As health-care costs climb ever upward, controlling expenses without sacrificing high-quality care becomes increasingly important. Payment systems based on the value of care are emerging as a way to combat rising costs.

Many researchers like Jason Wang, an associate professor of pediatrics and a Stanford Health Policy core faculty member, have found that bundled payment systems may help health-care institutions achieve better value of care.

In a new study in the Journal of the American Medical Association Oncology, Wang and his co-authors show that a value-based bundled payment system is associated with cost containment and improvement in care, even improving chances for survival.

The study examined Taiwan’s bundled pay-for-performance (PFP) system for breast cancer. Instead of the traditional fee-for-service (FFS) system that is typical in the United States — in which every test, surgery and exam is billed individually — this system includes all aspects of treatment in a single established cost, or bundled payment.

Based on guidelines set by Taiwan’s National Health Insurance Administration (NHIA), the pilot program reimbursed health-care institutions’ costs for breast cancer treatment based on the patient’s cancer stage, 0 to IV. Institutions that exceeded the NHIA’s standards received a financial bonus as an incentive for better performance.

The study followed 4,215 patients in the bundled-care system over a five-year period, comparing the quality of their care, the cost of their treatment and the outcomes of their treatment to 12,506 similar patients in the traditional FFS system.

The authors found that patients in the bundled-payment system received better care throughout treatment, were more likely to survive, and contained medical costs over time, compared to their peers in the FFS system.

Costs for patients in the bundled payment system remained about the same throughout the study. However, the cost of treatment for those in the FFS system steadily increased throughout the study period. By the end, even health-care institutions receiving the maximum bonus incentive would incur lower costs than those in the FFS system.

Yet even though their treatment was cheaper, patients in the bundled system experienced better results. Patients using the bundled system had significantly higher survival rates for cancer stages 0 to III, and they were more likely to receive higher quality care based on quality indicators.

This is largely due to the better coordination of care made necessary by the bundled system, according to Wang.

“When you play in an orchestra, the whole group needs to play together, so it plays the right tune,” said Wang. “Focusing on value for the patient and the health-care system forces people to play the same tune.”

Wang believes the lessons learned from Taiwan’s program could be applied in other parts of the world, including the United States, which is currently moving toward bundled cancer care.

Though the U.S. already bundles care for conditions like appendicitis and chemotherapy — in which costs are fairly predictable — many hospital administrators fear that broadening the use of bundled payments for more complex conditions is too risky, financially.

Wang does not share their misgivings.

“People say, ‘We can’t do this for a very complex disease.’ It’s not true,” he said. “When we went outside of the U.S., we started to find systems that work.”

Wang found that when institutions can coordinate care for patients — that is, when a single institution manages all aspects of a patient’s care — the patient is more likely to have better outcomes.

“If institutions take the leadership of providing the infrastructure to coordinate care, they can really deliver better care with the same or lower costs.”

There are benefits for the institutions, too. Right now, because health insurance providers may accept or reject particular costs in an unpredictable way, care institutions never know how much they’re going to get paid for a service. But in a bundled payment system, costs are much more stable and revenue easier to predict.

Considering the benefits, Wang hopes the Taiwan breast cancer study will show institutions in the United States and around the world that bundled payments for cancer can be done on a broad scale.

The value, he said, is worth the risk.

An Indian businessman approached Stanford Medicine in 2005 with an outlandish proposition: Help us build an ambulance system across the sprawling South Asia nation, which is home to 10 percent of the world’s traffic deaths.

S.V. Mahadevan, MD, an associate professor of emergency medicine at Stanford Medicine, was skeptical the nonprofit GVK EMRI (Emergency Management and Research Institute) could truly pull it off.

They only had 14 ambulances in the world’s second most populous nation.

Today the system has expanded to a fleet of nearly 10,000 ambulances, manned by some 20,000 medical professionals who ply the roads in cities and rural villages to provide access to emergency care to 750 million people — three-quarters of India’s population — according to a story in Stanford Medicine magazine last year.

“It’s hard to fathom what this system has done in 10 years,” said Mahadevan, founder of Stanford Emergency Medicine International, which has provided medical expertise to GVK EMRI over the last decade, helping to train the EMTs who now belong to the largest ambulance service in the developing world.

