What single change could be made to the current health-care reimbursement system to help bring down costs? Recent Journal Report articles on the future of Accountable Care Organizations and the expansion of Medicaid have touched on the issue of cost reduction.The Wall Street Journal put this question to The Experts, an exclusive group of industry and thought leaders who engage in in-depth online discussions of topics related to articles in the Reports.
Also be sure to watch three of The Experts—David Foster, co-executive producer of the Fox television show “House”; Rita Redberg, a professor at University of California San Francisco Medical Center, and Elliott Fisher, a professor at Geisel School of Medicine at Dartmouth—answer this question and others on video in a Spreecast this Friday, Feb. 22 and 3 p.m. EST.
David Foster: How About Being Up Front With Costs?
Speaking as a consumer of health care, it is the one area of my many types of consumption where I have no clue about costs. And I try. I get my car fixed, I’m given an estimate up front. Same for my accountant, my grocery store, my veterinarian. But, when I go to my doctor’s office, I have no clue. Even after the fact, it takes five rounds of paperwork to figure out what my insurance company actually paid for the visit.
Now, I’m not saying a price chart handed out to patients would reduce costs. I am saying it would educate consumers. That is the first step in having an honest, public debate about the relative worth and costs of health care. And we need one.
Dr. David Foster was a co-executive producer of Fox’s medical drama, “House.”
Carol Cassella: Get Rid of the Fee-for-Service Model
Ouch! I can only choose one? All right then, my vote is the fee-for-service physician payment model. It inadvertently incentivizes more testing, more procedures and ultimately higher costs, particularly when it’s coupled with third-party insurance so that neither the seller (physician) nor the buyer (patient) witnesses the dollars changing hands. In fact, most doctors, fee-for-service or otherwise, don’t have a clue about what the tests they order cost—it’s negotiated between the billing office and the insurance company. Do I see many physicians consciously milking this system? Surgeons recommending surgery where it’s not really necessary or anesthesiologists advising epidural back injections before trying conservative care first? No. At least not overtly. But it’s inherently a conflict of interest to expect all health-care providers everywhere to prescribe less expensive care when that means they’ll make less money. And the problem is magnified by the fact that invasive procedures generate a lot more income than face-to-face conversations with patients explaining why that epidural or arthroscopy won’t likely help them.
There’s always a way to game the system if you’re willing to bend your ethics—a truism in any industry. Capitated care, which pays the physician or clinic per patient rather than per procedure, can have the effect of discouraging valid but expensive interventions. Hopefully some of the newer experiments in accountable-care reimbursement, where payments are tied to good outcomes, will prove a better mix of motivation plus sound, evidenced-based care. For all the complaints that turning this ship around will destroy the quality of U.S. health care and the caliber of our physicians, plenty of other countries (and some medical centers of our own) are proving that this is not so. There are numerous examples of salaried doctors promoting healthier populations at lower costs.
Dr. Carol Cassella (@CarolCassella) is a practicing physician and author of the novels “Oxygen” and “Healer.”
Harlan Krumholz: Promote Patient-Centered Care and Implement Malpractice Reform
There is so much to be done. At a high level, we need to develop payment systems and incentives that promote patient-centered care and decisions that are aligned with the preferences, values and goals of patients. To have a system that simply pays more for more utilization is a fundamental flaw. A model that simply provides financial rewards for utilization will influence even well-meaning and highly competent health-care professionals. And then there is an immediate need for malpractice reform so that people can be compensated for harm but not in the way that is capricious and unpredictable. The fear of litigation should not be driving practice.
Dr. Harlan Krumholz (@HMKYale) is a cardiologist and the Harold H. Hines, Jr. professor of medicine and epidemiology and public health at Yale University School of Medicine.
Murali Doraiswamy: Rethinking Our Spending Priorities Could Help
A single-payer system will slow the rise in costs initially but it will also reduce innovation and probably lower quality of care in some areas. We also have to ask ourselves what our priorities are for spending to enhance happiness of the nation. Cutting the budget for a single warship or bomber might pay for the health care of an entire community.
Dr. P. Murali Doraiswamy is professor of psychiatry and medicine at Duke University Medical Center where he also serves as a member of the Duke Institute of Brain Sciences and as a senior fellow at the Duke Center for the Study of Aging and Human Development.
H. Gilbert Welch: Skin in the Game
The single-most effective intervention would be to prohibit third-party payment (i.e. health insurance). If all health care was paid for by individuals out of pocket, costs would fall dramatically. Of course, there would be multiple undesirable side-effects. So while it is not a serious policy proposal, it is a reminder of the importance of having “some skin in the game.”
