Incentives

flying cadeuciiIn recent weeks, the market has reacted to a few noteworthy headlines, all involved with or touching upon value-based discretionary actions, and many with the not-so-hidden question: What’s In It for Me or WIIFM?

  • CMS announced that by 2016 30% of fees in health care should be paid for through a value-based system, moving away from fee-for-service.
  • ACO results have shown ambivalent outcomes.
  • Outcomes-based contracts have permeated the Hepatitis C cost-nado (that’s a cost sharknado, the kind that fiercely defies cost controls and takes over all noise about payment reform and patient preferences).
  • Reference-based pricing is a good/bad troublemaker in the middle of the value-based travails.

The latest rampages have appeared on two national and highly-regarded blogs: The Health Care Blog [Value-Based Reform] and The Health Affairs Blog [Go Slow on Reference Pricing].

As one of the loudest proponents on value-based designs, I lift the curtain again to show the thinking behind the movement from fee for service to value-based designs. All of these items above discuss the message of payment reform, or system alignment, but they are intensely linked to the patient-consumer ability to make the right choices, choose the right sites for care, and pay the right amount for services rendered to achieve health security.

This last—health security—should be at the heart of the US health system.

▪      It’s the place where patient competency is built and tested over time, as the patient becomes aware of health risks and chooses to modify behaviors to lower the risk.
▪      It’s the place where, when there are acute or emergent symptoms, there is no question but that the patient will be able to access the appropriate and affordable care in the safest possible setting, hopefully receiving care that delivers the patient back to functional health.
▪      It’s the place where caregivers and administrators are paid a competitive wage for serving the needs of the patient and getting the patient back to the best health possible.

Continue reading “Value-Based Health”

flying cadeuciiThe recent Health Affairs Blog post by Al Lewis, Vik Khanna, and Shana Montrose titled, “Workplace Wellness Produces No Savings” has triggered much interest and media attention. It highlights the controversy surrounding the value of workplace health promotion programs that 22 authors addressed in an article published in the September 2014 issue of the Journal of Occupational and Environmental Medicine titled, “Do Workplace Health Promotion (Wellness) Programs Work?”  That article also inspired several follow-up discussions and media reports, including one published by New York Times columnists Frakt and Carroll who answered the above question with: “usually not.”

There are certainly many points of contention and areas for continued discussion on this topic. It turns out that Lewis et al. and I agree on many things, and there are other areas where we see things differently. Continue reading “The Value of Workplace Health Promotion (Wellness) Programs”

Screen Shot 2014-10-04 at 8.22.11 AMLast week, Dr. Bob Kocher and I took to the pages of the New York Times to detail a health care success story in Southern Texas.  In a region once featured for its extreme health care costs and poor health outcomes, a group of physicians motivated by new incentives in the Affordable Care Act has started to change the equation. The Rio Grande Valley ACO Health Providers achieved eye-popping savings in their first year – coming in $20 million below its Medicare baseline and receiving reimbursements totaling over $11 million while also achieving better health outcomes for its patient population.

The savings number made for an impressive headline.

But as is often the case, other information had to be left on the cutting room floor. We dive a little deeper into the RGV ACO below:

The Central Role of Information Technology

Dr. Jose Pena, Chief Medical Director of the Rio Grande Valley ACO, emphasizes that one of the first and most difficult tasks for the newly-formed organization was developing an IT infrastructure that would serve their needs.  “Using what was there wasn’t really an option,” says Dr. Pena, “so we built our own infrastructure.”

Forgoing a single EHR solution, the Rio Grande Valley now operates on a mix of cloud and office-based systems. The ACO developed software to identify metrics from various EHR systems, migrate that information to the cloud, and view real-time performance of providers. “IT accounted for 40% of our costs,” says Dr. Pena, “but the importance of proper reporting – to our leadership team, and to CMS – was at the top of our list.” The ACO identifies its customized IT system as foundational to its success.

Continue reading “A Deeper Dive into the Rio Grande Valley”

flying cadeuciiMeaningful Use and Pay for Performance – two of the most talked about programs in healthcare IT over the past several years. They are both based on the premise that if you want to drive behavior change among providers and improve quality of care, you need to offer financial rewards to get results.

But what about the consumer? We have now entered a new era in healthcare where the consumer is rightfully front and center – AHIP is even calling 2014 the “Year of the Consumer.” Payers, and other population health managers, who until recently viewed consumers as claims, now want to “engage,” “motivate” and “delight” them.

The challenge, however, is that we are giving consumers more responsibility, but not making them accountable for the quality of care they provide for themselves.

As a country we have spent tens of billions of dollars on Meaningful Use incentives and Pay for Performance programs for clinicians. Providers need to demonstrate they are making the best choices for patients, being efficient and coordinating care.

They need to educate patients and give them access to information based on the belief that if patients are informed, they will take responsibility and action. Unfortunately, this seems like a “Field of Dreams” spinoff – “If we say it, they will act.”

However, that movie has a different ending. The intentions are good, but the flaw is that consumers don’t simply need more information. They need personalized guidance and support, and they need to feel like they have a financial stake in the game.