“It could be regarded as one of the most important advances in global medicine in the world today," he said.

Yet up until now there has been no analytical research on the impact of the ambulance service. Though EMRI says its 911-like service has saved more than 1.4 million lives in its first decade, there has been no published research to back up that claim.

Now, research by Stanford Health Policy scholars published in the October edition of the health policy journal, Health Affairs, indicates EMRI’s system has had a significant impact on saving the lives of newborns and infants, one of the most challenging health dilemmas plaguing India today.

Focusing on the first two states served by GVK EMRI — with a combined population of 145 million — their results show that the organization’s services have reduced infant and neonatal mortality rates by at least 2 percent in high-mortality areas of the western state of Gujarat. There were similar effects statewide in the southeastern state of Andhra Pradesh.

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“With our modern medical knowledge, childbirth should not be so risky and newborns should not be dying at such high rates,” said Babiarz.

India has 28 maternal neonatal or infant deaths per 1,000 live births, according to the World Bank, making it one of the highest in the world. The global average is 19.2 deaths per 1,000 births; the rate drops to 4 in North America.

“These issues are particularly compelling to me as a mother,” Babiarz said. “It's wonderful to find a model that has found some success in connecting mothers and their infants with high-quality and timely emergency care when it is most needed.”

The authors used electronic service records from GVK EMRI, matched to population-representative surveys from the International Institute for Population Sciences, and their own survey that they conducted in Gujarat in 2010 through the Collaboration for Health System Improvement and Impact Evaluation in India. The combined surveys include information on over 16,000 live births.

The public-private nonprofit provides its services free of charge and most of its beneficiaries are the poorest of the poor. Each state contributes to the ambulance system, as does the federal government. It also depends on private philanthropy among some of India’s wealthiest industrialists.

The School of Medicine in 2007 signed a formal agreement to develop an educational curriculum and train the initial group of 180 skilled paramedics and instructors. Over the years, the Stanford instructors have learned to tailor the curriculum to local needs.

About one-third of the toll-free calls to 108 — an auspicious number in India — are from women in labor. Deliveries have traditionally been done at home, particularly in rural villages, where women often die of complications. So the Stanford team has since designed a special obstetrics curriculum and helped create the country’s first protocols for obstetric care.

Grant Miller, an associate professor of medicine, core faculty member at Stanford Health Policy and senior author of the study, has worked on many health policy projects in India over the years. The results aren’t always hopeful.

“I’ve conducted a number of evaluations of large-scale health programs in India, and there are disappointingly few programs and policies that we’ve found to be effective,” said Miller, who is also director of the Stanford Center for International Development and a senior fellow at the Stanford Institute for Economic Policy Research and the Freeman Spogli Institute for International Studies. “So it’s exciting to find one that may have worked quite well.”

Miller and his fellow authors note, however, that further research on emergency medical services in other Indian states and by other providers is still needed.

“We need to do a lot more work — but these results suggest that something important has happened,” he said. “With the release of more population-representative data from more states, we’re eager to expand our analysis to the rest of the country.”

Stanford Medicine’s Center for Innovation in Global Health also supported the authors’ research in India.

Ruthann Richter, director of media relations for the medical school's Office of Communication & Public Affairs, contributed to this story.

Many people dread dealing with health insurance. Choosing the right plan, navigating benefits and understanding premiums, copays and deductibles can leave you frustrated and confused. Even in economic research, health insurance markets pose some of the most challenging questions.

But Maria Polyakova, a faculty fellow at the Stanford Institute of Economic Policy Research and core faculty member at Stanford Health Policy, is motivated to find the answers.

Intrigued by the shifting dynamics of the industry and inspired partly by her own experience of finding health care coverage during graduate school, Polyakova has joined a small group of health economists who are at the forefront of examining the increasing complexities surrounding the provision of medical insurance.

Changes under the Affordable Care Act have deepened the connection between public and private players, Polyakova says. There’s a rise in health care plans that are publicly funded but privately run. And many people using public plans, like Medicare, are supplementing their coverage with private add-on insurance.

The intertwined relationship raises a host of policy challenges, which Polyakova outlines in this detailed policy brief.