The second-most effective intervention would be to prohibit fee-for-service medicine. Paired with third-party payment, fee-for-service creates a powerful positive-feedback loop: The patient has little financial disincentive to seek care, the provider has a strong financial incentive to provide care.
I believe the system is gravitating away from fee-for-service. At the same time, there are a few settings when we may want to maintain the monetary incentive—for work that is unpredictable, unscheduled and typically in the middle of the night.
The pediatrician who takes a phone call at midnight from a mother with a sick infant falls in this category. So does the general surgeon who comes in at 2 a.m. to take a trauma victim to the operating room. So, too, does the family practitioner who spends the night in the hospital waiting for a new mother to deliver vaginally. If we want these services, we ought to expect to pay for them.
Dr. H. Gilbert Welch is a general internist at the White River Junction VA and a professor of medicine at the Dartmouth Institute for Health Policy and Clinical Research in the Geisel School of Medicine.
Leah Binder: First Things First, Let’s Quit Calling It ‘Reimbursement’
We should stop using the word “reimbursement.”
Say you hire a celebrity to speak at your sales meeting. You agree to pay him or her $20,000 for the day, plus a reimbursement for travel expenses. You do not ask the celebrity for an explanation of what aspects of their education, talent and accomplishments add up to the $20,000 fee. You negotiate the fee based on competitive market prices for celebrity speakers. But for the travel reimbursement, you expect receipts for the flight, the cab fare, etc., demonstrating the celebrity spent the money the way you agreed.
By using language about “reimbursement” instead of “payment” or “prices” to describe the flow of money in health care, we accept as fact that patients reimburse doctors and hospitals for the costs they incur when they treat patients. Of course, patients themselves don’t usually write the biggest “reimbursement” checks: Those come from government through Medicaid or Medicare or employers through their health plans. As David Goldhill writes in his new book, “Catastrophic Care: How American Health Care Killed My Father—And How We Can Fix It,” if patients did write the checks we would have a much better health-care system.
Because we accept the providers-get-reimbursed framework, policy efforts tend to focus on reducing provider costs, assuming logically that we will then reduce “reimbursements.”
Think about it this way: If you can get your celebrity to fly coach, your travel reimbursements would go down. In health care, it doesn’t work out that way—often to the puzzlement and irritation of purchasers.
“I’m tired of hearing about all the fabulous advances in lasers and robotics and all this technology that supposedly reduces the cost of so many common surgeries,” said one Leapfrog employer member to me. “Where’s my savings? My claims costs keep going up and up, and surgery claims are astronomical.”
Even hospitals and doctors are confused by the mythology of the “reimbursement” model. A group of leading hospital CEOs co-authored a report published by the Institute of Medicine called “A CEO Checklist for High-Value Healthcare.” In other industries, when CEOs talk about value, they mean value to the customer. But these CEOs are talking about value to themselves. The report details valuable innovations leading to higher margins and better cash flow for the hospitals, but no mention of lower bills for the patients. That means your celebrity is going to fly coach, but still bill you for a private jet. The celebrity is more frugal and made a nice profit, but you’re still out the same money.
My issue with the word “reimbursement” is not just wordsmithing. We must begin to understand health costs as prices and subject them to the same competitive market scrutiny we do any other pricing scheme in any other industry. We should not “reimburse” a hospital for an inpatient stay any more than we reimburse our grocer for a carton of eggs. We pay for these things and if the price or the quality are not competitive—we should go elsewhere.
Albert Einstein said, “We cannot solve problems by using the same kind of thinking we used when we created them.” By thinking about “reimbursement,” we are doomed to failure in diagnosing and addressing our health care system’s spiraling costs.
Leah Binder (@LeahBinder) is President & CEO of Leapfrog Group, a national organization based in Washington, D.C., representing employer purchasers of health care and calling for improvements in the safety and quality of the nation’s hospitals.
David Blumenthal: Do Away With the Fee-for-Service Payment System
That single change would be replacing the current fee-for-service payment system with one that asks providers of care to share responsibility for the overall costs and quality of care delivered to their patients. A fairly extensive body of research, including much supported by the Commonwealth Fund, has shown that fee-for-service payment, which predominates throughout the U.S. health system, encourages the provision of an ever-higher quantity of services, including some that may not be strictly necessary. Volume, not value, is rewarded. Fee-for-service also inhibits coordination of care across different health-care professionals and organizations. In contrast, when providers of care benefit from keeping costs down, as they do in various risk-sharing arrangements, they are free to be creative in redesigning services and benefit from finding the most coordinated and efficient plan of care.
