Can Medical Management Succeed Within A Fee-For-Service Environment?

Brian Klepper

The column immediately below is an important discussion by Douglas Elmendorf, the Director of the CBO – actually it was prepared by Lyle Nelson of CBO’s Health and Human Services Division, but it has Mr. Elmendorf’s imprimatur – which recently released an issue brief concluding that major cost control approaches had not produced savings in Medicare. This of course elicited a cascade of pro/con medical management commentary.

Most important is this sentence near the bottom.

Demonstrations aimed at reducing spending and increasing quality of care face significant challenges in overcoming the incentives inherent in Medicare’s fee-for-service payment system, which rewards providers for delivering more care but does not pay them for coordinating with other providers, and the nation’s decentralized health care delivery system, which does not facilitate communication or coordination among providers.

In other words, so long as we use a fee-for-service reimbursement system that rewards excess, efforts aimed at reducing unnecessary cost are swimming upstream and doomed to failure.

I don’t believe for a moment that the approaches reviewed in the CBO Issue Brief are generally ineffective. These and many other mechanisms – longer primary care office visit durations, electronic health records, clinical decision support, patient incentives, provider performance transparency, medical destinations, and on and on – produce significant results in real world situations where the deck isn’t stacked by perverse payment incentives. My firm’s clients see this every day in the clinics we operate for them, and they will attest to their power.

But no single approach is a panacea. Health care is complicated, and requires a complex of sophisticated mechanisms, all directed in concert, to create a meaningful impact. Putting in a wellness program alone, or a patient literacy program or a disease management program, won’t reduce costs significantly. Doing all these and much more, in a coordinated fashion, can.

But even so, America won’t make real headway on health care costs until we move to a payment system that properly values medical services, and resists rewarding the delivery of unnecessary care or the denial of necessary care.

One thought on “Can Medical Management Succeed Within A Fee-For-Service Environment?

  1. Suggesting that all of the different models tested in these demos can be lumped together and then conclude that this whole area of applied R&D is universally unfruitful is terribly off the mark. It reflects a decided lack of appreciation for how much the details of design and implementation matter with these kinds of interventions (and suggested by the wide performance variation between programs in the CBO report). I’m the principal investigator of the one remaining program that CMS continues to evaluate within the MCCD, Health Quality Partners’ model of Community-based Care Management. Results from the 4th Report to Congress on this demo were NOT incorporated into the CBO report. If they had been, they would have shown that care management programs, even in the fee for service world, can decrease in all-cause mortality 25%, and in higher-risk patients, reduce hospitalizations 39%, ER visits 37%, and net cost 28%. We need to move past unhelpful generalizations and get on with the disciplined research needed to learn how, specifically to engineer better models of care. The evidence indicates that we can.

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