Can Health Plans Explain Why They Aren’t Re-Empowering Primary Care?

Brian Klepper and David C. Kibbe

First published 10/30/2008 on The Health Care Blog

Brian’s Note: Recently I received a note from a New Jersey primary care physician who argued that, even more than Medicare, the health plans are killing primary care through extraordinarily low reimbursements. He wrote:

Through state legislation and regulatory changes over the past 10 years commercial carriers are now routinely and consistently paying less than Medicare in New Jersey.  Last year Aetna dropped to less than 65% of the local Medicare rate for a complex office visit.  This year, in my county, CIGNA dropped to 51.5% for the same office visit, and that’s when the RUC, as flawed as it is, declared that 53.5% of the full Medicare rate was what the practice overhead should be.  So now CIGNA is officially paying less than what the undervalued RBRVS system states is the cost of care.

To my mind, this type of reimbursement cannot be interpreted as anything else than an intentional effort to stifle primary care and it’s moderating influence over specialty, outpatient and inpatient excesses. While a robust literature – first by Barbara Starfield and more recently in Health Affairs – has nailed down that more primary care reduces risk and cost while improving quality, America’s health plans continue to pay primary care through volume-based reimbursement that functionally shortens office visits, increases specialty visits and diminishes our supply of primary care doctors.

David Kibbe and I asked about this problem this two and a half years ago. See below.

Sometimes a whisper is more powerful than a shout. Below is a cartoon from Modern Medicine that shows a Medical Home counseling session between a primary care physician (PCP), a specialist and the health plan. The PCP looks forlorn, while the specialist and the insurer have their backs turned, fuming. It is perfectly true.

Along with changing the way we pay for all health care and creating far greater pricing and performance transparency, we need to turn around the primary care crisis if we hope to substantively improve quality and cost.

Over decades we allowed the combined actions of the AMA, Medicare and the nation’s commercial health plans to marginalize primary care, so that now the typical cardiologist makes up to 4 times more than a PCP, and only 7 percent of medical school graduates now
enter office-based primary care – not nearly enough to care for the aging boomer population that’s growing by leaps and bounds.

Worse, as the most recent Dartmouth Atlas report made clear, the greatest concentration of “unwarranted variation” – waste – is concentrated in the specialties and inpatient arenas. This explosion in services and cost has largely resulted from tying the hands of America’s PCPs, preventing their involvement in downstream decision-making. Equally corrosive culprits have been a fee-for-service reimbursement system that financially incents specialists to conduct unnecessary procedures, and a lack of transparency that would allow us to more easily identify the excesses when they occur.

There’s hardly any question whether empowering primary care would dramatically improve the system. As Sepulveda, Bodenheimer and Grundy pointed out in a March Health Affairs article, literally dozens of studies show that more primary care in a community is associated with lower costs and better outcomes. More specialists lead to higher costs. In the US, the ratio of PCPs to specialists runs about 30/70, while in other developed countries its typically around 70/30. Their costs are generally about half ours and their outcomes better. Can anyone really argue with a straight face that empowering primary care is an iffy proposition, and that it demands more study before acting?

The entire premise of the Medical Home movement, seen most vividly through the efforts of the Patient Centered Primary Care Collaborative (PCPCC), is based, first, on empowering PCPs to do the things they were trained to do, and second, giving them the tools, programs and authority to optimize their roles. The PCPCC has been built around the power of Fortune firms and business health coalitions, each with considerable stroke, as well as several primary care associations. The health plans are at the table too, busily showing their support through pilot projects that test what happens when PCPs are paid a pittance more.

Even that is critically important, though, because the commercial health plans are the linchpins of change for this aspect of American health care. Unlike public health plans, who must adhere to policy that is dictated by the health care industry’s lobby, the commercials can respond to market forces. Health plans also are the only ones who can reach and transform the practices of the 250,000 or so community-based PCPs faltering under the lash of our current reimbursement paradigm. Their salvation is absolutely vital to re-establishing American health care’s stability and sustainability.

But so far as we’re aware, not one national health plan has yet decided to move beyond a pilot and unilaterally improve their medical management performance by paying PCPs significantly more. So far, there are no broad-based efforts to empower PCPs to have a say in what happens to their patients once they’re referred downstream to specialists. Nor are health plans systematically helping PCPs acquire the sophisticated patient management information technologies that can result in better outcomes at lower costs.

What are they waiting for? Why aren’t health plans making this obvious and straightforward adjustment to their medical management models? Skeptics might argue that, despite their protests that they’re in business to hold down costs, health plans make a percentage of total claims, so they certainly don’t want total claims to be less.

The plans might respond that they don’t want greater PCP involvement to antagonize the specialists, who they rely on. After all, its clear that, interference notwithstanding, collaborative decision making at the specialist level drives down specialty utilization and, with it, specialist incomes.

Or they might argue that they run enormous, complex operations, and big course changes are difficult and take time. Whatever.

Hence the inherent truth of the cartoon.

Still, there’s no question that we’re at a tipping point and that the time for action has come. Health plans have reported weaker enrollment figures, with reductions in the sales of even their much skinnier High Deductible Health Plans (HDHPs), as more employers and families are priced out of insurance. The coverage market is eroding as health costs continue to spiral upward, exacerbated by a credit crisis that is freezing liquidity. These economic trends are abetted, of course, by a primary care structure that is unable to exert control over the unbridled provision of specialty and inpatient services.

All this would be academic if there weren’t a very visible alternative model that performs MUCH more efficiently. Employers with strength and foresight are actively moving around the health plans by establishing worksite clinics, effectively staff model primary care practices that are fully realized medical homes. In general, these enterprises pay PCPs far better than they make in private practices, giving them access to excellent tools, and letting them loose to provide the care they know how is appropriate. The results are dramatic. Clinic companies routinely report significant savings, both on group health costs and occupational health and productivity costs, which are corroborated by their clients.

If the reports from the big benefits firms are right, more than half of all jumbo Fortune firms will have put up worksite clinics by 2010. Because these clinics are scalable, the trend is now catching like wildfire with large and even midsized (down to about 250 employees) firms as well. Several clinic firms are also working to bundle commercial insurance products with clinics in ways that allow smaller businesses and individuals to come together, collaboratively using the clinics to enhance access and drive down cost.

But the core problem remains. We won’t have real change in the delivery of care until the health plans either voluntarily change their relationship with primary care, or are forced to do so. As the cartoon  suggests, they’re not inclined.

So here’s a sincere request. If you’re a reader of this blog associated with the health plan sector, how about provide us with a lucid explanation of your hesitancy to change. What EXACTLY are you waiting for? Tell us.

If you’re a primary care physician and you agree with us on this, then please send this post to your regional health plans and pointedly ask why they’re dragging their feet. Pass this along to business leaders you know as well, and ask them to contact their health plans too.


Brian Klepper PhD is a health care analyst. David C. Kibbe MD MBA is a family physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies.

One thought on “Can Health Plans Explain Why They Aren’t Re-Empowering Primary Care?

  1. One of the issues with primary care is that your average pcp is not learning to do more in his or her practice. They learn to see an issue then refer to a specialist. All this discussion about primary care is good, and certainly our system would be better off with a global capitation-style primary care risk arrangement, but this would mean the primary care would have to do more within their practice other than refer to specialists. 50 years ago the traditional primary care did just about everything from basic infections to setting broken bones. Today, much of these services are referred out to community specialist. Having more pcp that do nothing but make more referrals will not help the system. The primary care needs to do more and manage the whole body and be able to assume risk under a capitation environment. Otherwise, all of this is just cheap senseless talk.

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