Cost Efficiency plus Quality Measures: Prescription for the Indian Healthcare Sector

In recent years, in India, a strong free market, a rapid economic growth and a burgeoning private healthcare sector, have accelerated public demand for consumer centric, high quality, medical care.1 The shift towards a consumer-driven healthcare movement is now further facilitated by the increasing use of social media and online searches by a growing middle class. Today, rather than relying on the Government, a more informed Indian public exhibits rising expectations and it is increasingly intent on making its own choice in matters of personal health, cost and of real or perceived quality of health services.

Currently, more than half of India’s hospital beds are run by private corporations² and, both, the urban and the rural population, prefer to receive care mostly in the private sector. Even among the poorest 20 percent rural households, the use of private healthcare services has increased by 15 percent since 1995-1996.³ And 60 percent of the national healthcare expenditure is out-of-pocket.⁴ Less than 15 percent of the population is covered by private insurance.⁵ The shift from the public to the private sector is attributed to the substandard performance of the Government health services, plagued by poor outcomes, substandard infrastructure and high rate of staff absenteeism. According to the 2005 Report of the National Commission on Macroeconomics and Health, the “key factors that adversely affect the functioning of the public health system are poor management of resources and centralised decision making, low budgets, irregular supplies, large-scale absenteeism, corruption, absence of performance based monitoring and conflicting job roles, making accountability problematic.”³

There is no evidence that progress has been made in the Indian public health sector since 2005. Infrastructure, manpower and outcomes and operational efficiency remain inadequate.

According to the 2005 Report of the National Commission on Macroeconomics and Health, the “key factors that adversely affect the functioning of the public health system are poor management of resources and centralised decision-making, low budgets, irregular supplies, large-scale absenteeism, corruption, absence of performance-based monitoring and conflicting job roles, making accountability problematic.”

In the last decade, most of the improvement in India’s healthcare delivery has been led by the private sector.^{1, 2} Large private sector hospital chains have achieved high operational efficiency and yet cost substantially lower than those in the West. However, recently, the quality of care provided within the Indian private healthcare sector has been questioned, because of “irrational drug prescription, alleged kickbacks and referrals, unnecessary surgical procedures.”^6,7 Indeed, now in India, one can obtain second opinions about procedures and treatments by accessing online services.8 For example, it has been reported that a second opinion reversed the initial recommendation in 44 percent of 12500 patients.⁹

From my experience of working in the country, I have witnessed continuous progress by Indian healthcare providers in operational efficiency and observed better clinical outcomes comparable to those in the West. However, I have also faced challenges when attempting to measure the performance of providers and facilities, against all domains of quality care: timeliness, safety, effectiveness, efficiency and equity.¹⁰

If the trend towards consumer driven healthcare continues in India,the only way to protect the consumer/patient is for individual providers and facilities to make public their current statistics, not only on prices, but also their clinical outcomes. The information should include measures of operational efficiency and the degree of quality associated with the services provided.

Given the situation in the Indian healthcare system and based on the general methods and measures used in the USA to profile and rank the performance of providers and their facilities, I believe all Indian healthcare stakeholders should adopt an approach to consumer driven healthcare that would allow meaningful comparison among individual providers and facilities. Such comparison should be based on a risk adjusted analysis of operational efficiency and price, and the degree to which the services provided by physicians and facilities meet all healthcare quality specifications. A brief description of performance measures and a list of pertinent definitions follow.

Healthcare Efficiency and Cost of Care

According to the American Quality Alliance (AQA), efficiency of care is the cost of care associated with a specifi c level of quality of care. Therefore, measurement of efficiency of care should identify the cost of providing high-quality care, which the Institute of Medicine (IOM), defines as care that is safe, timely, equitable, effective, efficient and patient-centred.¹⁰

