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1. Many good points in this conversation. There are ways to compare plans and providers based on quality. US News & World Report publishes results of the NCQA’s measurement efforts each year..http://health.usnews.com/sections/health/health-plans/index.html. Many employers consider HEDIS information in their choice of health plans. Medicare mandates its use in measuring Medicare Advantage plans and 30+ states mandate it in measuring their Medicaid plans.
   The New England states have created all-payer’s database in order to provide quality and price measures to each state’s citizens across plans and to the level of physician groups and/or systems. Utah and, most recently, Oregon and Tennessee have followed suit. Oregon put together a policy brief in support of its effort: http://www.oregon.gov/OHPPR/HFB/docs/2009_Legislature_Presentations/Policy_Briefs/PolicyBrief_AllPayerAllClaimsDatabase_4.30.09.pdf
   New York has mandated that public reporting of HEDIS results for all plans will be through NY Department of Health and have, for years, provided HEDIS or similar information through its Managed Care Plan Performance Reports program.
   Health plans, primarily through the HEDIS dataset, also provide quality information as well as price information about network providers to their subscribers. Medicare also provides information about its MA health plans and certain providers.
   Here’s an interesting paper on public reporting: http://www.mass.gov/Ihqcc/docs/meetings/2009_02_18_Public_Reporting_Excerpt.pdf
   Provider payment schemes and incentives are as much cultural as they are economic. The VA system of care has dramatically improved in the past several years but it wasn’t known as a paragon of quality despite having no conflicting fee for service or market incentives.
   Incentives are broader than payment systems. Transparency is incredibly important: disclose salaries, administrative overhead, and direct costs as well as quality performance. Provide service level quality measurements such as friendliness, responsiveness, primary language, and so on and not just the technical aspects of care.

2. Seems like the idea of capitation is being used a bit loosely in the comments here. Kaiser Permanente is an insurance company (much like any other) as well as care provider (where it is very different), and it’s more descriptive to call the care side of the house integrated care delivery.
   One significant issue for cost control in the integrated care model is that salaried doctors have no incentive to perform high-reimbursement but unnecessary procedures (or procedures with less expensive substitutes). There is also greater incentive to provide preventive care, though not as much as there should be, since customers often don’t stay with one insurance provider long enough to justify the investment. What makes economist/business folks cringe about extending this model for the entire country is two main things:
   1) The KP model kills competition amongst care providers for quality (though Porter has argued, I think persuasively, that competition amongst care providers exists at the wrong level and thus isn’t really working in the typical reimbursement arrangement)
   2) Adopting the model would be incredibly disruptive to the care delivery side of the industry.
   It will not happen, and in my opinion should not happen as it would be far too disruptive to a critical industry. Our political system is deliberately deliberative, to prevent revolutionary changes from destroying what has been built, and it will do that. Hilary’s plan was much less radical than typically portrayed, focussed heavily on the insurance side–steering very clear of single-payer or direct interference in care delivery systems. That was easily killed off by the Harry and Louise ad campaign. Imagine how much easier it would be to kill a bill that mandated single payer or integrated care delivery? A talented political strategist could knock that one off before breakfast.
   The market already allows patients to choose between KP and other insurance carriers. If KP is structurally much more efficient, it should win in the marketplace and drive all the other insurance companies out of the market. This is not happening. . .
   Of course, as a consumer of healthcare, I have no reliable way to compare quality from one plan to another. So it comes to price, anecdotes, and marketing. Not exactly the basis for sound decision-making.
   I hope that insurance reform comes with a serious attempt to tackle the extremely tricky problem of outcome measurement. It can be done:
   http://my.clevelandclinic.org/about/quality/quality_measures_list.aspx
   Efforts like these go a long way toward helping consumers make better choices.

3. “Makes sense to me.”
   Sir: as Churchill might note: “yes — and to you, only.”
   Nationwide capitation will happen when EHRs/EMRs provide authentic benefits.
   Have a good day, sir.