The dominance of the fee-for-service payment model is one reason we are not achieving outcomes commensurate with the vast resources the U.S. spends on health care. Fortunately, several new payment innovations included in the Affordable Care Act are beginning to reorient incentives in our health system and reward providers for delivering coordinated, patient-centered care in an efficient manner. Though implementation is continuing, we are already beginning to see a proliferation of accountable-care organizations, in which doctors are formally responsible for the cost and quality of care delivered to a defined group of patients, and several other alternative payment arrangements across the country. These initiatives could be particularly valuable when supported by information systems that guide and drive improvement.
As the Commonwealth Fund’s Commission on a High Performance Health System has recently pointed out, fee-for-service payment encourages fragmentation in delivery of care, but it is really just one of several drivers of the unsustainable increases in U.S. health spending. A comprehensive cost-control framework must also include policies that target the high and extremely variable prices we pay for drugs, devices and other services and encourage coordinated change across both public and private sector payers. Fortunately, our work shows that it is possible to simultaneously address both high prices and volume, slow spending by a cumulative $2 trillion by 2023 and begin to place the U.S. health system on a path to high performance.
Dr. David Blumenthal (@DavidBlumenthal) is president and CEO of the Commonwealth Fund, a national health-care philanthropy based in New York City.
Fred Hassan: Stop Playing Defense
Reduce the pressures on doctors to practice defensive medicine. The U.S. remains an outlier country in this regard.
Fred Hassan is the chairman of Bausch & Lomb.
Elliott Fisher: Shift to Accountable Care Organizations
Before prescribing a treatment, physicians try to understand the symptoms and make a careful diagnosis. In the case of U.S. health care, the symptoms are obvious both to policy makers and to anyone who has been seriously ill. The care patients receive is too often impersonal, uncoordinated, unreliable and unsafe. In addition, rising costs are the single-most important cause of projected federal deficits and a major threat to state and local budgets, company bottom lines and personal incomes.
We don’t have to look far for a diagnosis: It is how we pay for care. Fee-for-service payment, in which each test, procedure, hospital stay and home visit is paid for separately, reinforces the fragmentation experienced by patients. Fee-for-service also provides a powerful incentive for physicians to do more—whether patients really need and want the procedure—or not. Work done here at Dartmouth and by others suggests that as much as 30% of U.S. spending on health care is wasted, much of it on potentially avoidable and unnecessary care.
The remedy is to shift to a payment system that rewards better care, not just more care, and we are seeing the beginnings of that shift now with the creation of accountable-care organizations. ACOs represent a new payment model approved by the federal government for Medicare beneficiaries and by many commercial health insurers as well. Under this approach, physicians and hospitals are encouraged to work together to improve care for the patients they serve and to reduce costs. If they demonstrably improve quality, they are eligible for a share of the savings they achieve. Early evidence is promising, and there are now over 300 ACOs around the country, serving an estimated 10% of the U.S. population.
To slow the growth of spending, Congress should accelerate the transition to ACOs by setting a date in the near term when cuts to payment rates for physicians, hospitals and other providers who are not under ACO arrangements will be introduced. Congress should also create financial incentives for commercial health plans to offer an ACO option to their members.
Dr. Elliott Fisher is the James W. Squires professor of medicine and community and family medicine at Geisel School of Medicine at Dartmouth and director for population health and policy at the Dartmouth Institute for Health Policy and Clinical Practice.
Susan Devore: Bundle Payments to Coordinate Care, Engage Patients and Encourage Innovation
Move the government-run Medicare fee-for-service payment system to one that enables innovation and rewards care coordination, quality and efficiency. This system is the single-biggest cause of high costs, lack of care coordination and inconsistent quality in American health care.
But change is under way. Over the last decade health-care providers and the Medicare program have been testing a new generation of payment methods that reward providers for managing populations of patients throughout care episodes. These changes essentially “bundle” payment among doctors, hospitals and post-acute providers for the care of a patient’s condition. These systems better align Medicare with private efforts that have been used for years but were undermined by the “market setting” Medicare system. Bundling payment creates an incentive for providers to coordinate care, engage patients and innovate to provide high quality and more efficient care.
Bundled payment has already proven successful for heart bypass surgery and other procedures through a Medicare-led bundled payment demonstration that saved about 10% of expected costs and reduced patient insurance costs while improving care and lowering mortality rates. Medicare’s most expansive bundled payment program, which bundles payment for the entire care of a person, has been appropriately named an accountable-care organization, or ACO.
We need to move faster in implementing these programs in order to unlock the potential of America’s health-care providers.
