Back in 1997 when IFTF was working on the 10 Year Forecast of Health and Healthcare, our chief economist Greg Schmidt vehemently decried capitation and FFS as unsustainable systems and said that a rational market would develop in paying for medical excellence. He convinced us all to put something called "Performance-based reimbursement" in our forecast, and our final forecast suggested that by 2010 some 20% of reimbursement for the health care system would be in some kind of pay for performance manner. Remember what Keynes said about us all being "slaves of some defunct economist"?

This week two different sets of leading health care luminaries have put the state of Pay for Performance and its related cousin of plan-based care management in their sights. Brad Strunk and Robert Hurley at HSC have an issue brief looking at the spread of "P4P" in several of the markets that HSC tracks. Their analysis is that P4P is plan driven and a response to try to tease out some of the "good effects" of capitation. (You remember the pre-Helen Hunt period when capitation was supposed to encourage long-term thinking in care management, and innovation in improving patient services?) It’s obviously also a way for plans to try to establish some limited control over provider behavior during a period when visions of a return to 1973 and the "Golden Age" have been terrifying the plan medical directors trained at the temples of the prophets Enthoven and Berwick.

Berkeley’s Jamie Robinson (the other Reggie Herzlinger fan) and CHCF’s Jill Matthews Yegian have an online piece in Health Affairs which summarizes the plans dilemma nicely:

"Health insurers are under conflicting pressures to improve the quality and moderate the costs of health care yet to refrain from interfering with decision making by physicians and patients"

. That’s really what health plans efforts to create better care for their members have evolved into.

Their article is an accurate parsing of the state of the art of DSM as managed by major health plans (or more accurately their data jockey and care management subsidiaries). They parse care management it into Identification (either data based, self-assessed by patients or more likely gained via notification from physicians that something bad is happening) and Intervention. Intervention tends to happen well when a nurse gets the patient on the phone (the American Healthways or Lifemasters model) and not so well when a medical director is trying to change physician behavior one doc at a time (the initial Active Health Management model).

Robinson and Yegian basically call the state of medical management out as being nothing more than a minor attempt to keep some level of quality improvement in the system while not upsetting providers or patients very much. They also doubt that there is much bang for the buck in these programs beyond a narrow segment:

"The health plans’ medical management programs are designed, packaged, and priced with modest expectations for what they can deliver. All programs assert that they generate a positive return on investment, with the benefits in lower medical costs exceeding the administrative costs of identification and intervention. The positive return on investment is predicated on the modest level of investment, however, and a major ramping up of medical management programs would not generate commensurately higher returns and slay the dragon of cost inflation and quality deficiency."

In other words they seem to think that Wennberg and the Dartmouth crowd’s jobs are safe for now.

In a follow-up piece Victor Villagra notes that as health plans have developed DSM outside of the "traditional" provider system, no one has dealt with the complex question–"Can DM Organizations Support Small-Practice Adoption Of The Chronic Care Model?" It’s not hard to see Robinson and Yegian’s answer as being "No".

I’m not quite so certain. Somewhere in the bowels of the malpractice debacle a reasonable debate about following evidence-based medicine is trying to get out. If you think about it care management is all about extending evidence-based medicine over the continuum of care. P4P is merely about trying to encourage that trend. While the defeat of managed care in the court of public opinion and in the boardrooms of insurers seems more or less final for now, there are two things leading me to believe that the war is not yet over. First, it’s just the right thing to do, and you know what Churchill said about Americans doing the right thing. Secondly, and rather more known to motivate Americans, it’s the money. If aggressive private sector negotiating doesn’t work to restrain health care costs, something else will find its place. Stein’s law says that if something’s unsustainable in the long run it will end. At some point 15-20% rises in health care costs every year is unsustainable. The combination of EBM, care management and P4P has the kernel of a promise to reduce the care variation, the unnecessary care and the dumb care that is responsible for a big chunk of the $1.6bn spent every year.

So round one to the system, but I for one still believe that the question of Greg Schmidt’s "defunctness" is still up in the air.

The IFTF Forecast from 1998