4. Karl: Your comments lack any factual basis so far as I can tell, plus they seem to be intentionally insulting to other commenters, so please make them on, say, the WSJ’s HealthBlog, where there is a better fit.
   From my perspective most of the analysis in the Porter/Teisberg book is excellent, but none of it is unique. The primary weakness in its analysis (leaving aside its recommendations) is its dismissal of the structure of healthcare systems outside the USA. Needless to say those systems universally “perform” – as measured by population health status/cost per capita – dramatically better than the USA system, so their characteristics should be duplicated in the USA.
   Application of the Kaiser Permanente system to the USA as a whole is what jd suggests without explicitly stating that: capitation as the basis for revenue and costs contained through salaried providers, among other common-sensical features. Makes sense to me.

5. “And if you think capitation failed, I look forward to seeing you at Kaiser Permanente’s bankruptcy hearings.”
   Is that after California’s Chapter 11 bankruptcy reorganization filing?
   Or Obama’s bailout of California with funds from North Dakota and MORE printing of worthless paper money?
   Or both?
   Get a calculator, sir. Those in bankruptcy need them.

6. John. You may be right but if that’s the case Porter certainly sold a whole bunch of us a dummy. I myself read not only the book but all the other articles he and Teisberg wrote at the time in preparation for the interview that never was with her, and several others I trust agreed with me. On the other hand maybe he didn’t believe what he was saying about Enthoven.
   Docannon is of course correct. Medicare FFS, itself based on Blue Cross payment circa 1936, is the root cause of the problem. But the change to a more rational payment system may come Either from government fiat or by some type of managed competition–which itself would require some huge regulatory changes. Changes which Porter seems to be asking for now.
   THe point Karl misses is that you need an incentive first, and then you’ll develop a system to respond to it. If you tell people they’ll be paid by an end state, they’ll develop systems to get themselves to that end state. The problem is that the current end state we pay for is volume of procedures. If it was a few simple population health measures, you’d see the provider side re-orient itself the way that Porter and Enthoven think it should. Or some variety of that at least. The current example of payment for nursing home reporting and hospital infection reporting proves my point.
   But that won’t happen if you appeal to providers to change their behavior when their financial incentives are telling them to do something else. It’s that simple fact that’s taken Porter 5 years to understand.
   And if you think capitation failed, I look forward to seeing you at Kaiser Permanente’s bankruptcy hearings.

7. Nate, you got that right. Capitation FAILED. Get a clue, jd.

8. jd, we tried capitation and it failed big time. Let me correct that, it succeded at it’s goal but failed politicaly, leading the Democrats that championed it to throw it under the bus. With Obama’s penchant for bus murders he would throw them under the same day he proposed another round. The discussions on MedPac popping up are another flavor of capitation but why should be expect the public to accept rationing this time? If the public won’t accept it why do you think the politicians won’t throw it under the bus once again when it succeeds? Or do we manage healthcare in spurts, ration or 10 years then let the system go nuts for 10 then back to rationing again?
   When you tell someone they can’t have something they will blame someone, who is going to step up an take the blame? Insurance companies, Congress, HMOs, MedPac, or the consumer if they can’t afford to buy it? There are only a handful of entities with which to place the blame, until we pick one and stick with it the problem will never be solved.

9. Karl, thanks for pointing to something that Porter actually wrote. Now please address what Matt actually wrote.
   It is not enough, and actually naive, for Porter to say the following: “Results data not only will drive providers and health plans to improve outcomes and efficiency but also will help patients and health plans choose the best provider teams for their medical circumstances.”
   The whole disagreement Matt and others had with Porter is that under the current system there are inadequate incentives to collect, disseminate and use this data. You need to change the incentives first to get providers to try to maximize quality of care rather than quantity of care.
   It’s a chicken-egg problem. Without some incentives (monetary, legal, political) the data will not be collected or disseminated so that it can be acted on. But, without some data the incentives don’t have any purchase. P4P programs in the private sector have proven to be too weak, and providers have effectively resisted stronger programs from insurers. So, the point I take Matt and others to be making is that government needs to step in to re-write the ground rules about how care is paid for.
   One solution that works pretty well to get around the chicken-egg problem is to start paying a capitated rate to the system and pay individual providers who work in that system a salary. That automatically removes incentives to preference quantity over quality, and it creates incentives to become more efficient (either to increase profits, or to lower prices and gain market share). That payment arrangement is also more easily compatible with the dissemination of quality data, because efficiency is positively correlated with quality (at least in our current system), whereas in fee for service efficiency and quality are negatively correlated with income (weakly, since if you suck too bad you get a reputation).