Susan DeVore is president and CEO of the Premier healthcare alliance.
Charles Denham: Inform and Empower Board Members on Patient Safety
Ground zero in the war on health-care harm is the boardroom, not the bedside. If federal purchasers, major employers and private payers made board governance competency in patient safety a requirement for full measure payment, hospital care would change in a hurry. If every governance board member of every hospital in America were required to understand patient safety and be certified to have the knowledge necessary to ask the right questions to make hospital management accountable for keeping patients safe, we would have dramatically less waste, harm and cost due to fragmented performance.
In some communities, board membership is but one of many badges on the tunic of community service. Few board members have attended governance leadership courses such as the excellent programs of the American Hospital Association. Still fewer have been thoroughly grounded in fundamentals of safety and quality. Yet, the board’s power to move resources rapidly is enormous. Our nation’s safest hospitals attribute their success to a life lost that ignited their passion—a child, a mother or a father of someone important. And every one of those organizations says that their journey to greatness paid for itself financially, spiritually and culturally.
In defense of our front-line hospital CEOs and quality leaders, recruiting medical staff to drive system quality is like going to war with a circus troop. Doctors who are not employees of organizations are often seen as self-absorbed performers who use their hospital as a swap meet for business. It is definitely hard to herd those cats. This is why physician leaders must step up and join their boards and support them. Boards are shocked when they find out that large studies have verified that 37% of hospital staffs are afraid to speak up while errors are happening.
This crisis of leadership will require governance boards to practice forgiveness and discipline—forgiveness of prior budgets and failed quality programs and the discipline to make administrators and doctors accountable for the safety patients deserve. In our film Surfing the Healthcare Tsunami: Bring Your Best Board, we provided great leadership role models who understand how to inspire and develop the gifts of their workforce like Bob Chapman.
When they are informed and empowered, boards are far less likely to sit on large endowments that are earning very little and put those funds to work protecting the families of the communities they serve. Those who pay the bills need to wake up those who pay the bills. And it would cost nothing to require it, so why not try it.
Dr. Charles Denham (@Charles_Denham) is founder of the not-for-profit Texas Medical Institute of Technology, a medical research organization, and the for-profit HCC Corp., an innovation accelerator.
Atul Grover: Decrease the Amount of Services Used
Over 50% of the health-care dollar is spent on hospital and physician services. There are two ways to control costs: by decreasing the amount of services used or decreasing how much each service costs. Medicare and Medicaid have very effectively controlled unit cost of services, making their cost growth rate much lower than that of commercial health-insurance products.
The use of services is driven by many factors, including regional practice patterns, patient demand, impact of chronic disease, social determinants of health (poverty, lack of education), lack of care coordination, patient engagement, defensive medicine, etc.
Focusing on decreasing the utilization rate of services is far more difficult to control. However, ultimately it is a better way to manage the skyrocketing costs in the U.S. over the long term while also addressing the epidemic of chronic diseases such as obesity, diabetes and congestive heart failure.
Dr. Atul Grover is the chief public policy officer of the Association of American Medical Colleges.
Peter Pronovost: Let Physicians Set the Rules, Especially When It Comes to Therapies
The Institute of Medicine estimates that approximately one-third of health-care spending is spent on things that do not get patients well. Some of that is from fraud, but much more comes from the overuse of some therapies. Changes in the reimbursement system can change this. Policy makers can ask physicians to develop a list of therapies that do not get patients well and should not be done, such as certain cancer screening tests in patients with advanced age or certain surgeries. They can also develop appropriateness criteria for certain therapies such as back surgery or invasive cardiac procedures that are right for certain patients but not helpful—or even harmful—in others. For this to work, the rules must be set by physicians, not regulators.
Regulators can work with physicians to develop a list of the therapies that do not get patients well, decide how to measure them and then stop paying for them. For the therapies that work in some clinical scenarios but not in others, regulators can work with physicians to develop criteria and measures of appropriateness and then pay only when the criteria are met. Regulators working with physicians can randomly audit compliance with these criteria, imparting penalties for noncompliance. The audits can be done by peers and do not need to be frequent. The audit effect demonstrates that even the threat of audit enhances compliance with rules.
The key for this or other policy reforms is to have the technical experts—the physicians in this case—develop the rules and measures and then regulators can enforce the rules. Too often payment policies are created without physician input. For any of these patient reforms to work and to benefit patients, physicians and policy makers need to work together.
Dr. Peter Pronovost is a practicing anesthesiologist, critical care physician, professor, Johns Hopkins Medicine senior vice president and director of the Armstrong Institute for Patient Safety and Quality.