How Will a Shift to Value-Based Financial Models Affect Care for Hospitalized Children? Free

Currently, 40.4% of all health care costs are estimated to be paid via FFS models, though VBC systems are increasing.⁶  For hospitalized children, this breakdown is not well defined, though the proportion paid via FFS is likely higher. Hospital services are typically paid for based on contracts between the health care system and the patient’s insurance company. Based on criteria such as InterQual (Change Healthcare) or Indicia (Milliman Clinical Guidelines/MCG), a hospitalized child is assigned a care class such as “observation,” “acute inpatient,” or “critical care.” Despite these criteria being referred to as guidelines, insurance companies often interpret them stringently, especially when the interpretation benefits the insurance company. The development of “observation care,” a class that technically refers to outpatients, has been characterized by some as a loophole to save insurance companies money.⁷  The category of observation care, based on adults, may be less applicable to pediatrics because care provided to pediatric observation patients does not vary significantly from those who are assigned inpatient status.⁸  In pediatrics, hospitalized patients’ conditions can change rapidly, so patients require high levels of vigilance; retroactively assigning a level of care based on a patient’s course may not accurately capture the resources required.

Perhaps partially in response to these patient classifications, many hospitals have created departments of utilization management (UM) that seek to provide financial stewardship by supporting efficient, effective care. Unfortunately, however, UM departments often spend significant resources navigating payment disagreements with insurance companies. Investments in UM departments under an FFS system, although perhaps generating a positive financial impact for the health system, may not directly improve health care outcomes or reduce out-of-pocket costs for the patient or family.

Partly because of problems with FFS payment systems, models that emphasize VBC, often referred to as alternative payment models (APMs), have been developed. These models also developed in response to ideas such as improving Medicare’s purchasing power via concepts such as the Institute for Healthcare Improvement’s Triple Aim (improving patients’ experience of care, improving population health, and reducing health care costs)⁹  that likely influenced the Affordable Care Act. In APMs, health care organizations are incentivized to improve quality and cost. A review of these models will not be undertaken here, and these models may differ substantially by state and payer, but the Healthcare Payment Learning and Action Network lists 3 different types of APMs (Table 1).¹⁰  In this table, models 2–4 are considered APMs. APMs may include concepts such as Accountable Care Organizations (ACO) and Clinically Integrated Networks, clinical organizations that aim to improve quality and reduce costs by improved care coordination and other strategies.

Value-based systems may function differently for children than they do for adults. In its policy statement regarding the impact of value-based systems on children’s health, the American Academy of Pediatrics has offered recommendations to ensure that these systems support children’s needs.¹¹  Although these recommendations have an outpatient focus, inpatient providers should be aware of their scope.

Pediatric value-based models, including APMs, offer particular promise for children, although we note barriers to their implementation. One barrier is that cost savings in children take longer to accumulate than in adults.¹²  The model of annual contracts between payers and health care organizations may not incentivize investment in programs that take years to impact outcomes and cost. Limited data from pediatric ACOs have demonstrated effectiveness, especially in working with Medicaid programs, but also highlighted challenges.¹³  A study of Ohio children with disabilities found that pediatric ACO membership was associated with increased adolescent preventive care and reduced hospitalizations but reduced use of home health services.¹⁴  Another study of an Ohio ACO involving pay-for-performance incentives for some physicians found improved performance by incentivized community physicians and nonincentivized, hospital-employed primary care physicians.¹⁵  Several examples of models 2 and 3 exist in pediatrics, though an example of model 4 in pediatrics has not yet been described.

The concept of high-value care for individual patients is not new for hospitalists. Choosing Wisely, a campaign to discourage low-value clinical practices, began with recommendations about U.S. adults,¹⁶  but has spread to other populations such as adults in other countries and hospitalized children.¹⁷  Hospitalists should use these principles to develop systems that create higher value for patients on a larger scale. Approaches might include ways to prevent patients from coming to the hospital initially, focusing on subacute or lower-level care, and care management programs to help with care transitions. Reduced rates of inappropriate emergency department utilization, for example, could be achieved via a gatekeeper program involving 24-hour access to primary care providers¹⁸  or texting programs using artificial intelligence for postoperative patients.¹⁹  An approach called “hospital-at home” may provide a safe alternative to hospitalization with reduced costs.²⁰  Hospitalists might be important contributors to these programs. A particular challenge for pediatric VBC systems is how to integrate care for behavioral health problems because they occur commonly in children and adolescents, often impact physical health,²¹  and are associated with high health care utilization.²² 

Within the hospital, systems of care that aim to create higher value include observation units,²³  surgical-hospitalist comanagement programs,²⁴  use of clinical pathways,²⁵  and infusion centers for conditions such as acute headache.²⁶  Hospitals should learn from each other so that they can adopt these creative approaches. Health care systems must improve their data transparency so that patients and families can make informed decisions and also payers, policymakers, and other institutions can adopt systems of VBC.²⁷ 

Pediatric hospitalists’ focus on quality and safety over the past 2 decades has demonstrated their impact on outcomes—and value. However, beyond relatively limited data,¹²  VBC models for hospitalized children have received little study. These systems may reduce the frequency of hospitalization by emphasizing prevention and care coordination and decrease inappropriate utilization of intensive care, diagnostic testing, and medications. Other effects are unknown, however. One might imagine increased illness severity among hospitalized children or medicolegal risk among providers because of financial pressures to treat patients in alternative settings. Rigorous study of VBC systems in different settings among diverse patients is imperative as more organizations adopt these models.

Several strategies may be considered as ways to move toward better value in pediatrics. These strategies may be implemented as ways to improve value generally as we prepare for a move toward APMs or formally as part of APMs. Pediatric VBC on a population level requires creative thinking and partnerships between health care organizations and others that provide services for children and families such as insurance companies, government, schools, and social service organizations. Medical-legal partnerships serving children and adolescents with health-harming legal needs may help increase school attendance and decrease hospitalizations for mental health emergencies.²⁸  Technologies such as geomapping and geoanalytics can improve school-based health in specific geographic areas,²⁹  whereas artificial intelligence can help map social patterns to reduce health care disparities.³⁰ 

VBC for hospitalized children should emphasize patient care efficiency without attention to financial issues unimportant to patients and families. VBC systems could obviate the need to classify patients as “observation” or “acute care” because the hospital will have no incentive to do so—and the classification rarely matters to patients or families. Resources that hospitals have invested in UM departments could be partially reapplied to more patient-centric areas such as care coordination. Insurance companies will likely save money because they can spend more resources on direct care rather than administrative costs.

The future for pediatric hospitalists will likely include an increased focus on population-based care, collaborating with care coordinators, social workers, and lawyers to support their patients. This shift may make less distinction between inpatient and outpatient care. For example, hospitalists may pay closer attention to immunization records to catch up hospitalized patients,³¹  improve follow-up for complex children using care coordinators,³²  and round with case management personnel.³³ 

The move to value-based payment systems for pediatric health care in the United States is relatively new but growing. This development should prompt health care systems to adopt approaches that benefit patients, families, and communities. Pediatric hospitalists should understand these developments because they affect our patients, but also because they may require adaptation of our professional roles, including ensuring that children equitably receive high-value care. These models require rigorous research to assure that they bring high-value care to children in the United States.