10. WOW! Does this mean that President Obama is NOT going to call Porter? And call you, instead?
    I doubt it. Very seriously.
    This is what Porter *actually* wrote:
    “First, measurement and dissemination of health outcomes should become mandatory for every provider and every medical condition. Results data not only will drive providers and health plans to improve outcomes and efficiency but also will help patients and health plans choose the best provider teams for their medical circumstances.”
    Disclosure is one method. A huge government bureaucracy handing out taxpayer goodies for politically-correct behavior is very much another.
    This is much ado about nothing. Nothing. Zero.

11. Thanks, bev. MD and Deron, for your replies.
    Even though I didn’t read Porter’s book yet (I ordered it) – as opposed to many other folks here, as it seems, I want to point out re. the concepts discussed here:
    1) how is quality/outcome exactly measured in practice? The only clear parameter I know of is the quality adjusted life year (QALY), if I recall correctly
    2) what is a care episode/cycle exactly? Most chronic diseases are year long processes with multiple acts of care/services, and outcome is often hard to define and depending on multiple parameters. What about the COPD patient kept out of hospital for a long time (good midterm outcome), but being kept on steroids for too long (bad longterm outcome)? What about gaming the system, e.g by playing with accuracy of diagnosis? If I diagnosed enough patients with vague symptoms and spots on their MRIs with MS, I will have better outcomes than any colleague who diagnoses with more scrutiny? What about patient compliance? Will doctors try to get rid of noncompliant patients in order to improve their stats (I actually do think that some patients need more pressure re. compliance).
    My intuition is that quality of care may be, in most cases, so hard to measure that in order to do it right, you may have to spend an enormous amount of resources … except for some substitute parameters, some of which seem good (e.g. HbA1c, normotension), but they rarely give the whole picture and mostly apply to PC. Or are we talking about system performance, i.e. no more free standing, independent offices (that may be a blessing, but isn’t mandating that a very hard sell)? But maybe all these questions become clear after reading Porter’s book.

12. All six of the points in this article are entirely in keeping with the various theses of the Porter/Teisberg book. The idea that they ignore incentives is absurd–this book is ALL about incentives, as any book (co)written by an economist/management consultant will be. Also absurd is the idea that the book only covered the care delivery side–it gives approximately equal coverage of public policy, the insurance industry, employers, and patients. A quick perusal of the contents page on Amazon will verify that this is true. So will reading the book.
    As others have stated above, care delivery systems can only change so much under the dysfunctional care reimbursement systems we have. This obvious truism is well-covered in the book. Reasonable people can certainly disagree on the probability of success of different reform approaches. But intelligent and comprehensive analyses are hard to find, and there is a lot of material here. It deserves to be represented accurately.

13. @ Dustin Lipson:
    The power to set incentives is _currently_ concentrated within a single quasi-governmental entity known as the RUC. This tiny and secretive little politburo sets nearly all Medicare Part B payment rates. Since Medicare is such a huge and inflexible purchaser of physician services, no private insurer can deviate too far from its price pegs for physician labor. And because physician behavior is a powerful driver of all medical spending, the RUC exerts insidious power over all aspects of the U.S. health care system. Google “RUC” or “RVU Update Committee” and prepare to be horrified.
    This is where Matt is completely right: Porter and his companions at HBS have ignored two essential facts in their writings.
    1. With few exceptions, the prices of medical services are determined by an administrative schedule, not a free market.
    2. Any example of an enterprise that “thrives” in the current FFS-driven incentive environment is a mirage. It’s totally dependent on the corrupt, politically-determined price schedule set by the RUC (and rubber-stamped by CMS).
    That said, I’m all for defining value as patient outcomes per unit cost. But this is hardly a new idea. It’s simply a restatement of the true economic definition of efficiency (utility divided by cost).

