Re­duc­ing costs re­quires end to fee-for-ser­vice

Modern Healthcare - - COMMENT - By Harold D. Miller

The health­care in­dus­try faces grow­ing con­ster­na­tion that em­ploy­ment of physi­cians and con­sol­i­da­tions of hos­pi­tals are in­creas­ing the power of health­care providers to raise their prices.

Many people have called for stricter an­titrust en­force­ment and some have sug­gested reg­u­lat­ing prices. Be­fore adding more reg­u­la­tions to an al­ready over-reg­u­lated in­dus­try, we should fix the ex­ist­ing poli­cies that are caus­ing the prob­lems.

Prob­lem No. 1: The myth that “big

ger is bet­ter.” Govern­ment and pri­vate health in­sur­ance plans have im­posed many ac­cred­i­ta­tion re­quire­ments and man­dates for mea­sure­ment and tech­nol­ogy that do lit­tle to re­duce costs or im­prove qual­ity, while mak­ing it dif­fi­cult for in­de­pen­dent physi­cians and small hos­pi­tals to stay afloat. In other in­dus­tries, we en­cour­age small businesses, but many health­care poli­cies do ex­actly the op­po­site.

Much of this de­rives from a wide­spread but mis­taken be­lief that co­or­di­nated ser­vices for pa­tients can be de­liv­ered only by large “in­te­grated” or­ga­ni­za­tions. Yet we have many ex­am­ples of small physi­cian prac­tices and small hos­pi­tals work­ing to­gether to pro­vide high-qual­ity, ef­fi­cient care while re­main­ing in­de­pen­dent. There’s no ev­i­dence that large de­liv­ery sys­tems pro­vide bet­ter qual­ity or lower-cost care than in­de­pen­dent providers work­ing to­gether can of­fer.

In­stead of en­cour­ag­ing con­sol­i­da­tion and try­ing to con­trol the re­sult­ing mo­nop­o­lies, a bet­ter ap­proach is elim­i­nat­ing re­quire­ments that force con­sol­i­da­tion and start pay­ing providers based on the qual­ity and cost of their care.

Prob­lem No. 2: A bro­ken health­care

pay­ment sys­tem. The big­gest bar­rier to bet­ter health­care is that physi­cians and hos­pi­tals aren’t paid for what we re­ally want them to do—keep us healthy and deliver ef­fi­cient, high-qual­ity care when we’re sick. For ex­am­ple, Medi­care and health plans won’t pay pri­mary-care providers to an­swer a phone call from a pa­tient about a health prob­lem, yet they’ll pay if that pa­tient goes to the emer­gency room. Spe­cial­ists aren’t paid for the time they spend co­or­di­nat­ing care. Doc­tors aren’t paid at all when they keep their pa­tients well.

We want hos­pi­tals to achieve good out­comes, but hos­pi­tals are paid less when pa­tients have fewer com­pli­ca­tions, in­fec­tions and read­mis­sions. We want hos­pi­tals to have emer­gency rooms, car­diac catheter­i­za­tion labs, and sur­gi­cal suites ready to go if we have an in­jury or heart at­tack, but we don’t pay hos­pi­tals to be there when we need them; we pay them only when they per­form pro­ce­dures. Forc­ing hos­pi­tals to treat enough non­emer­gency pa­tients to gen­er­ate the rev­enue needed to cover emer­gency ser­vices can eas­ily lead to overuti­liza­tion and un­nec­es­sary spend­ing.

There are bet­ter ways to pay for health­care that solve these prob­lems. Bun­dled pay­ments give physi­cians and hos­pi­tals the flex­i­bil­ity to re­design care in ways that re­duce costs with­out ra­tioning. “War­rantied” pay­ments pay providers more for qual­ity care but don’t pay more for treat­ing pre­ventable com­pli­ca­tions. Risk-ad­justed global pay­ments en­cour­age physi­cians and hos­pi­tals to keep pa­tients well while still pro­vid­ing ad­e­quate re­sources to treat pa­tients quickly when they’re sick.

Un­for­tu­nately, most pay­ers aren’t us­ing these types of pay­ment sys­tems.

In­stead, they’re us­ing “shared sav­ings” and “value-based pur­chas­ing” pro­grams that merely add a small bonus or penalty on top of the ex­ist­ing, bro­ken fee-for-ser­vice sys­tem. That’s like try­ing to treat cancer with a Band-Aid.

Prob­lem No. 3: Ob­ses­sion with lower prices rather than lower spend

ing. In­stead of cre­at­ing a bet­ter pay­ment sys­tem, Medi­care sim­ply cuts pay­ments and pri­vate in­sur­ers de­mand big­ger dis­counts in the ex­ist­ing fee-forser­vice sys­tem. But if in­sur­ers won’t pay for care co­or­di­na­tion and other ser­vices we re­ally need, and if they cut fees for what providers do deliver, they sim­ply force providers to deliver un­nec­es­sary ser­vices, en­cour­age them to con­sol­i­date to bet­ter fight pay­ment cuts, or force them out of busi­ness. The re­sult isn’t bet­ter care or lower costs, but fewer choices for pa­tients.

The best way to re­duce health­care spend­ing isn’t fee cuts, price reg­u­la­tion or payer-de­fined nar­row provider net­works. It’s com­pe­ti­tion by providers for pa­tients based on cost and qual­ity. How­ever, it’s im­pos­si­ble for pa­tients to com­pare prices or judge qual­ity on the over 7,000 CPT codes and more than 700 DRGs in the ex­ist­ing fee-for-ser­vice sys­tem. That’s the other rea­son why chang­ing the pay­ment sys­tem is so im­por­tant. Bun­dled, war­rantied and global pay­ments en­able pa­tients to choose teams of physi­cians and hos­pi­tals that of­fer the best com­bi­na­tion of price and out­comes for the spe­cific health prob­lems those pa­tients are fac­ing.

In­stead of pur­chasers and providers arm­ing them­selves for an ever-es­ca­lat­ing bat­tle over prices, they should work col­lab­o­ra­tively to com­pletely re­design health­care pay­ment and de­liv­ery sys­tems. Pa­tients will get bet­ter-qual­ity care, pur­chasers will spend less, and providers will be more fi­nan­cially vi­able.

Harold D. Miller is pres­i­dent and CEO of the not­for-profit Cen­ter for Health­care Qual­ity and Pay­ment Re­form.

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