Linking quality to financial outcomes: The foundation for value

Feb. 24, 2021 / By Dawn Weimar, RN

Many Medicaid programs, health plans, and ACOs are looking for new strategies to offset tight budgets. COVID-19 has dealt severe blows to the economy, state budgets and the provision of health care to at-risk persons. How do you turn your administrative claims data into insight to drive outcomes and reduce costs while creating a substantive foundation for your value-based payment and care/disease management strategies?

I have been in your shoes. In my previous role as Director of Analytics for a care management firm, I struggled with actuaries to report HEDIS-based outcomes data and demonstrate a return on investment (ROI) for the populations we served. Care standards benefit patients and measuring them is the “right” thing to do. Everyone “believes” that there is long-term savings, but it falls short. “Proving” ROI is an industry malady with no clear and plausible link to the bottom line. Regression to the mean and predicting next year’s high-cost population are common complicating comorbidities. What we need is a different approach that clearly links health care performance and outcomes to financial results. 

Does this mean we need more outcomes measures? Patient care standards are necessary and should be measured.  However, outcome measures for specific patient cohorts such as diabetics or asthmatics are quite limited; they are not broad and weighty enough to be the foundation for value-based payment across the health system for a wide variety of patients. Certainly, we can agree that appropriate care for your diabetic patients does not indicate clinically appropriate care for all patients. So how do we measure and incent quality care across all types of patients? 

If you already use Medicare all cause readmissions you may think you have that covered. However, 37.2% of Medicare readmissions are not considered potentially preventable, demonstrating major theoretical and practical implications. Surely, limited resources demand a focus on patient care amenable to improvements, i.e., “potentially preventable.” 

3M Quality Outcomes Performance Measures (QOPMs) identify overutilization of care that is potentially preventable.[i] Let’s look at an example comparing 3M QOPMs with Medicare.  Medicare readmissions apply to only a few diagnostic cohorts of patients. Yet, a most simplistic all cause measurement is applied that penalizes hospitals for readmissions not related to the initial hospitalization, and was recently criticized by Harvard Medical School researchers who found a “misclassification of condition-specific penalty status for up to 31% of hospitals.”[ii]  We are long overdue for a more sophisticated measurement approach. 3M Potentially Preventable Readmissions (PPRs) cast a broad net, yet are more clinically sophisticated, ensuring that the readmission is clinically related to the initial admission.

3M Clinical and Economic Research has painstakingly developed a detailed and comprehensive algorithmic logic, establishing which APR DRG readmissions are clinically related to each APR DRG admission. Readmissions are measured for all patients, with appropriate global exclusions for patients at high risk of readmission due to severely compromised immune health status such as active cancer treatment. Then, only readmissions clinically related to the initial admission are counted as a Potentially Preventable Readmissions (PPR). This approach is inherently more precise, and thus fairer to clinicians being measured under a value-based payment program.  Furthermore, improvement in performance and ROI is easily and fairly calculated using payment relative weights.  

To gain a more comprehensive view of health care system performance, 3M has created related measures such as Emergency Department visits after an inpatient stay. For a comprehensive picture of quality performance after an inpatient stay, patient returns to not only the inpatient setting, but also to the emergency department must be measured.[iii] 

QOPMs are designed to be broad measures of systemic performance, not limited to specific cohorts, yet intrinsically clinically specific. How does this rate-based approach differ? QOPMs don’t set the standard of care, rather the report card measures outcomes which indicate systemic case mix adjusted strengths and weaknesses, thereby empowering clinicians on the frontlines to decide on specific improvements to strengthen performance. QOPMs highlight variation in patient cohorts, geographic regions and between providers allowing the Chief or VP of Quality to analyze and identify opportunities for improvements. Then, pass out the magnifying glasses to clinicians for root cause analysis to determine quality improvement interventions. Furthermore, all results are case mix adjusted and compared to actual results known as the actual/expected ratio. 

Several major state payers have implemented and measured success with 3M’s rate-based QOPMs, improving patient care processes and eliminating systemic waste. Your state Medicaid program, managed care organizations and ACOs can achieve similar results with QOPMs, which use 3M Clinical Risk Groups and the 3M Potentially Preventable Events (PPE) methodologies as the basis for the QOPM report card that highlights variation.  Every quality manager knows where there is variation, there is opportunity! 

3M estimates that Medicare would save $8 billion dollars by reducing variation in eight inpatient and emergency department outcomes measures for the FFS population—quite a foundation for value-based payment. (Note: the $8 billion of savings includes only eight of the 3M measures; this study did not include Potentially Preventable Admissions and Emergency department visits.)  If you have reviewed this study, “Financial Impact of Geographic Variation in Hospital Quality Performance in Medicare,” notice the significant variation between and within states and regions which highlights opportunities for improvement.

Recent MedPAC recommendations[iv] support a limited number of outcome measures indicative of system effectiveness with a measurable impact, specifically these characteristics are:

  • Value: an integration of quality outcome performance and financial performance
  • Outcomes: Outcomes of care as opposed to care processes
  • Focused: Manageable number of performance measures
  • Population: Overall delivery system effectiveness

3M responded by integrating the inpatient care QOPMs based upon the premise that “A well-functioning hospital delivery system should be able to deliver care without an excess number of avoidable complications, readmissions and ED visits.”[v] Inpatient QOPMs were measured, consolidated into a composite inpatient episode quality outcome performance value (QPV) and correlated with five population utilization metrics. Inpatient measures summarized into the QPV included:

  • Inpatient Complications – Potentially Preventable Complications (PPCs)
  • Readmissions within 30 days – Potentially Preventable Readmissions (PPRs)
  • Post Discharge Emergency Department Visits within 30 days of hospital discharge – Potentially Preventable Return Emergency Department visits (PPREDs)
  • Hospital Admissions from Emergency Department

The researchers concluded that, “Although the QPV was intended as a measure of quality outcome performance during an inpatient episode, it can provide insights into the overall utilization of hospital resources within the population of a state. States with poor QPV performance (higher QPV) tend to have a low utilization of outpatient services, higher than expected length of stays and a high utilization of inpatient stays and bed days contributing to higher per capita inpatient expenditures. Quality outcome performance during inpatient episodes of care as measured by the QPV provides a general indication of the overall functioning and effectiveness of the hospital delivery system in a state.”[vi]

State specific results using 3M QOPMs, which enhance and build on 3M Potentially Preventable Events, are available at Quality Measurement Archives – 3M Clinical and Economic Research. Join the ranks of other Medicaid programs and payers with a strategic and methodological approach that will drive systemic outcome improvement and cost reduction, preserving health care access for the most vulnerable among us. 

Dawn Weimar, RN, is director, state regulatory affairs for 3M Health Information Systems.

[i] Financial-Impact-of-Geographic-Variation-in-Hospital-Quality-Performance-in-Medicare.pdf (

[ii] Medicare readmissions reduction program penalizes hospitals inaccurately, study finds (

[iii] Financial-Impact-of-Geographic-Variation-in-Hospital-Quality-Performance-in-Medicare.pdf (

[iv] jun20_reporttocongress_sec.pdf (

[v] CER-report-Inpatient-Quality-Outcomes-7-30-20-finalrev.pdf (