14. Dr. Motew,
    I think Porter would agree with you and in fact argue that this is where government could help by mandating both outcome reporting and more price transparency. There would be plenty of info aggregators chomping at the bit to provide consumer friendly explanations of value analyses if the data were available. In every case where outcomes were measured (as far as I have found) and shared, quality improved and cost decreased…it’s hard not to buy some of Porter’s argument.
    On a separate note, while I agree that incentives are absolutely key to driving change, I don’t think that concentrating power in a single government entity is the answer either especially when that entity is so often influenced by which party is in power. By mandating public outcome reporting, insurers would already be incentivized to move volume to better providers because it would come presumably at lower costs. Of course, I believe for profit insurers would try to pocket that gain (as would the providers themselves) but that should be solved with competition for patients/customers.

15. bev MD, thank you, points well taken. Nonetheless even relating my comments more directly to Porter’s definition of patient-centric value, the impact of the patient’s role in defining this value must be accounted for somewhere in the system. The integrated organizations or hospitals or insurers can assume the responsibility for involving the patients or pass it down the chain, but I still contend that at the end of the line unless the patient is brought more directly into the model, then this critical variable will limit its applicability and success.

16. And ps, I ENTIRELY agree that the patient must be brought closer to the $$$. Virtually every doctor commenting on this subject over time makes this point from experience, but our politicians don’t seem to want to touch it with a ten foot pole.

17. Dr. Motew;
    In the context of Porter’s book and concept, as we are discussing here, “value” is specifically defined as patient outcome per dollar spent. Your other definitions of value do not apply to Porter’s concept. In my opinion, that is the beauty of his central tenet – that “value” is defined as patient-centric. Therefore, if the hospital wants to achieve “value” as it wants to define it (e.g. profitability), it must achieve good patient outcomes at low cost in order to successfully compete for patients.
    As to whom is responsible, once again I refer commenters directly to the book, which defines formal integrated organizations of care providers for given medical conditions (such as heart care) as jointly responsible for providing the value which will gain them the business.
    Granted, this is easier in theory than implementation, but it’s food for thought.

18. The concept of a value-based construct for health care falls short in determining who is responsible or bears the benefit from a ‘valuable’ service. The idea of value is different for each player in the game; the insurers defining value based on end-of-day profitability and growth, physicians basing this on practice patient care/outcomes and sustainability, employers defining value as it relates to employee satisfaction and bottom-line dollars, and most consumers currently mainly left out of the loop.
    There are little if any comparisons akin to health care whereby the the ultimate ‘goal’ of wellness is tied to the end consumer, yet they have little or no direct ‘financial’ incentive to understand or achieve this.
    When shopping for an automobile, the consumer has a strong vested interest in finding value to achieve the goal of obtaining a means of transportation, and therefore takes into account cost, reliability, reputation, function and longevity. Where does this interaction sit within the health care realm…rarely with the patient. We have coddled the masses into accepting top-notch ‘paid-for’ health care as a right without responsibility. Therefore I strongly agree that until some responsibility falls to the end-consumer (ie the patient) in some form, then looking for value will fall short of an effective reform strategy. This is a hard concept to sell with difficult choices…

19. Employers are involved in decisions they shouldn’t be becuase consumers dumped their responsibility on them. If employers could buy insurance for their employees instead of arranging for their healthcare this wouldn’t be an issue. In the 70s and 80s insurance was reimbursement. You went to the doctor had what ever done then sent your bill to the insurance company to get reimbursed. Insurance had no say what went on in the doctors office. At that time people were paying 30-50% of their own cost. Then consumer demand changed and they wanted insurance to pay 100% of the bill and the employer to pay the premium. If consumers hadn’t demanded employers move from offering insurance to providing for their health we wouldn’t be in this position.
    It is the responsibility of consumers to once again assume responsibility for our health and not expect our employers and insurance companies to do it for us. Once we do that then employers can once again offer insurance to help us through those unexpected times, things will work as they are suppose to and we can all live happily and healthly ever after.

