Nemours Children’s and Delaware Agree to Groundbreaking Payment Model
On January 6, senior leaders at the Wilmington, Delaware-based Nemours Children’s Health were able to make public the announcement of something that had been in the planning stages for numerous months, and whose achievement represented a major breakthrough in healthcare policy around children’s health. The press release announcing the development began thus: “Nemours Children's Health and the State of Delaware today announced an agreement to create a transformational new effort aimed at making Delaware's children the healthiest in the nation. The new healthcare payment model is centered on the 120,000 children covered by Delaware's Medicaid program. The new payor arrangement aligns the financial incentives that pay for healthcare with Nemours' aim to keep children healthy. This partnership marks the first-ever pediatric global revenue budget model in the United States. Unlike traditional arrangements in which providers earn more money for providing more medical services, Nemours Children's will be incentivized to address both medical and non-medical drivers of children's health in an effort to avoid unnecessary medical expenses,” the press release noted.
As the Nemours leaders emphasized, “This program is a bold next step in Nemours whole child health model, which considers both a child's medical needs and the social and community issues that impact their health. It integrates Nemours' excellent primary, specialty, and hospital care with health initiatives that impact all of Delaware's children, including many who come from historically underserved communities. This agreement builds on Nemours longstanding commitment to serving the children of Delaware and further establishes the First State as a leader in child health.”
And the press release quoted R. Lawrence Moss, M.D., president and CEO of Nemours Children’s Health, as stating that “We know that what happens in a child's home, school, and community is critical in setting them up for lifelong health, yet America's healthcare institutions are primarily paid for providing medical care. Today's agreement creates the financial incentives for Nemours and the state of Delaware to align on what we all want: healthier kids who grow up to become healthier adults.”
And it quoted Delaware Governor John Carney, who stated that "Making sure our children are healthy and able to be successful is as important as anything we do. I’m grateful for the hard work that the Department of Health and Social Services and Nemours Children's Health put into this effort to better support children across our state through innovative care,” Governor Carney said.
The press release noted that ,“Working in partnership with community support systems and local and state government agencies, Nemours will coordinate access to the broader range of services needed to help children thrive and achieve optimal health. Nemours' unique position as the only multistate, multi-hospital pediatric system in the country will provide broadly applicable lessons in how different financing systems can improve overall child well-being and health in America.”
Further, the press release quoted Kara Odom Walker, M.D., M.P.H., chief population health officer at Nemours Children’s, as stating that "This innovative global budget model will demonstrate how shifting to a 'pay for health' model can create the healthiest generations of Delaware's children. Addressing social drivers through collaboration with parents, communities and governmental agencies is foundational to the trajectory for healthy kids to become healthy adults."
And it quoted Delaware Health and Social Services Secretary Josette Manning, as stating that "I'm proud that the First State will yet again be first, this time in bringing an innovative model to our state which will ensure the best health outcomes for Delaware's children. I look forward to seeing the results of this effort in the years ahead."
Shortly after the announcement was made, Healthcare Innovation Editor-in-Chief Mark Hagland interviewed Dr. Moss to drill down on the announcement and get his perspective on what is being accomplished in launching this new payment model. Below are excerpts from that interview.
How did the journey towards this new payment model begin?
It starts at the core of who we are as an organization, and our purpose in the world. Nemours is in the business of creating health, not just treating disease. Our kids are every child in our service area, and we should be accountable for creating health for every child. And so we approached the state with that aspirational concept. And fortunately, they were very willing to listen, and so several years later, we were able to sign this MOU [memorandum of understanding.] And by the way, I want to note that our colleagues and partners in the State of Delaware have worked extremely hard on this, too. People talk about government moving at a slow pace, but that was not my experience of this at all.
How is the model going to work, in practice?
It’s based on the model of a global budget, where we and the state come to an agreement on the value we mutually decide to put into a yearly spend for healthcare. And then we’re accountable for providing the medical care; and if that ends up being a financial win for Nemours, and if it ends up costing more, it’s actually a financial loss for us. In the first three years, we’re learning together with the state, during that three-year learning-model period.
Conceptually, our vision is that this is not Nemours and the state sitting on opposite sides of a negotiating table haggling over money; this is us all sitting on the same side of the table asking, how can we create the best health for every child in Delaware? And that’s not just a platitude. This is the first-ever pediatric global budget model in the U.S. We’ve learned a lot from the state of Maryland in particular. But per kids, the scope of disease is different, and the total spend per person is different in childhood than in adulthood. And importantly, interventions outside the hospital to create health in childhood, can have a profound impact. So investing in food security, freedom from violence, and literacy, and other issues, is totally different. This model really focuses on that. Built into that model is health.
