Moving Beyond Merchant Health Care

Brian Klepper

Published 4/05/12 on MedPage Today

Another luminary-rich panel has been formed to make recommendations about how physician and other healthcare services should be valued and paid for.

The Society for General Internal Medicine launched the National Commission on Physician Payment Reform with funding from prominent healthcare foundations. The 13 commissioners represent a mix of perspectives: a former surgeon/senator, community physicians, academics, two healthcare mega-corporations, a think tank, a state regulator, and a reform-oriented advocacy organization. A group representing large employer purchasers has one seat.

The Commission’s chairman, Steven Schroeder, MD, worries that the group will end up being just another voice. “[Many commission] report[s] wind up sitting on a shelf. We want people to say at the end of this that our findings really made sense.”

He is right to be concerned.

One question is whether any panel’s recommendations, no matter how sensible, can overcome the industry’s influential opposition to giving up fee-for-service reimbursement. Another is whether, the commissioners’ good intentions notwithstanding, its composition renders it likely to comprehensively address the problem.

After all, excess has served healthcare well. A payment structure that values only appropriate care could devastate revenues for the professionals and organizations at the table.

Fee-for-service has made healthcare a merchant enterprise. Every product and service delivers a margin, and so the industry does as many as possible. The payment system’s clear incentive is to deliver more care, and more expensive care, where the absolute profit dollars are higher.

Consider, for example, the 2011 500,000 patient follow-up analysis by William Boden, MD, and colleagues to their 2007 landmark COURAGE study. COURAGE definitively showed that expensive invasive procedures like angioplasty and stenting provide no additional benefit to patients with stable coronary artery disease beyond that provided by less costly drug treatment — referred to clinically as optimal medical therapy (OMT).

The new study found that COURAGE has been virtually ignored by American cardiologists, who continue to rely as enthusiastically on stents and angioplasties as they did before the COURAGE results.

The U.S. reception of COURAGE starkly contrasts with its reception in England, where the findings were incorporated into best-practice guidelines that were disseminated to primary care physicians.

The differences between our two health systems? Britain pays its primary care doctors more if they follow the protocols that encourage better patient care at lower cost. Here, we use financial incentives — fee-for-service reimbursement — that encourage doctors to deliver substandard care if the financial rewards are high enough.

We have become hostage to a payment method that, more often than not, puts the financial interests of doctors, hospitals, and corporations above the interests of patients and purchasers of care.

Every thinking healthcare professional knows it and everyone outside the profession is confused or enraged by it.

The best doctors are endlessly frustrated by the choices they face, but many healthcare professionals are content to simply play the game and reap the rewards.

There are alternatives. In the employer on-site clinic market, many vendors now pass through all operational costs without a markup — there is supporting documentation for the purchaser — and then charge a per employee per month fee for managing the care process. Unlike fee-for-service, this model incorporates no financial incentives to deliver unnecessary services (or to deny necessary ones). In this arrangement, the purchaser evaluates how effectively the clinic vendor reduces cost while improving individual and population health status.

The vendor’s incentives are to develop mechanisms that ensure the appropriateness of care and cost within the clinic and downstream, throughout the care continuum. It is also in the vendor’s interests to provide credible data showing how much the clinics are being used, what impact they have had on the health of the group, and whether cost patterns have changed.

In other words, the focus has moved beyond a merchant mentality to facilitating better care for the patient while protecting the purchaser’s financial interests. This payment model has been so well received that many clinic requests-for-proposal now specify it as a design requirement.

In truth, the current healthcare marketplace is loaded with low-hanging fruit that can yield tremendous quality and financial improvements — big benefits for patients and purchasers — which is why this sector is perhaps the fastest growing in healthcare and why this “care-neutral” payment approach could ultimately be appreciated as a model for the system.

Even so, getting payment models like this into policy will require that patients and purchasers have as strong a voice as healthcare vendors do now. So far, it appears that the healthcare industry doesn’t see that approach as productive.

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