20. Nate,
    I’m not saying employers have no role to play, I’m just saying that their interest and incentives don’t always with the individuals needing care. People need to be closer to their health care choices (as in they should be choosing their plans rather than receiving a plan their employer chooses). See Deron S.s comments. We need patients to be tied to the money and the choices to get the economics of health care fixed. Employers can get get in the way of that.
    I agree with you that health care consumption is a big part of the problem. It has been shown time and again that people will consume what they have access to. Again, patients must be more closely tied to the money spent and the choices available.
    This would then give an incentive for staying healthy.

21. Value involves the dimensions of cost and quality. Both must be measured on a per condition basis. Cigna is already giving my docs reports on cost per condition. There’s still work to be done on the quality front, but I think we need to better define “outcome”, particularly in the outpatient realm.
    Patients must be the ultimate consumer of healthcare, because they are (or should be) the center of the healthcare universe. They must have money at stake, or they will not be good consumers. The CDHC concept is solid, but only if value is easier to measure.
    Patients must also be a consumer of health coverage. Quality and cost data on health plans must also be readily available. It can’t be hidden beneath a mound of paperwork and underwriting.
    The doctor ordering the tests is like a general contractor subbing the electrical work out to an electrician. If the ordering physician wants to maintain good value scores, he must associate with good labs, imaging facilities, etc.
    Employers should not be consumers of healthcare or health coverage. They can give employees the money to spend, but they need to get out of the business of choosing health plans.

22. rbar;
    Porter’s definition of value is patient outcome per dollar spent. He defines episodes of care more broadly than just one hospital admission, but outcome for a given disease process, such as diabetes or chronic renal failure, etc. He believes that formal groups of integrated experts in a field of care, including docs, ancillary staff, hospitals, etc., should compete to provide the best value for a given disease process.
    I recommend you read his book, as it’s hard to explain his theories in one sound bite. (Matthew is only concentrating on one aspect of his concept.) Although it’s pretty dense and I don’t agree with everything he’s written, it opens one’s mind to a different way of perceiving the way care is (or should be) delivered.

23. “Providers must compete for patients based on value. Why is that so hard for people to understand?
    Deron, please define value and tell us how to measure it in order to allow value comparisons. On that occasion, define who the consumer in health care is as soon as there is a third party payor – is the patient consumer of healthcare services, or his insurance/third party payor, or maybe the payors of the respective insurance (i.e. the employer or the privately insured individuals)? Or is the doctor a consumer of the tests he initiates in order to serve his client/patient?

24. Leonard are you saying 350 Million individual policies are more efficient then 1 million employer policies and 30 million individual? If you have some ideas on how to more efficiently distribute insurance outside the employer market please share. Employers are the same system the government uses to collect taxes, collect child support, and perform other functions unrelated to the act of employing someone, could that possibly be because it is more efficient then any alternative imagined to date?
    There is no insurance problem, insurance premium is a direct relation to healthcare consumption, solve the later the first will follow.
    MH why do we pay taxes so Washington can turn around and give us money back to pay for what they are taxing? Occam’s Razor would imply don’t tax it in the first place. I know the left hates this concept as it greatly reduces the money they have to play with and corrupt but can you cite one real legitimate reason why they should tax health insurance then turn around and pay for it? It’s inefficient for all reasons but power.
    Large pools are half the problem, when you have one carrier with 60% of the market bad things happen. See MA. 5-10 medium size pools and a market open to small players is ideal. When you eliminate competition and entry you eliminate any reason to be efficient and innovative. If your worried about the math of small and medium pools re-insurance is a cost effective and efficient market.
    5. What incentives do you give low income people to stay healthy and not waste Uncle Sam’s money? Has Medicaid taught us nothing? Give people stuff for free they treat it like it is free. UAW healthcare expenditures are another example.
    1. What if we left insurance companies to insuring risk and made people responsible for their health? Insurance is a terrible mechanism for social change, it’s a game of math not an inspirational life lesson.

