Health Care Payment Reform

The idea of an independent Medicare commission to set rates for health care providers –but not physicians or hospitals–seems wacky to me. In yesterday’s New York Times, Albert R. Hunt makes a good case of why the commission concept should be strengthened during the Senate-House compromise on health care reform:

One constructive action lawmakers could take is to put some teeth back in the Obama proposal for a Medicare commission that would be empowered to set rates for hospitals, doctors and other providers, subject to congressional veto. The House killed the idea outright, and the Senate diluted it, exempting hospitals and doctors. Nancy Pelosi, the speaker of the House, and other liberals argue it infringes on congressional prerogatives. They also worry about a commission someday controlled by Bush or Reagan-type appointees.

Even then a congressional vote still could either block action or frame a political argument for the next elections.

The best case for infringing on congressional prerogatives may be the way this bill has been written. The hospitals, drug companies, doctors, insurance industry and device makers all carved out their special provisions. Everyone is for curbing health care costs; just don’t make cuts that affect powerful interests, which is almost every sector of the health care industry. History is clear: Congress will bow to those interests rather than make the tough decisions required to bend the cost curve.

Mr. Obama’s budget chief, and health care expert, Peter Orszag, calls a commission one of the “game-changers” that “would make sure that there is someone always on the beat, looking for ways to bend that curve.” The Democratic leaders, ideally with more effective pressure from the White House, have leeway in fashioning the final particulars. The measure would have a lot more credibility if this commission concept were strengthened, not diluted even more.

It’s obvious that, to be truly effective in lowering costs and improving quality, payment  bundling must include outpatient services as well as inpatient services, but the logistics of doing so are daunting. Geri Aston discusses this in today’s amednews.com

One model to consider is that used by Mount Auburn Hospital in Massachusetts. The bundled payments from Massachusetts Blue Cross and Blue Shield go  to Mount Auburn’s independent primary care physicians for distribution according to a contractual arrangement. Read about it in Leadership magazine published by Healthcare Financial Management Association.

Mayo Clinic supports the Senate health reform bill but seeks more action on how care is paid For, as per today’s Wall Street Journal.

Physicians and patients both may benefit from the launch of a new database that informs the rates that health plans will pay for out-of-network services.

The successor to the Ingenix database is expected to emerge in mid-year.

Writing in a web-first article in  Health Affairs, Dr. Robert Wachter,  professor and associate chair of the Department of Medicine at the University of California, San Francisco, reviews the past decade of patient safety and gives it a B- score.

In updating a five-year review, Wachter examines the role of health care payment in promoting patient safety:

The “no pay for errors” policy, launched in 2008, has increased hospitals’ focus on preventing certain adverse events (despite relatively trivial payment cuts to date). However, concerns have beenraised about fairness (particularly since many of the events on the list are not known to be substantially preventable)  and unintended consequences (such as keeping hospitalized elderly patients in bed in a misguided effort to prevent falls).

For now, I give this category a C+, with some points awarded to Medicare’s new policy for being a clever way to begin reshaping the reimbursement system to promote patient safety.

RAND researchers writing in the New England Journal of Medicine give a big thumbs-up for bundled payments to replace fee-for-service medicine.

In an article titled “Controlling U.S. Health Care Spending — Separating Promising from Unpromising Approaches,” the researchers estimated the likely impact of 12 policy options:

Bundled payment provides a mechanism for reducing both the volume of services and the prices charged for them. We estimate that under optimistic scenarios and with broad use of the Prometheus model³ of bundled payment for six chronic conditions and four acute conditions or procedures requiring hospitalization, national health care spending could be reduced by 5.4% between 2010 and 2019.

Price transparency alone does not lead to lower prices for health care services, according to an analysis of the New Hampshire HealthCost transparency program by the New Hampshire Insurance Department and the Center for Studying Health System Change.

..the study found public price reporting had no impact on price variation across providers, a result attributed in part to the lack of competition among providers and few incentives for consumers to compare providers based on price.

This isn’t surprising, but it does underscore just how many things have to work together to create a health care market in which patients shop for value, defined by the combination of efficiency and quality. The study’s authors wrote:

Whatever the extent of provider competition in a particular community, price transparency efforts are unlikely to spur significant price shopping by consumers as long as insurance benefit designs continue to contain little incentive for consumers to choose low-cost providers. In New Hampshire, as well as nationally, financial pressures on both public and private employers may result in more widespread adoption of high-deductible plans, tiered-provider networks and other benefit designs aimed at making consumers more cost-conscious when choosing providers. As more employers aggressively pursue such strategies, more consumers will find incentive to use price transparency tools like HealthCost.

However, there are limits to the extent to which increased patient cost sharing can be expected to lead to more active shopping by consumers. Some New Hampshire stakeholders suggested making HealthCost a more useful shopping tool by adding information about more “big-ticket items” such as heart bypass surgery and hip replacements. However, prices for expensive services often exceed a patient’s deductible even under a high-deductible plan, which would reduce that patient’s incentive to shop for price; in some cases, prices may exceed a patient’s annual out-of-pocket maximum as well, which would eliminate the price-shopping incentive altogether.

A new payment system that would reward hospitals based on the quality of care they deliver would apparently shock hospital board leaders. According to a report on the Wall Street Journal’s Health Blog, a new Health Affairs survey finds virtually all board chairmen believe their hospital is at least average:

Ninety-nine percent of hospital board chairmen think their hospital fares at least as well as a typical hospital on standard quality measures. Among the chairmen of hospitals that perform worst, 100% say their hospital performs at least as well as a typical hospital.

With this kind of leadership, it’s no wonder the quality of hospital care in America is so unreliable.

Writing in today’s Wall Street Journal, Dr. Herbert Pardes, president and CEO of New York-Presbyterian Hospital, brings up a topic that has not received enough attention in the health care reform debate: the shortage of physicians.

Of course, an overhaul of the health care delivery system could decrease the demand for physician services as a team-based approach to care supplants the current physician-centric model. But the legislation currently being considered will not transform the industry in that way, so the greater number of insured patients is likely to increase demand for physician services.

The law of supply and demand suggests that physician pay will have to increase to assure an adequate supply of  physicians. On its face, an overall increase in physician pay would appear to be in conflict with the goal of decreasing health care costs.Do you think Dr. Pardes is right with this comment?

To address the shortage of doctors and the incentives that compel young doctors to eschew primary care, Congress needs to think about how to increase doctor pay, institute malpractice reform, and provide subsidies to reduce the amount of debt doctors have to take on. Residency caps should also be raised so teaching hospitals can train more doctors. Without these actions new doctors would be foolish to enter primary care, and thankfully our medical schools do not recruit foolish people.

The reality that health care reform will not solve America’s Medicare and Medicaid crisis is beginning to sink in, and the idea of creating a commission to face that challenge–and the Social Security crisis to boot–appears to be gaining traction, according to a story by Kaiser Health News.

The federal government is on track to his a $9 trillion deficit by 2019, according to KHN.  Part of that comes from the recession and government’s response to the economic meltdown, but much of that amount reflects the growing cost of  entitlement spending on Medicare, Medicaid and Social Security.

Christina D. Romer, chair of  President Obama’s Council of Economic Advisers, said the aging population is only part of the problem; the bigger culprit is health care costs that are rising more quickly than the gross domestic product.

“It is simply not a problem that can be kicked down the road indefinitely,” she said.