Performance Measures of Efficiency and Cost of Care

The most reported measures of hospital efficiency are: the severity-adjusted average length of stay, cost per risk-adjusted discharge and total cost of hospital discharge and outpatient visits (risk adjusted). These measures don’t specify the associated level of quality of care. Therefore, they should be considered as measures of operational efficiency and of the cost of care, rather than the cost of achieving quality care.11 A more complex method used mostly for research purposes, is the Stochastic Frontier Analysis (SFA), and the Data Envelopment Analysis (DEA), that compares an individual hospital’s performance with an ideal “frontier” of best performance (Rosko 2008).¹² This method has also been used by various Indian researchers for various purposes: hospitals’ ability to remain effi cient while scaling their operations (scale efficiency);¹³ to study the technical efficiency of public district hospitals in Madhya Pradesh;¹⁴ and to improve the operational efficiency of a number of hospitals in Punjab, in order to improve life expectancy in certain districts of that State.¹⁵ One of the advantages of the SFA and DEA methodology is that it allows adjustment for risk and outcomes¹⁶ (Mutter 2008). For example, Deily and McKay demonstrated that a higher risk-adjusted mortality rate in Florida hospitals was associated with higher hospital cost and reduced hospital operational efficiency (McKay 2008).¹⁷ Current SFA methods do adjust economic performance for burden of illness and quality of care. However, due to their complexity, SFA methods are mostly confined to academia and research.

All Indian healthcare stakeholders should adopt an approach to consumer driven healthcare that would allow meaningful comparison among individual providers and facilities. Such comparison should be based on a risk adjusted analysis of operational efficiency and price, and the degree to which the services provided by physicians and facilities meet all healthcare quality specifications.

Physicians

Most physician cost-profiling methodologies involve assigning episodes of care to individual physicians ((ETGs, PEGs, MEGs, CCGroup Market-basket System).^{18, 19, 20} An episode of care covers all the care a patient receives during the course of treatment for a specific illness or condition, or for a medical event in a delineated period of time. Each physician’s relative cost is obtained by calculating the ratio of actual (observed) cost of care to the average (expected) cost for similar types of care provided by peer groups. The use of propensity score weighting, which adjusts for practice size and types of services rendered, improves the comparison of cost performance of individual providers, because each physician is compared with a subset of his or her peer group with a similar episode mix.21 Most of these measures are used in health plans and by accreditation agencies and have been developed by private vendors or agencies such as the AQA, the National Committee for Quality Assurance (NCQA), the Leapfrog Group, the Integrated Health Care Organisation and the Employer Health Care Alliance Cooperative.^{22, 23} They should be considered measures of operational efficiency as they calculate the ratio between the costs of resources used (input) and the amount of episodes of care rendered to individual patients; or the total care provided to a specific population over a certain period of time (output). Though, they allow us to make comparisons within peer groups, these measures don’t identify the quality of the clinical services provided. In order to overcome the limitations of measures based only on operational efficiencies, several health plans (United, Aetna, IBC), have taken a “gated approach” in profiling physicians and hospital’s performance to reward physicians and hospitals with enhanced payments based on operational efficiency, lower cost, and quality indicators.^24,25,26 With the gated approach, physicians and hospitals must first meet quality indicators and they can be considered for cost performance incentives. For example, the “Integrated Provider Performance Incentive Plan (IPPIP),” at Independence Blue Cross, Philadelphia, is a hospital/physician rewards programme based on a balanced model for high-quality care and operational efficiency and lower cost.²⁶ The programme awards enhanced payments to be shared between physicians and hospitals, facilitating alignment of primary care physicians, specialists and hospital incentives. With IPPIP, half of the award is based on medical cost management measured via an annual risk-adjusted, per-member, per-month cost target. The other half is based on achieving quality indicators. However, the full incentive payment is payable only if quality standards are met (12.5 percent based on CMS/ PHCQA Appropriate Care Measures; 12.5 percent based on hospital-acquired infections; 25 percent based on Potentially Preventable Readmissions rates). Health plans now disseminate performance information directly to consumers (online portals; via e-mail and print material). Individual States and the Federal Government pursue similar public reporting initiatives. For example, The Centers for Medicare and Medicaid Services (CMS), publishes on its website the 30 days hospital readmission rates for heart failure, myocardial infarction and chronic obstructive pulmonary disease²⁷ and the payments made to each provider.²⁸

The most reported measures of hospital efficiency are: the severity-adjusted average length of stay, cost per risk-adjusted discharge and total cost of hospital discharge and outpatient visits (risk adjusted). These measures don’t specify the associated level of quality of care. Therefore, they should be considered as measures of operational efficiency and of the cost of care, rather than the cost of achieving quality care.