25. Matthew – The six things you mentioned are the steps he recommended to get to universal coverage. The meat of his argument comes a few paragraphs later, and he hasn’t strayed much from his main premise: providers must compete for patients based on value. Why is that so hard for people to understand? Why does it work well in essentially every other industry, but in healthcare we get arguments like “Uh, healthcare is different.” Healthcare is different because we’re making it different, not because it is truly exempt from the laws of supply and demand. We can put the competitive forces to work if we make shopping based on value a reality. The naysayers on that point are lazy and are setting their bar too low for what can truly be accomplished with system redesign.

26. So which is more powerful reward or motivation?
    Under the same incentive structure, signifcantly more efficient care is being delivered by Mayo, Marshfield, Geisinger, Intermountain, GroupHealth, Kaiser, etc… Why? Who was incenting them to get there? The explanation has very little do with with incentives. Why do we assume the answer to why others have not followed their lead is on an entirely different axis.
    It is true we should align incentives with the kinds of practices that are proven to be more efficient. We can all agree on that. It is pointless to penalize those who are doing it right. But incentives do not guarantee you will get to your outcomes.
    Put another way, under the same market conditions, Toyota and GM choose quite different paths toward making cars. Does anyone really think higher CAFE standards are what was holding GM back? they just needed stronger regulatory incentives?

27. The “Cost Conundrum” article by Dr.Atul Gawande in the New Yorker is a welcome change from the normal dimensions of this debate which seems to focus on who pays, market incentives and the like. His POV is that one of the main drivers of cost increases is due to doctors increasingly thinking of their practices as businesses.
    http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande

28. Porter (Saul) on the road to Damascus? Or perhaps if we all live long enough and don’t go bankrupt because of a health event we can all admit to learning something and occasionally changing our opinions.

29. After some serious review, I think we need to persue a similar system in comparision to the Swiss. A requirement that all US citizens have private health care, with a minimum standard and substities, especially for the poor. MCOs are doing a fantastic job managing health, especially in comparision to systems such as Canada or the UK. (Don’t look at WHO macro level stats, look at micro level work and demographic comparisons – which there is significant work to do)

30. In previous comment, I misstated: meant to say is that problem is thought to be health insurance when it’s a HEALTH problem. I need more coffee.

31. Wow – incentives! What a novel idea 😉 Seriously, tho, without the consumer, i.e., well, US, taking point on discovering the central incentive of managing our health and thereby saving $$, little progress will be made. What’s cast as a health problem is actually, IMO, a health insurance problem. Insurance doesn’t equal health. Good op-ed here that outlines what I mean:
    http://bit.ly/Zob58

32. Funny, just today I re-read the chapter in Porter’s book on the creation and destruction of value in health care. While he might not have reform right (I like Zeke Emanuel and Vic Fuch’s approach best, personally), I did like the points they made about challenging the provider community to try integration again, this time with heart, and feeling, with a core emphasis on organizations designed around active learning. Admitted, that won’t happen without incentives, but, even then, they will go kicking and screaming…
    So much of what providers do is simple reactionary survival. That just rings of hollow leadership, which disappoints me more than delusional pundits, academicians and gurus.
    Tort reform does nothing about the biggest driver of costs in our health care system – chronic disease – it’s just a shiny distraction. On principle, it should be addressed eventually, but it can’t crack the top 5 of things to do, IMO.

33. No tort reform? No healthcare reform.

34. It is amazing how often intelligent, knowledgeable people talk about HC reform without talking about incentives. kin to talking about symptoms without understanding the root cause.
    Even more amazing that intelligent, knowledgeable people believe employers are the answer.