Alliance to Reduce Disparities in Diabetes

Eliminate incentives that encourage underinvestment in low-income, high- risk patients

Policy Consideration:
Although current law and regulations have safeguards against financial incentives that encourage under-investment in health care for low-income, at-risk patients, how can those safeguards be further strengthened and what steps can be taken to improve the ability to monitor their effectiveness?

The Problem

Health systems and providers that treat at-risk, low-income populations face many challenges in helping patients to achieve better health. These patients are often the sickest, poorest patients who have the most barriers to achieving good health. Emerging quality improvement policies and payment structures, such as accountable care organizations (ACOs), may unintentionally create perverse incentives for providers serving minority patients.vii At a time of health system transformation, when accommodation of new modes of financing and new delivery systems is taking place, some health systems may seek to minimize their financial risk. Monitoring for health system under-performance is required by Medicare and Medicaid managed care standards as well as by regulations recently published by the Centers for Medicare and Medicaid Services (CMS) for ACOs participating in Medicare’s shared savings program. Still, several problems may arise:

  • The information needed to monitor health system performance in a comprehensive and timely fashion may not be available or accessible.
  • Even when collected, the data may not be analyzed and actively used.
  • Health systems may engage in selectively choosing to treat only those patients for whom providers can demonstrate the largest improvement with the least amount of effort. In doing so, providers would avoid serving the sickest and most costly populations – actions that could jeopardize access to quality health care for low-income, at-risk patients and serve to further exacerbate disparities in diabetes.
  • Incentive systems that use "payment withholds" and thus payment penalties for providers who don't meet performance targets, may place providers who serve a significant number of vulnerable and complex patients at a significant and challenging financial disadvantage.
  • Policies that penalize hospitals with high readmission rates may disproportionately punish at-risk communities, exert additional financial burdens on already stressed local health systems and could have the unintended consequence of increasing health disparities.

The Alliance Experience

The Alliance sites have focused extensive efforts and resources to ensure that the diabetes health care needs of the people they serve are met. To that end, the sites have sought ways to build broad and more effective collaboratives to track patients and ensure they receive needed services in a timely manner.

  • The University of Chicago site has created a quality improvement collaborative. This collaborative includes staff members from different health care sites and promotes learning about better care techniques and sharing of best practices. These quality improvement (QI) efforts have been shown to improve diabetes care in safety-net clinics and have taught QI team members the importance of team-based care and care integration.

Building such partnerships would complement and perhaps further spur development of community health teams that are being successfully modeled in states such as North Carolina and Vermont.


Policy Questions Arising from the Alliance Experience

  • How can safeguards be put in place to prevent underinvestment or disinvestment in health systems serving low-income patients? For example current Medicare policy that penalizes hospitals with higher readmission rates should be adjusted to prevent safety-net hospitals from being disproportionately impacted.
  • How can financial incentives be realigned to reward positive health outcomes and reductions in health disparities in diabetes and other chronic conditions?
  • How can payment mechanisms be established to support the development of multi-disciplinary community focused health teams?