So the big question is – why aren’t we spending more time thinking about how the concepts behind “meaningful use” and “pay for performance” could be used as a way to get consumers engaged in their health? Yes, clinicians are important as they direct approximately 80 percent of the healthcare spend in our “sick-care” health system.

However, what most people do not realize is that 75 percent of healthcare costs are driven by preventable conditions like heart disease and type-2 diabetes. And while some consumers may throw up their hands and blame genetics for the majority of their health issues, it’s a fact that 50 percent of what makes us healthy is under our control – as opposed to 20 percent for genetics.

So what if we made wearable technologies such as FitBit more “meaningful” for the consumer?  Instead of just tracking steps, what if consumers were financially rewarded for taking steps to improve their health (pun intended) through health premium reductions, copay waivers or even gift cards?

Consider a scenario where an individual who was identified as being pre-diabetic and then took action to prevent the onset of diabetes. What if we required that proactive person to pay less in premiums than someone who was not taking any initiative to improve their health? That would clearly be very motivating.

Continue reading “Should Health Consumers Be Paid for Performance Too?”

Zubin DamaniaFor the better part of a decade, I practiced inpatient hospital medicine at a large academic center (the name isn’t important, but it rhymes with Afghanistan…ford).

I used to play a game with the med students and housestaff: let’s estimate how many of our inpatients actually didn’t need hospitalization, had they simply received effective outpatient preventative care. Over the years, our totals were almost never less than 50%.

For my fellow math-challenged Americans: that’s ONE HALF! Clearly, if there were actually were any incentives to prevent disease, they sure as heck weren’t working.

In a country whose care pyramid is upside down—more specialists than primary care docs, really?—we’re squandering our physical, emotional, and economic health while spending more per capita than anyone else. Four percent of our healthcare dollars go towards primary care, with much of the remaining 95% paying for the failure of primary care. (The missing 1%? Doritos.)

Worse still, the oppressive weight of our non-system’s dysfunction falls disproportionately on the shoulders of our primary care providers—the very instruments of our potential salvation. To them, there’s little solace (and plenty of administrative intrusion) in the top-down reform efforts of accountable care organizations and “certified” patient-centered medical homes.

But what about a bottom-up, more organic effort to reboot healthcare? A focus on restoring the primacy of human relationships to medicine, empowering patients and providers alike to become potent, positive levers on a 2.8 trillion dollar economy? What if we could spend twice as much on effective, preventative primary care and still pull off a net savings in overall costs, improvements in quality, and increased patient satisfaction?

What if George Lucas had just quit after the original Star Wars series? Wouldn’t the world have been better without Jar Jar Binks?

While the latter question is truly speculative, the former ones aren’t. We’re trying to answer them in Las Vegas (hey now, I’m being serious) at Turntable Health, where we’ve partnered with Dr. Rushika Fernandopulle and Cambridge, MA based Iora Health.

We aim to get primary care right by doing the following:

Continue reading “Rebooting Primary Care From the Bottom Up”

flying cadeuciiIn ancient Athens, the philosopher Diogenes wandered the daylight markets holding a lantern, looking for what he termed, “an honest man.”

It seems since the dawn of the consumer economy that customers and buyers have traded most heavily on a single currency – trust.

Three millennia later, our financial system still hinges on the basic premise that the game is not rigged and any trusted intermediary is defined by a practitioner who puts his client’s interests ahead of his own.

Anyone responsible for procurement of healthcare may feel like a modern-day Diogenes as they wander an increasingly complex market in search of transparent partners and aligned interests. The art of managing medical costs will continue to be a zero-sum game where higher profit margins are achieved at the expense of uninformed purchasers.

It’s often in the shadowed areas of rules-based regulation and in between the fine print of complex financial arrangements that higher profits are made.

Are employers too disengaged and outmatched to manage their healthcare expenditures?

Are the myriad intermediaries that serve as their sentinels, administrators and care managers benefiting or getting hurt by our current system’s lack of transparency and its deficit of information?

Continue reading “ACA 101: An Employer’s Search for Objective Advice”

Amid the rancorous debates over the Affordable Care Act, one provision deserves to be getting serious discussion.

It’s a provision that allows employers to increase the amount that they may fine their employees for “lifestyle” conditions, such as being overweight or having high blood pressure or high cholesterol.

Almost 37% of Americans are overweight or obese. The supposed goal is to use financial penalties to reduce obesity, the health costs of which exceed $200 billion per year. But this idea, while well intended, will not help Americans suffering from obesity, a medically defined disease and disability. In fact, it will likely make their situation worse.

For years, the country’s “wellness” industry has offered health-enhancement and obesity-reduction programs to corporations, from gym memberships to dietary counseling. For obesity, this approach has not worked. Research on these programs shows that they have not significantly reduced weight or cholesterol levels, or improved any other health outcomes.

Even the most successful programs, such as Weight Watchers, achieve an average two-year weight loss of only about 3% for their members— and even that tiny weight loss often returns later.

Continue reading “An Obamacare Fine on Overweight Americans: Discriminatory and Ineffective”

Through a series of small grants, we’re is exploring the utility of applying behavioral economic principles to perplexing health and health care problems—everything from getting seniors to walk more to forgoing low-value health care.