“We're moving toward this world where we think competition in health insurance is good because that somehow increases efficiencies and provides consumers with choices that they like,” Polyakova says. “But on the other hand, there has been a lot of debate on whether health insurance is the right place to have choice.”

Polyakova, an assistant professor of health research and policy at the School of Medicine, joined Stanford in 2014. Her ongoing economic research looks at the impact of government policies in social insurance  on consumer behavior, insurer behavior and market outcomes, including risk protection and redistribution.

By investigating the design of health insurance systems, Polyakova’s work could inform policymakers on the extent the government should facilitate competition among insurers that are providing social insurance benefits, or the steps public and private insurers can take to reduce risks and costs for consumers. Her early forays have gained recognition.

For her doctoral thesis on Medicare Part D — the prescription drug component of the federal health insurance program — Polyakova won the 2015 Ernst-Meyer Prize, which recognizes original research about risk and health insurance economics. She also received the John Heinz Dissertation Award from the National Academy of Social Insurance in 2015.

Her findings included evidence of substantial inertia among enrollees, despite significant changes in about 40 plans under Medicare Part D.

“If no one actually ever reacts to changes in products,” Polyakova says, “it could defeat the purpose of having competition.”

Polyakova continues to drill into details where answers may lie. Her empirical research in progress ranges from examining new ways of calculating risk to the effects of word choice in insurance plan descriptions.

“Policies are labeled silver, gold, platinum — theoretically to simplify the plans. But in reality, those simplifications may lead people to choose plans that are not the best for them,” she says. “Assessing the implications of their choices for the overall efficiency of the health insurance system is tricky”

The health care system appeared much more straightforward in Germany, where she worked for a year after graduating in 2008 from Yale with a bachelor’s degree in economics and mathematics.

Then while attending graduate school at the Massachusetts Institute of Technology, Polyakova went through the hassles of figuring out the health insurance system and how insurers reimburse medical providers. She recalls thinking, “Why is this so complicated?”

Polyakova turned her focus to health economics after taking some courses with MIT Professor Amy Finkelstein, a pioneer in the field who became Polyakova’s primary advisor.

“It was very contagious,” Polyakova says.

A long line of research has shown that women live longer than men, yet according to Karen Eggleston, director of the Asia Health Policy Program, and four other Stanford health researchers, mortality rate differences between men and women are much more variable than previously thought, following predictable patterns. Life expectancy differs depending on time, location and socioeconomic circumstance, not on biological factors alone, according to their newly published findings.

The researchers found that women have greater resilience when faced with socioeconomic adversity in a developing country—living nearly 10 years longer than men on average—but this pattern changes as the country evolves. Developed countries typically have smaller gaps in mortality rates between men and women than developing countries do.

Japan and South Korea are outliers, however, with higher mortality rate differences between men and women than is average for developed countries. In addition to the prevalence of male smoking, one possible explanation they draw is the lack of career-related opportunities for women in Japan and South Korea, two countries that have low gender wage equity among Organisation of Economic Co-operation and Development members.

Eggleston, who is part of the core faculty at the Shorenstein Asia-Pacific Research Center, et al. suggested the idea that reducing gender inequality may help narrow the mortality gap: men increase years lived when fewer barriers for women exist, but concluded that their findings supporting this conclusion merit further inquiry.

Their findings were published in the August edition of SSM – Population Health and highlighted in an earlier column on Voxeu.

Ponte a prueba. Put yourself to the test.

As he explained during the recent Rosenkranz Prize Symposium, Stefano M. Bertozzi used this slogan to promote health reform in the Mexico City prison system. By encouraging inmates to step up and get themselves tested for HIV and other chronic illnesses, Bertozzi, dean and professor of health policy and management at the UC Berkeley School of Public Health, was able to decrease the spread of illnesses in Mexican prisons and the surrounding communities.

The Rosenkranz Prize Symposium celebrated research projects that—like Bertozzi’s—address the health care needs of the world’s most vulnerable populations. With support from the Rosenkranz Prize for Health Care Research in Developing Countries, Stanford scholars have stepped up to tackle health issues in regions in need.

Since 2010, the award has funded six young Stanford researchers who aim to improve health in developing countries. The symposium celebrated their achievements.

