OP-ED

The Road from McAllen to El Paso

Head Shot Dr. Harold S LuftDr. Atul Gawande has provided a chilling description of the problems facing true health reform in his  recent New Yorker article.  In  The Cost Conundrum he describes how medical care is provided in McAllen, Texas, which is second only to Miami as the most expensive healthcare market in the country. McAllen’s per capita expenditures are twice those in El Paso, Texas, a city with similar demographics.

There are no good reasons for the differences. McAllen’s population isn’t demonstrably sicker and the care isn’t measurably better.  There is also little understanding among the participants about what causes the higher spending. What is chilling is how easy the medical care environment in El Paso could become like McAllen’s.

Gawande refers to the accountable care organization (ACO) concept proposed by Elliott Fisher and colleagues at Dartmouth University. They propose that physicians whose practices are focused around a specific hospital be given incentives to lower the overall costs of patient care.

Payer Costs are Provider Revenues

The ACO has merit as a goal, but the challenge is in forming them.  Getting very intelligent people such as physicians and hospital administrators to change their behaviors, especially if such changes may reduce their income, will be difficult. We need ways to encourage voluntary participation of both physicians providing care in the hospital and those who decide who should be hospitalized.

The Dartmouth data show that in areas like McAllen, there is much more interventional work, such as tests, procedures and admissions, than in areas like El Paso.  With more access to, and time with, primary care physicians there is less need for interventional work.  This means redistributing resources from the interventionists to primary care clinicians.

It is hard to imagine a new ACO with interventionists and primary care physicians achieving this redistribution.  The interventionists often wield scalpels and have a ready ally in the hospital that depends on them to keep beds filled.The Answer Lies in Separation, Not Amalgamation

Interventionists should partner with the facility in which they do most of their work. Elsewhere, I describe these new care delivery teams (CDTs) that are effectively the inpatient side of Fisher’s ACOs.  CDTs would be voluntary associations of a facility (usually a hospital) and those physicians whose work depends on the facility.

Unlike Fisher’s ACO, the CDT specifically excludes office-based physicians responsible for the ongoing treatment of patients.  The CDT also need not include all eligible physicians at the hospital, just the voluntary paticpants.

The CDT may be a single entity with physician employees or a loose collaboration of independent physicians and a facility, collectively deciding its own governance rules.  The key is that the CDT takes responsibility for an episode of care at a fixed price.  Physicians might be compensated by salary, fee-for-time, or fee-for-service and may share in the gains or losses of the CDT.

CDTs will focus on how to provide inpatient care more efficiently and at higher quality.  (Quality measurement is critical in any reform; see my overall proposal. Savings will be achieved not through lower net provider income, but through better management and clinical decisions.  For example, instead of routinely repeating imaging, radiologists may review well-done MRI and CAT scans done elsewhere.  Orthopedists can agree on the necessary implants, allowing the hospital to strike better deals with suppliers.  Nurses may be empowered to implement routine procedures reducing infection rates.  Lowering Interventional Costs and Rewarding High Quality Care

CDTs by themselves will not solve the key problem identified by Gawande — the overuse of interventional services.  To address that problem, we need to redirect patients toward those physicians who provide high quality care at lower overall cost.  This can be achieved by combining (1) a mechanism shifting resources from interventional care to effective outpatient management with (2) a way to identify those physicians who provide such effective care.

A  comprehensive realignment of the payment system can accomplish this, but in the interim, a  voluntary major risk pool (MRP) can move us in the right direction.  The MRP covers hospitalizations and chronic illness.  This coverage for insurers eliminates costly underwriting.  The MRP, however, is not simply reimbursing plans for expenses incurred; it directly offers attractive bundled payments to CDTs.  These episode-based payments allow CDTs to do what they do best—high intensity acute care—and reap increased income.   Higher provider incomes within CDTs are not inconsistent with lower costs to the MRP as the CDT reduces the resources needed from suppliers outside the CDT.

The MRP obtains electronic copies of claims from the insurers who are its clients and from Medicare, more information than the Dartmouth group has.  After linking all the data and substituting coded identifiers, the MRP will make available the data under arrangements ensuring patient confidentiality.

The Power of the Electronic Matchmaker

Insurers and others accessing the MRP data will see there are local providers with efficient practice patterns, but not their names.  An intermediary trusted by physicians will serve as an electronic “matchmaker,” transmitting messages from insurers seeking efficient physicians.   By remaining anonymous until a “deal is struck,” efficient physicians will negotiate better remuneration—probably not just higher fees, but payment for ongoing patient management, telephone and e-mail consultations, and other innovations.  Some physicians may band together, perhaps by sharing electronic medical records, forming real or virtual group practices—the outpatient component of the ACO.

The major risk pool is the mechanism reallocating dollars.  More effective chronic illness management will lower admission rates and the MRP will transfer more dollars to those health plans directing more patients to efficient ambulatory care providers.  To find those providers, health plans will negotiate better payment arrangements.  To steer patients towards those providers, plans will provide new incentives and sources of information.  We can create what Fisher and Gawande have in mind, as long as we think about how to manage the transition.

McAllen and El Paso are almost 800 miles apart—a long day’s drive.  To move away from the expensive McAllen model of care, we need not just a destination but a plan how to get there.  The self-interest of the players is currently driving us in the wrong direction. By harnessing that self-interest with realigned incentives we can reform the system.  Without taking account of the incentives, we will never get to where we need to go.

Harold S. Luft is Professor Emeritus in health policy at University of California, San Francisco, and author of Total Cure:  The Antidote to the Health Care Crisis (Harvard University Press, 2008).  More information is available at  www.haroldluft.com.