And now that we’ve agreed to do the model, we’re sitting down with our partners at the state to figure out what the funds flow looks like. Health includes more than just medical care, and we need to make investments. And we’re working through now those dollars will flow. And those are complicated to marry those issues to medical care in children, in a way that makes sense.
What is the timeframe for working out the details of the model? Several months?
Yes, I think it will be several months, in the context of the three-year initiation phase. The intent isn’t to hold feet to the fire for results, because we’re learning what results will look like. We’re really in a learning mode over those first three years. And it will really be a partnership. But the state and Nemours have extended some considerable amount of trust to make this happen. And if we didn’t both believe that we were really mutual partners, this would never work. The state of Marland’s global budget is purely about medical costs, and that is a laudable goal. But we’re much broader. The fundamental, paramount foundation of our model is child health.
You must have done some analytics on this before you moved forward with the plan, correct?
Yes, that’s correct, and we’ve engaged some very sophisticated actuarial firms. And together with the state, we had a very open data-sharing format, and it requires trust.
You’ll be investing very early on in a child’s life in terms of preventive health and wellness, then, correct?
Exactly. Mostly, we’re trying to treat disease with compassion, quality, and effectiveness; here, we’re really building out the road ahead of us. To get more concrete, how do we figure the return on investment? Much of the return is a long-term, healthy population. That is way outside a budget cycle or a political election cycle. So you might ask, how do you invest now? My answer to that is that there are enough modest short-term financial wins in terms of reducing acute-care stays and ED visits—there’s enough bang there early, to demonstrate that this is viable financially. But those short-term wins pale in comparison to a longer-term reduction in the incidence of cancer, diabetes, heart disease, Alzheimer’s. We need the short-term wins first.
I still remember your telling me the vivid story a few years ago of a patient named Wendell, who, because of lack of access to a safe playground space, ended up severely injuring his leg, with resulting gangrene and necrosis, and more than a million dollars’ worth of medical care, including an amputation, whereas, as you noted, providing a safe playground space near his public housing, would have been so inexpensive and so effective.
His care cost multiple millions of dollars, actually. And he endured a nightmare experience because of the injury.
So, in working out this new payment model with the state of Delaware, you were thinking of Wendell and other kids like him, correct?
Absolutely. Obviously, when we’ve got an ICU full of kids, we’ve got to take care of them, and we do everything possible for them. At the same time, we try to apply a broader lens, to ask what the real problem was; and often, as with Wendell, the real problem was a child who grew up without the resources for play supervision. Or a child who got the worst case of RSV in town and ended up in the ICU. So we want to be creating health in the first place, which will of course mean less medical care needed down the road. There will always be kids who need heart transplants and chemotherapy, and we’ll always absolutely be there for them; we’re there on both sides of the equation.
In other words, you’re not trying to get rid of yourselves?
We’d love to get rid of ourselves, but there will always be disease out there, and we will always be there to care for children with illness.
We need to create greater health to insulate people from things like Medicaid rollbacks, right?
Yes, and our payment system does have a lot of flaws. But what we’re talking about today is even a level above that. Regardless of your health insurance coverage, the economics of healthcare in the U.S. incentivizes the opposite of health; it incentivizes the maximal amount of care delivery as possible, in the most expensive forms possible. We should fix the vagaries of payment systems; but what we really need to do is to change the financial incentives of providers.
Analysts from the Medicare program just announced last month that the healthcare system experienced 10.4 percent hospital inflation over the last year, a huge jump. Right there, we have a burning platform, don’t we?
Yes, and at the risk of sounding like a broken record, it’s incentives, incentives, incentives. Every fiber of our system incentivizes volume and complexity. The system is driven by incentives, and my belief is that, until we change those incentives, we won’t be able to stem that tide. And this model we’re talking about today, in my view, is transformational. We’ve said, go ahead and incentivize for health, not volume.
Is there anything else you’d like to add?
Three things I want people to understand about this model. Number one, the news here is about child health, not a payment model. This is an agreement to make our state’s children the healthiest in the country. Secondly, we’re focusing on every child in our service area. And third, it’s highly significant that this is a true partnership between our health system and the state.