At a recent meeting in Philadelphia we challenged grantees to compete in an Innovation Tournament. The goal was to identify testable ideas that leverage behavioral economic principles to help make people healthier by working with commercial entities. Participants were assigned to groups and made their best pitches to their colleagues. And of course we used a behavioral economics principle (financial incentives) to increase participation: Each member of the first, second and third place teams received Amazon gift cards.

Eight teams made the finals:

1.     Love Lock: This team addressed the issue of driving and texting by proposing an app that could be installed on your cell phone that would send reminders not to text while driving. This team would work with car insurance and mobile phone carrier companies and provide discounts to those who get it installed. The behavioral economics principles being tested are default choice and opt-out.

2.     McQuick & Fit: Too many people eat unhealthy food. This team’s idea was to have a rewards card that can only be used to purchase healthy food. With each purchase, the customer would earn points toward free, healthy foods. Online orders would be placed through a website that would feature salient labeling and allow for defaults to order healthy meals. The behavioral economics principles at play include pre-commitment, default choice, labeling, and incentives.

3.     Just Bring Me Water: The problem tackled by this team is “regrettable” calories—mindlessly consuming whatever is put in front of you, such as free bread at a restaurant, or soda on a plane. The innovation: when booking a table online or calling for a reservation, you could ask to “opt-out” of the complimentary bread or chips that are offered. This would reduce the consumption of regrettable calories.

4.     Lunch Club: This group looked at addressing gluttony through a partnership with a chain restaurant. When going out for a meal, portions are typically bigger and diners consume more. But what if you had the option of doggy-bagging one third of the meal for another meal—framed as “buy dinner and get lunch free”? And, if you took this option, you would get a scratch off as an enhanced incentive and immediate reward. The behavioral economic principles being tested here include loss aversion, active choice, and incentives.

5.     Snooze, But Don’t Lose: People don’t get enough good sleep, which leads to poor executive functioning and safety issues. To increase safety, productivity, and efficiency, this group proposed using a Fitbit to build in reminders to go to bed earlier and provide feedback on good sleep. The behavioral economic principles at play are pre-commitment and loss aversion.

Continue reading “Eight Bright New Ideas From Behavioral Economists That Could Help You Get Healthy.”


The shortcomings of the Fee For Service (FFS) model are widely known.

During the 1800s, the British empire shipped prisoners to newly formed penal colonies in Australia (technically, these were British prisoners, but that doesn’t make a catchy title).  Ship captains were compensated for each prisoner who boarded the ship.  The financial incentive ruled over decency, each captain stuffed as many prisoners on to the ship as it could handle.  Of course, the prisoner survival rate lingered at a precarious 50%, while those who managed to survive the journey often arrived beaten, sick or starving.

Attempts were made to improve the survival rates, through what might be considered early wellness programs.  Captains were mandated to bring citrus to combat scurvy, a 19th century wellness program.  Doctors were required on each ship carrying prisoners, improved access ala concierge medicine.  I’m sure someone may have proposed it’s the prisoners responsibility to survive the trip and they ought to engage in their own survival.  Nevertheless, requiring lemons and limes and placing physicians on the ships proved equally ineffective.

In 1862, economist Edwin Chadwick suggested a change to the incentive structure.  Ship captains were no longer compensated for each prisoner who boarded in England, but, instead, received payment for every living prisoner who got off the ship in Australia.  The first pay for outcomes program in healthcare.  The survival rate on ensuing trips jumped from 50% to 98%.

The moral of the story is that incentives matter.

  • Primary care physicians are the ship captains of the 21st century.
  • American patients are prisoners of the US healthcare system.
  • Misaligned incentives are the root cause for what ails the system.

Christopher DeNoia is the Vice President of Business Development at Amplify Health, where this post originally appeared.

Three juicy lemons came through my inbox this week. The NY Times published an expose of why hip replacement surgery costs 5-10 times as much in the US as in Belgium even though it’s the same implant. JAMA published research and a superb editorial on the Views of US Physicians About Controlling Health Care Costs and CMS put out a request for public comment on whether physicians’ Medicare pay should be made public. Bear with me while I try to make lemonade, locally, from these three sour economic perspectives.

Here’s a super-concentrated summary of the three articles: The hip surgery is more expensive because, in the US, as many as 10 intermediaries mark-up the price of that same hip prosthesis. Then, Tilburt et al said in JAMA that “physicians report that almost everyone but physicians bears responsibility for controlling health care costs.” The physicians reported that lawyers (60%), insurance companies (59%), drug and device manufacturers (56%), even hospitals (56%) and patients (52%) bear a major responsibility to control health care costs. Finally, CMS is trying to balance the privacy interests of physicians with the market failure that my other two lemons illustrate.

Can we apply local movement principles to health reform? How much of our money can we keep with our neighbors? What policies and technologies would enable the health care locavore? The locavore health system couldn’t possibly be more expensive than what we have now and, as with food and crafts, more of the money we spend would benefit our neighbors and improve our community.

Continue reading “Enabling the Health Care Locavore”

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