Discussion

In the USA, within a free market environment, the purchasers of healthcare services, the health plans, the government and the employers drive a number of initiatives, including pay-for-performance and value-based tier products, designed based on data collection and analysis of operational efficiency, cost and quality indicators. The assumption is that the use of robust analytics allows employers and health plans to identify hospitals and physicians who are efficient and less expensive but who also provide high quality clinical care. These programmes are designed to steer patients to preferred providers, by adjusting the patients’ out-of-pocket expenses and by disseminating information on outcomes and costs.

Patients experience lower out-of-pocket expenses, if they use providers and facilities that meet, both cost efficiency and quality indicators. Health plans and employers facilitate patients’ choices, and help improving the consumer driven process by disseminating information on providers and hospital operational efficiency (cost) and quality.²⁹ Reporting data on medical quality in addition to information on cost and operational efficiency is essential, because it is well established that operational efficiency and quality are not necessarily “proxy for each other” (Rattray and all).30 It is also important to notice that risk adjustment methods are always used to determine the portion of the variability in cost and quality among providers and hospitals that should be attributed to intrinsic patient factors rather than provider and facility performance.^{31, 32}

In India, given that less than 13 percent of the population is covered by health insurance, the industry and the employers don’t have a strong role in influencing the efficiency and quality of the health services provided by the private sector. In addition, so far, the Central Government in India has not intervened in monitoring the performance of private hospitals and their providers. In this situation, the consumer is left with little protection and can only perceive quality on references and perception rather than metrics based on rigorous benchmarking and ranking.

Although the Indian private healthcare sector has acquired a reputation for great operational efficiency, several studies have proven that cost of care profiles and operational efficiency have little correlation with quality measures.³⁰ It is time that the Indian private healthcare sector starts to self-regulate with the introduction of accurate risk adjusted analyses and public reporting not only of their operational efficiency, but also of the specific level of quality that they sell to their patients-consumers (gated approach). This is the only way in which the private sector can address current criticism on its ethics and continue to thrive within a fair consumer driven system, fending off future heavy regulatory burdens that inevitably will come in the absence of new transparency and self-regulation. In addition, there is a need for a strong partnership between the private and the public healthcare sectors. India continues to face significant public health challenges because of a very high disease burden. With nearly 16.5 percent of the global population, India contributes to “a third of the diarrhoea, TB, respiratory and other infections and parasitic infestations, and perinatal conditions; a quarter of maternal conditions, a fifth of nutritional deficiencies, diabetes, CVDs, and the second largest number of HIV/AIDS cases after South Africa.”² In addition, 600 million Indians still living below the poverty line, have no easy access to private facilities and physicians and rely on government healthcare.

This means that, because of the inadequacy of the public healthcare sector, for the majority of the Indian population, it is practically impossible to access quality healthcare. That is, care that is timely, effective, efficient, safe, equitable and patient centric.¹⁰ In the next ten years, only a partnership between the private healthcare sector and the local, state and central governments, can adequately address the high national disease burden and facilitate access to operational, efficient and clinically effective care for the majority of the Indian population. Again, irrespective of whether care delivery will be financed or directly provided by the Government, the public should demand transparency and accountability through public reporting on operational efficiency and the degree to which the services provided meet each of the six domains of quality healthcare: timeliness; efficiency; effectiveness; safety; patient focus; and equity.

It is time that the Indian private healthcare sector starts to self-regulate with the introduction of accurate risk adjusted analyses and public reporting not only of their operational efficiency, but also of the specific level of quality that they sell to their patients consumers (gated approach).

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