidence) of an intervention that helps patients and reduces Medicare expenditures. I think that often groups such as MEDPAC and Congress focus so much on long hospice stays because it helps drive a narrative that one way to reduce costs is just to stop people from abusing the system. I am against abuse of the system, but we won't 'waste fraud and abuse' (WFA) our way out fo the overall cost problem our country faces, and too much focus here just lets us avoid harder issues.

Focus on WFA and long stays in hospice generally is inevitable, and correct, but we need to keep in mind that there is more than one problem (long stays) to be considered in trying to get the incentives correct in hospice. Short stays in hospice may also represent a problem.

A paper I did with colleagues found that hospice reduces Medicare expenditures by around $2,200 in the last year of their life; this means that after choosing hospice, Medicare paid about $2,200 less for their care until death than they would have had they not chosen hospice. Maximum cost savings to Medicare occurred with a length of hospice use of around:

• 60-100 days for Cancer
• 50-110 days for diseases other than Cancer

And cost savings at the maximum level were around $7,000 for Cancer, about double that for non-Cancer. Keep in mind the definition of saving here is what Medicare paid for care, not the profit margin of a hospice, which is a related, but not the same issue. And this paper, like most focused on cost didn't measure quality, which is a limitation and what we really need to know (cost and quality together).

The median length of hospice use in the study in JAMA this week was 20 days for those treated in a FP hospice and 16 days for those treated in a NP. The years and data sources are not the same as those that produced the cost savings data noted above, but to illustrate the incentives lets stick those numbers (they have changed some, but not that much).

If the median length of use (half the patients use less than amount, half more) is 20 days, then doubling the median length of use still doesn't produce a length of use that has achieved maximum savings for the Medicare program. For around 75% of the patients using hospice, we see that the profit motive incentive, and the incentive of the Medicare program from an overall cost perspective is the same: we need to find a way to increase length of hospice use. What we wish we knew was how quality of life/care improved for patients when moving from a length of hospice use from the median (20 days) toward the maximum cost savings for Medicare (2-3 months). The shape of this curve is needed to know how hard we should work to try and incentivize stays on the short end of the spectrum to be longer. If maximum quality of life improvement is obtained at 20 days, it might not be that important. However, if QOL and patient benefit is not achieved until 60 day length of use, then we should work very hard to increase shorter periods of hospice use.

We shouldn't focus policy only on the very long periods of hospice use, we must make sure that whatever we do there doesn't shorten the length of use for more common periods of usage. If the median fell from 20 days to 15 days, you would be reducing the cost savings to Medicare and probably harming patient QOL. Note that the publicly available data on Medicare hospice margin (profitability) shows that periods of hospice use less than 10 days or so are money losers for hospice providers, so the profit incentive at the lowest end of hospice use (shortest 30% of stays) is also aligned with both quality improvement and the finding that hospice reduces Medicare expenditures, with the biggest daily effects being closest to death. Thus, everyone has an incentive to transform 5 day lengths of hospice use into at least 15-20 day periods of use.

Both the long periods of hospice stay and the short ones may represent policy problems. We need to make sure that Medicare hospice policy pays attention to both ends of the distribution, and doesn't only seek to shorten very long periods of hospice use.

Updated: just added a bit in the last two paragraphs to further clarify aligning of incentives to extend length of short periods of hospice use.