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trader chat roomgo kartsDeron S.Tom LeithPeter Recent comment authors
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Just when I thought I had read everything on this topic you had to come along and make me think. Thank you for doing that.

go karts
Guest

You actually make it appear really easy along with your presentation but I find this topic to be really one thing which I believe I’d by no means understand. It seems too complex and extremely extensive for me. I’m having a look ahead to your subsequent put up, I will attempt to get the hold of it!

Nate
Guest
Nate

the US government is greed. Politicians are more power and money hungry then your average CEO. Bastards in washington would destroy a nation if it benefited them

Deron S.
Guest

It’s all about reallocating RVUs from procedures to cognitive services. If the RVU value for E&M codes is increased at the expense of overutilized procedures, there will be a natural shift in utilization that will allow family docs to spend more time with patients and solve many more problems without handing patients off to another specialist or testing facility. It will be budget neutral. It will also entice more med students to enter primary care. It’s a shame that money talks, Peter. I don’t like it any more than you do, but it’s pervasive throughout society. If you want to… Read more »

Peter
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Peter

Deron, I’ve never heard docs talk about how to cut their pay through the RVU system, instead they propose expanding RVUs to include the touchy-feely part of their practice now not reimbursed. Would your agreement of R Watkins comment include his suggestion of simply cutting RVU reimbursment? Is that where you get the $1.499 trillion?

Deron S.
Guest

R Watkins – Thank you for your concise, no nonsense comment. You are absolutely correct that the RVU system is a big part of the problem. The best part of that: it would cost $1.499 trillion less to address that than what Washington is offering up.
Peter – You read an article all the way through?? You could knock me over with a feather right now!

Nate
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Nate

“but there is no reason in the world why the states can’t or shouldn’t be the locus of policy and control.”
Since Tom put it on the table this is how Medicare, Medicaid, education and regualtion in general needs to be done. Most importatnly is to stop sending the money to the federal government to take a cut of it and send back to the states. This breeds corruption and waste. All funding should be raised by the states and kept in the states.

Tom Leith
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Tom Leith

Nate asks: > We are mostly smart people here is anyone > really fooled by the new names? Gee, I hope not. And Nate’s absolutely right — all this is simply the HMO by another name. It seems to me that re-legalizing the HMO (repeal AWP laws and reform CPOM laws to start with) and implementing a variant of “Medicare Advantage for All” is a stepwise thing that doesn’t require a new vocabulary or a new organizational form. I’d be especially pleased to see “Alabama Medicare Advantage”, “Alaska Medicare Advantage”, “Arizona Medicare Advantage”, “Arkansas Medicare Advantage” … “Wyoming Medicare Advantage”.… Read more »

Peter
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Peter

Thanks for this important post Harold, I read “The Cost Conundrum” right through. What we see is the real cause of high medical care in America – greed and corruption, while using lies to divert blame to the government and legal system. Wall Street has played the same game and the health system’s outcome will be the same as the financial system’s – with innocents taking most of the hit.

EMF
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EMF

CDTs will only serve to further fragment a fragmented health care system. The cynical comment of the McAllen primary care physician in the Gawande article who stated, “of course she would be cathed,” would be amplified. CDTs would break down the communication between primary care and interventionists. The real answer is the Geisinger model where there is a vertically integrated system that creates transparency and has outcomes that are driven by all members of the clinical team. ACOs are realistic in those settings. The challenge is to adapt the Geisinger model in research focused medical centers that are funded and… Read more »

Mike Muldoon
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Mike Muldoon

One of the potiential reasons for such tremendous practice and cost variance as so eloquently outlined by Dr Gawande is quality of the physician pool. McAllen is much more likely to draw an entrepreneurial MD over an erudite one. Not a big recruiting ground for future Mayo Consultants I suspect. Additionally, testing is a lot more appealing when you are overwhelmed by patient volume and even more so when there is an element of self referral to laboratory and imaging services. These Comparisons are interesting but not all that enlightening. The key to successful overhaul of medicine will not be… Read more »

Nate
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Nate

it’s like I died and went back to 1970. If you really want another go around of HMOs why can’t we save on the printing and just call them HMOs, PHOs, and IPOs again? We are mostly smart people here is anyone really fooled by the new names? “With more access to, and time with, primary care physicians there is less need for interventional work. This means redistributing resources from the interventionists to primary care clinicians. ” Add scraping BRBVS to that and you are right back to capitation and PCPs. CDTs are the PHOs and IPOs of 15 years… Read more »

Abby
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Abby

Thank you so much for this post. I haven’t yet read your book, but I plan to.
Can you tell me how your proposal deals with mental health, specifically for people with chronic problems, i.e. someone with bipolar disorder? Psychiatrists work in both inpatient and outpatient settings. Would it be the psychiatrists or the primary care doctor who was incentivized with an extra chronic care payment from the universal pool to keep the person out of the hospital?

Barry Carol
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Barry Carol

The thing that struck me about Atul Gawande’s article is how much room there is for medical costs to rise significantly from here if more providers in more geographic regions adopted the practice patterns prevalent in McAllen, TX. The history of CMS’ attempts to control costs by squeezing provider payments is that utilization grows instead. Yet, the theory behind the proposal for a robust public insurance option that would pay Medicare rates or, at best, 10% above Medicare, is that we can save a lot of money by squeezing provider payments relative to what they currently collect from private insurers.… Read more »

Donald E. L. Johnson
Guest

Universal has a hospital and other health facilities in McAllen, but not in El Paso.
http://www.uhsinc.com/hospitals.php?location=tx