Loren Bonner , DOTmed News Online Editor
August 15, 2013
DMN: After Steven Brill’s blockbuster article in Time Magazine came out a few months ago, it feels like everyone is interested to know the real scoop on hospital pricing and what’s driving up the cost of health care. I think you have some opinions on this. Can you share your thoughts?
BK: Egregious hospital unit pricing is certainly one driver, but the truth is that over the last several decades, every health care sector has devised ways to extract money from the rest of us that they’re not legitimately entitled to. I’ve written extensively about the Specialty Society Relative Value Scale Update Committee (or RUC), the secretive AMA committee that has jiggered the relative value scheme that Medicare, Medicaid and most commercial payment systems are based on, driving up cost.
In my day job, I see health systems buying stakes in Pharmacy Benefit Management (PBM) firms, jacking up the generic pricing to their own members by 200% or more then telling their members that they’re managing their cost. Physicians are doing unnecessary procedures on patients, which not only costs a great deal but puts those patients at risk of physical harm. Primary care reimbursement has been driven down by Medicare and the commercial plans, which decreases visit time and increases the rate of specialty referrals and in turn produces much more costly care unnecessarily. Health plans push “choice” in networks, but having the right to go to a lousy doctor or hospital does nobody any favors, except by driving the cost up for less effective and efficient care. I could provide many, many more examples.
If you get down in the health care weeds, as we do, you can see these behaviors clearly. Nothing will meaningfully change until the system moves away from fee-for-service reimbursement and onto some version of risk, and everyone is held accountable through transparent safety, quality and cost performance data. And the only way to make that happen is for purchasers to galvanize and mobilize to be a counterweight to the health industry’s influence over policy.
DMN: You said before that health systems want market dominance. How is this driving excessive care and costing our health system?
BK: Health systems have been actively consolidating — putting as many services as possible under one roof — in their markets, while at the same time continuing to lobby hard for higher reimbursements inside systems. They’re acquiring primary care physicians now at a rapid clip, but many are also rounding out their specialty faculties. Everything will be designed for one-stop shopping without any need to limit cost, at least until there’s a shift in reimbursement.
So over the past few years, many primary care physicians acquired by health systems have been incentivized to refer into the mother ship as often as possible for images and other diagnostics, and certainly for possible procedures. Under this widespread scenario, the cost of primary care services has skyrocketed compared to what it was when independent primary care physicians provided them. And the rate of unnecessary and inappropriate utilization has also risen, with horrendous cost consequences.
Employers have become demoralized and often don’t believe they have alternatives. But they do. There’s a growing sector of organizations like mine that have developed business models around disrupting the excesses that have become institutionalized in health care.
DMN: How is health system market dominance also working against what health care reform preaches — increasing quality and lowering costs in the system?
BK: At this point, many, many health systems claim that they’re developing accountable care organizations, but all but a few are still operating off fee-for-service reimbursement, which means that they’ve had no incentives to change care and cost patterns or to invest in the infrastructure or cultural change that will be required to deliver care in different ways.
It is important to understand that, even while certain major aspects of the ACA remain unchanged, the health care lobby continues to work for changes in the law and in the rules that will define where the reform law’s rubber meets the road. So far, we haven’t moved much closer to real risk-based arrangements, and until we do, health systems have no real reason to improve quality or lower costs.
DMN: The Affordable Care Act clearly favors primary care over specialty care. You might disagree with that statement. Regardless of the law, how is primary care becoming more valuable than specialty care?
BK: The ACA really doesn’t favor primary care in any meaningful way. If it did, then primary care would have “primacy” in terms of a change in its reimbursement and structure. There’s been a lot of hoopla around primary care empowerment and medical homes, but the changes in what primary care doctors get paid has been pretty small, especially compared to their far better paid specialty colleagues.
The one way that primary care can become more valuable than specialty care is when health systems and health plans go at risk. In that scenario, suddenly, you want nobody getting referred for specialty services unless they really need those services, so the incentives on the primary care physician would suddenly shift from steering a lot of patients in for unnecessary care to making sure that appropriateness is the rule. In a risk-based environment, no system can succeed without driving appropriateness.
DMN: What are some interesting things we might be seeing more of down the road as they relate to controlling the cost of imaging?
BK: Given the cost of advanced imaging, it makes sense for any self-funded health plan to develop direct market-based contracts for imaging services. For example, in one market, our clients were now paying $450 for a high quality MRI, with a reading, and had previously been paying $1,750-$3,200 per image through their health plan.
These figures are not unusual. Keep in mind that health care is a big place, and there are lots of opportunities: lab services, dialysis, ambulatory surgery, pain management, Rx management are just the tip of the iceberg. As employers become more aware of this potential and how seriously they’ve been taken advantage of by the health systems and health plans, you’ll see more non-conventional arrangements like this taking hold. You’ll see narrow, high performance networks, based on provider-performance data, focusing care into fewer providers locally, and national centers of excellence attracting high cost cases regionally and nationally. You’ll see health plans with strong incentives and disincentives for approaches we know work or don’t work. And the responsibility for management of high cost cases will move away from the health plans, who have done very little actual management, and into high performance vendors who specialize in ensuring appropriateness.
All this will happen because the system is so highly stressed now, and purchasers can barely stand it anymore, and they’re beginning to take action. It’s way overdue.