The award honors the work of Dr. George Rosenkranz who spent his career reducing health disparities around the globe. Rosenkranz, who was the first to synthesize cortisone and the active ingredient in the first oral contraceptive, also celebrated his 100^th birthday at the symposium.

Producing research that will increase care for vulnerable populations globally is the ultimate goal of the Rosenkranz Prize.

Andrés Moreno-Estrada, the 2012 winner, has used the award to study genetics in Latin American and Caribbean populations, aiming to increase knowledge of potential genetic illnesses. He said, “The Rosenkranz Prize is a clear, important step forward to demonstrate that we can do cutting edge science in developing countries that is of international relevance.”

Other winners include Eran Bendavid, Sanjay Basu, Marcella Alsan, Jason Andrews and Ami Bhatt. Their projects range from the effect of AIDS relief efforts on health care delivery to the treatment of diabetes in India to low-cost diagnostic tools for regions lacking infrastructure.

“I can’t think of a better way to celebrate (my father’s) birthday than listening to the bright future of science,” said Ricardo T. Rosenkranz, son of Dr. George Rosenkranz and a prize donor. “We can’t wait to hear what the next Rosenkranz Prize winners tell us.”

Click below for event photo gallery:

An independent panel of medical experts has updated 20-year-old guidelines for evaluating cost-effectiveness in health and medicine, in an effort to help everyone from policymakers to patients make more informed decisions about tests and treatments.

Released in a special communication in the Journal of the American Medical Association, the panelists spent more than three years building on the work of the 1996 Panel on Cost-Effectiveness in Health and Medicine, originally convened by the U.S. Public Health Service. They developed recommendations by consensus.

The new recommendations are intended to guide decision-makers in using new methods for analyzing evidence, reporting standardized results, incorporating both health-care system and societal perspectives, as well as weighing ethical issues in the use of cost-effectiveness analysis (CEA).

“Some people question the use of economic analyses in health care, but cost-effective analysis is a way to ensure that we are proving high-value care,” said Stanford Health Policy’s Douglas K. Owens, a professor of medicine and senior investigator of the VA Palo Alto Heath Care System, who sat on the panel.

“If we do interventions without understanding their value, we may well spend money on something that may not really be worth it,” said Owens. “Cost effectiveness analysis is one approach to understanding how we can help control health-care costs and provide high-value health care.”

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The panel was led by co-chairs Gillian D. Sanders, Professor in the Department of Medicine and a member of both the Duke Clinical Research Institute and the Duke-Margolis Center for Health Policy, and Peter J. Neumann, Director, Center for the Evaluation of Value and Risk in Health at the Institute for Clinical Research and Health Policy Studies at Tufts Medical Center and Professor of Medicine at Tufts University.

Sanders said CEA could help inform decisions about how to apply new or existing medical tests, therapies, and prevention techniques so that decision-makers use health-care resources wisely.

“As health-care costs continue to rise at unsustainable rates, these recommendations provide a framework for comparing the relative value of different health-care interventions, and help decision-makers across the spectrum from policymakers to patients sort through alternatives and decide what tests and treatments make sense,” she said.

Neumann noted that in the 20 years since the original panel’s report, the field of cost-effectiveness analysis has advanced, as has the need to deliver health-care efficiently.

“Updating the guidelines provides an opportunity to reflect on the evolution of cost-effectiveness analysis and to provide guidance for the next generation of practitioners and consumers,” he said.

Primarily funded by grants from the Robert Wood Johnson Foundation and the Bill & Melinda Gates Foundation, the panel recommends several key changes to the guidelines, while confirming other principles from the first panel, including:

1. Broadening the scope and number of reference cases in a cost analysis, which describe standard methodology that should be followed to ensure quality analysis by creating comparable measurements. The panel is recommending that all CEAs should not report two reference cases: one based on a health-care sector perspective and another based on a societal perspective.
2. Using an “impact inventory” that lists the health and non-health effects of a health-care intervention to ensure that all consequences are considered, including those to patients, caregivers, social services and others outside the health-care sector. This tool also allows analysts to look at categories of impacts that may be most important to stakeholders.
3. Measuring health effects in terms of quality adjusted life years, a common measure used by health researchers that includes both the quality and quantity of life lived.
4. Including both costs reimbursed by third-party payers and those paid for out-of-pocket by patients in health-care sector analyses.
5. Including a reporting checklist and guidelines for transparency that includes assumptions in any analysis and the disclosure of potential conflicts of interest.

