QUALITY: Paying for medical excellence (and I do mean “paying”)

One of the best books on health care ever, second only to Paul Starr’s The Social Transformation of American Medicine is Michael Millenson’s Demanding Medical Excellence. In his tracing of the history of health care quality, Millenson demonstrated how organized medicine destroyed the burgeoning quality analysis movement early in the century, and how even as late as the mid-1990s, medical providers who became quality focused and more cost-effective found that they were losing money as a consequence.  The problem then was that managed care payers weren’t sophisticated enough to pay based on quality and performance, so the old fee-for-service paradigm of do more, get more actually rewarded poor quality care. Millenson’s expectation was that over time as more aggressive payers realized that quality was synonymous with lower costs, pay for performance would replace fee-for-service.  (For a contrary view see JD Kleinke’s Oxymorons, where JD decides that after preaching about the virtues of the market for all those years, better health care is just more expensive).

Well, now the New York Times is coming around to Millenson’s view. In an article called Hospitals Say They’re Penalized by Medicare for Improving Care, the Intermountain system in Utah claims that it’s providing great quality care, getting it right the first time and not having to redo procedures or transfer patients to higher intensity settings. As a consequence it is losing out on Medicare payments. Millenson’s book has a very complimentary section on Intermountain, and it’s no coincidence that Intermountain is among the most computerized health systems in the country and has been for years.

According to the Dartmouth Atlas, Utah certainly has lower rates of surgery than Colorado next door. Of course you don’t really know the incidence of disease behind this variation. This led to the great comment at a meeting I was at from Larry Weed: "You don’t know whether to move to Denver to get your problem taken care of properly or go to Salt Lake City to avoid unnecessary surgery." My pretty strong hunch is that you’re better off in Utah (even if it’s murder getting a drink there unless you know where to go).

The Times then suggests that getting Medicare to "pay for performance" is the answer, as suggested by the Jackson Hole veterans in Health Affairs, although I was somewhat disparaging about the concept’s prognosis yesterday. Apparently Tom Scully thinks it’s a good idea, and the Times says he is:

    quick to agree that the payment system needs to be fixed. "It’s one of the fundamental problems Medicare faces,"

Of course the minor problem is that years of data suggests that the for-profit hospital sector that Scully represented during the 1990s is the worst offender in terms of doing too many procedures that are medically dubious and of low quality; our buddies at Tenet being among the worst examples. I bet you all a nickel each that when Scully is back in the private sector he’ll be making sure that his clients don’t have to worry about Medicare forcing them to really change their ways–that is unless those Mormons can come up with some serious cash for lobbying.

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