Lembo: State to change health care pay model
For decades, Connecticut and other states have used a fee-for-service model to pay for health care: the provider bills for each service, every consult, every procedure, every test, every pill.
State Comptroller Kevin Lembo and others have come to view that system as seriously flawed. It not only contributes to skyrocketing medical costs but also fails to deliver optimal care, Lembo said.
“The incentives in that model are problematic,” Assistant Comptroller Josh wojcik said. “It incentivizes volume. It does not incentivize quality.”
A year ago, Lembo did something about it. With the state’s health insurance contract up for renewal, he did major surgery to its terms: the state will dump fee-for-service in favor of an “episode of care” — also known as bundle payments — model. Hospitals no longer will be allowed to bill for each service. Instead, they would receive a lump sum for the entire course of care, even if the patient has to be readmitted.
“It’s heavy lifting, and it’s important because we are talking about realigning the incentives in the health care system,” Lembo said.
The contract’s second big change will be the introduction of “centers of excellence.” The state will identify hospitals, medical practices and other facilities that provide the highest quality care for certain procedures, such as knee and hip replacements. They then will encourage state employees to have those procedures done at those facilities, even if they are some distance from their homes, using cash payments of as much as $500 and free transportation as incentives.
The comptroller’s office also is not going to use the winning insurer’s existing payment arrangements with providers. Instead, Lembo and members of his office negotiated the state’s rates with the hospitals. In those talks, Wojcik wojcik said, the state has sought a 5 percent to 10 percent discount per procedure on the facility’s best price.
“We’re not just telling them what we are going to pay them,” he said. “We’re negotiating. We expect savings.”
Taken together, the comptroller’s office estimates that these reforms, which are in partnership with the state employee unions — chief negotiator Dan Livingston said he long has pushed for such changes — will produce about $95 million in savings, according to Assistant State Comptroller Tara Downes. That would reduce the projected increase in the state’s fiscal 2021 health care bill from 8.2 percent to 1.6 percent, she said.
Now, after being delayed more than six months because of COVID-19, implementation of this new system is imminent, Lembo’s office said.
The comptroller’s office isn’t the only one who thinks the approach is likely to result in savings and improved outcomes. Insurer Anthem, which won the contract last fall, agreed.
“There is strong evidence that value-based payment models, including episode-based care, (also known as bundled payment) as well as medical Centers of Excellence, lower the cost of care without sacrificing quality,” said Sarah Yeager, the firm’s
director of corporate communications, in a written statement.
But not everyone is convinced the new approach will work as well as advertised. At least one Connecticut hospital CEO is somewhat skeptical it will lower costs and improve treatment.
Dr. John Murphy, president and CEO of Nuvance Health, which owns Norwalk and Sharon hospitals as well as hospitals in New York state, points to a 2018 study in the New England Journal of Medicine that found it produced savings in just one of five care areas surveyed and also failed to significantly improve outcomes.
“Hospital participation in five common medical bundles under (bundled payments) was not associated with significant changes in Medicare payments, clinical complexity, length of stay, emergency department use, hospital readmission, or mortality,” the study concluded.
Murphy said he nonetheless feels that the state’s new approach is worth trying.
“I think it’s innovative and it’s an attempt to address the elephant in the room, which is that costs are too high,” he said. “This is an intelligent way to try to get those costs down while pointing toward those who produce higher quality of care.”