The complete report of the so-called Second Panel will be published in October.

The panelists noted that the field of CEA has emerged dramatically since the last guidelines 20 years ago. For example, the Advisory Committee for Immunization Practices, which establishes national immunization policy recommendations on behalf of the Centers for Disease Control and Prevention, now uses CEA in its calculations.

“The need to deliver health-care efficiently and the importance of using analytic techniques to understand clinical and economic consequences of strategies to improve health, have only increased,” the Second Panel authors wrote in the JAMA paper.

Health-care spending in the United States comprised 13 percent of GDP in 1995; today it approaches 18 percent. And the total national health expenditures have tripled during that period, jumping to more than $3 trillion in 2014, according to the Kaiser Family Foundation.

“The goal of the Second Panel is to promote the continued evolution of CEA and its use to support judicious, efficient, and fair decisions regarding the use of health-care resources,” the experts wrote in the JAMA article.

Imagine there’s a new pill on the market. It promises you a one in 200 chance of avoiding a heart attack, stroke, heart failure or death over the next year — if you take it religiously.

It also promises a one in 60 chance of landing you in the hospital for some serious complication: Maybe you passed out. Maybe the pill affected your kidney function. Maybe you developed a severe electrolyte imbalance.

Would you take it? How would you decide?

This question is confronting some patients with hypertension as well as their health-care providers who, like me, help manage their blood pressure. The “pill” is not a pill per se, but a treatment strategy.

In November of 2015, researchers published results of a large NIH-sponsored trial known as SPRINT, which compared two systolic blood pressure treatment targets for hypertensive adults: a higher, conventional target of 140 mm mercury compared to a more stringent target of 120.  Participants in the trial were older, did not have diabetes, and were generally at high risk of developing cardiovascular disease. They were prescribed commonly used blood pressure medications, which were carefully adjusted by investigators to achieve target blood pressures.

The trial demonstrated a large relative benefit: Those in the lower target group had about a 25 percent reduction in the rate of cardiovascular disease or death. The absolute benefit, though, was small, with only about one in 200 patients avoiding cardiovascular disease or death as a result of treatment. The trial also showed that complications in the lower target group were relatively common.

As a physician, I’d love to be able to tell the patient in my exam room whether she will be the lucky one out of 200 who will benefit. That dream is still a few years off. I can, though, answer a related question. If I treat a large group of patients, on the whole, will my patients benefit? Or will the harms of treatment outweigh the benefits? And if the treatment is overall beneficial, what investment will we need to achieve this gain in health?

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To answer this question, I teamed up with a group of researchers at Stanford. Our team included experts in cost-effectiveness analysis as well as students developing clinical and analytic expertise in this area. We used data from SPRINT along with other published sources to project the expected benefits, harms and costs from targeting a lower or higher blood pressure over the course of a lifetime.

Results of our study were published this week in JAMA Cardiology. We found that targeting a lower blood pressure results in a substantial net benefit, even after accounting for harms from common, serious adverse events. This net benefit, though, doesn’t come free: An investment of about $23,777 is required for every year of life gained from this strategy.

Is $23,777 “worth it?” It’s a hard question to answer and it depends, in part, on who is paying. But in the spectrum of medical interventions that we routinely use here in the United States, this would be considered a good deal, a bargain even.

So should we go all in? Should we push stringent blood pressure targets for everyone?

No. There are a number of other considerations. SPRINT answered a specific question about hypertension treatment in a specific group of patients. Whether other groups of patients, like those at lower risk of cardiovascular disease, would benefit is unclear. There were also methodological quirks that have left the trial open to criticism.

But if we believe that the findings from SPRINT are generally correct, a lower blood pressure target seems to provide significant health gains for a reasonable cost in patients who are at high risk of developing cardiovascular disease.

Ilana B. Richman, MD, is a VA Health Services Research and Development Fellow at Stanford Health Policy.