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Musings on Payment Reform

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Charlie Baker is the president and CEO of Harvard Pilgrim, a nonprofit health plan that covers more than 1 million New Englanders. Charlie is a regular contributor to THCB, where he has authored posts on national health reform (See: “Is Massachussetts a Model for National Reform?”  and related issues facing the healthcare sector. (For example: “Shifting Costs From Public To Private Payers“). His posts also appear at his own blog, Let’s Talk Health Care.

This week Charlie confirmed a longstanding rumor, announcing that he will be giving up his position at Harvard Pilgrim at the end of July to run as a GOP candidate for governor of Massachusetts. You’ll find more about his campaign on his web site, CharlieForMA.com.

The Commonwealth of Massachusetts – along with a number of other states (including New Hampshire and Maine) and the federal government – is kicking around a number of ideas concerning payment reform.  The argument goes something like this – since the current health care system, led by the gigantic Medicare program, pays primarily on a fee for service basis.  This “do something” payment model encourages clinicians and hospitals to do “more” for patients than they might do otherwise, if they weren’t encouraged to “do something” to get paid.  Add to that the fact that fee for service – again led by Medicare – pays more for new technology than it does for existing technology, and less for primary care, and you have the primary ingredients in the recipe that’s driven our system to be technologically driven, volume driven, fragmented and very expensive.

In Massachusetts, the group that’s working on payment reform seems to think the solution to this problem is to move everyone away from fee for service and into something that’s being called, “global budgets.”  Put simply, global budgets are a new and improved form of capitation.  Let me be clear on this one – I’m actually a big fan of both.  I believed in capitation when I worked in state government, and I worked for a medical practice (Harvard Vanguard Medical Associates) before I came to Harvard Pilgrim that was built on global budgets.

And before I go any further, I would offer up the cover story in this month’s issue of Health Leaders Magazine – titled “Bundling By Decree” as a solid a representation of the pros and cons of this debate as it winds its way through the national discussion around health care and payment reform.  This article is primarily about bundling payments around episodes of care, but the issues it raises – in both directions – apply in either context.

With that said, I wonder about whether or not global budgets, at least in the short term, are the answer to our health care cost and quality problems.  For some provider organizations, global budgets work – but they work in large part because those particular clinicians believe in them, and want to practice in environments that are based on them (like Harvard Vanguard/Atrius HealthCare).  But that represents a fairly small slice of the practicing clinician community – I’m guessing 10-15 percent.  Maybe 20.  It’s also not clear to me that this issue, above all else, drives our cost/quality problem, since many other countries that spend a lot less than we do on health care and have solid clinical results use fee for service payment systems too.

As far as I can tell, those other countries that spend less than us on health care do two things differently than we do.  First, they spend less on each service than we do – sometimes a lot less.  They also have robust primary care systems.  This, in particular, is just the opposite of our approach.  Our payment policies – and as a result, our medical education system – have been disinvesting in primary care for years.

In the short term, I’m not sure global budgets solve this disinvestment problem.  First of all, it’s financial and operational whiplash for a system that’s been running on fee for service for years.  That, all by itself, will take some getting used to.  It’s also not clear that Medicare or Medicaid – which make up 50-60 of the payments to providers to begin with – would also adopt global budgets.  If they don’t, having private sector payors using global budgets and the public sector payors using fee for service is just about  the worst outcome I can think of for providers and their patients.  The mixed messages these two payment models would send about what matters and what’s important would be virtually undecipherable.

This makes me wonder if our short term approach shouldn’t focus instead on changing the message all payors send under the current fee for service system to providers by improving the way we pay for primary care.  No one thinks we can possibly deliver integrated, coordinated care if we don’t send some signals to the medical and medical education community that primary care matters.  If a young medical student can make $250 an hour in primary care – or $1,000 an hour in dermatology – or $2-3,000 an hour in cardiology or orthopedics – how hard do you think it is to get that person into primary care?  The answer is it’s wicked hard – and the declining number of students going into primary care coming out medical school for the past decade is proof positive of that.  We used to be 50/50 primary care / specialty care.  Now we’re 70/30, and some of the anecdotal information suggests that kids coming out of U.S. medical schools are now running 15/85 primary care/specialty care.

Think about it.  No one disputes the fact that primary care has a key role to play in care management and care coordination – especially as the Baby Boomers get older.  The state’s Payment Reform Commission says global budgets will take three to five years to implement – and expects that every doctor will be using an EMR as one of its requirments for success.  Will this approach really grab today’s medical students and practicing clinicians and say – ”HEY!  It’s time to invest in primary care!”  In the short term, I think we’re more likely to get more capacity, faster, into primary care by boosting, on a relative basis, the fees paid to primary care providers by the private plans, Medicare and Medicaid.

Over time, maybe everybody gets to global budgets, but in the meantime, I think we need to do more to support primary care.

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mombocitaPeter NesbittR WatkinsHealthcare Gurudocanon Recent comment authors
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mombocita
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mombocita

Dear Friends: As an RN for over 20 years; clinical, administration, and business, I assure you. Our healthcare SYSTEM is broken!!! It is a convoluted administrative nightmare. Doctor shortage??? Why would somebody study for 8-12 years, go into staggering debt, only to have an insurance company tell them they cannot prescribe the medication that the patient needs…until the patient tries a cheaper medicine first. Nurse shortage?? Being at the bedside can be the most exhausting yet exhilarating experience imaginable. Nurses are held to the highest standards of education, practice and performance. There is a high burn out rate not only… Read more »

Margalit Gur-Arie
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Yes, Peter, I do understand the political realities.
I thought I voted for that braver person. I don’t know anymore….

MD as HELL
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MD as HELL

“I envision that in the 21st century single payer system, the patients would pay nothing for care.” Let’s make food free also, with no rationing. All you can eat. Would that be god or bad? Would human nature take over or would there be less food eaten than when people had to provide their own food? There might be less consumed since the lines would be few and the wait forever. But then there would be food riots. People would stop growing food since they could just go pick it up. Of course the profit in producing food would be… Read more »

Peter Nesbitt
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Margalit,
You are right, of course, but please consider the political realities. I have suggested a system the may be able to significantly lower medical losses while assuring appropriate patient care. In my experience it will do so. Trying to also take on the political and lobbying establishment will take a braver person than I.

bev M.D.
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bev M.D.

As the Happy Hospitalist blog likes to point out:
“FREE = MORE”

Margalit Gur-Arie
Guest

Peter & Peter,
I think “single payer” is a misnomer in this context. The care management system that Peter Nesbitt describes doesn’t actually pay for the care. It manages the transfer of funds between the multiple payers and the contracted providers. It’s really an intermediary that aims at injecting quality and removing animosity to/from the system.
My preference would be to regulate the system from above, instead of mediating a broken system.

Peter
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Peter

“The only change would be to move care management and claims payment to the single payer.”
Having experience with the Canadian single-pay system care management is NOT with the single-payer (government), it is with the doctors and hospital boards and CEOs who all work together to stay on budget and provide healthcare to the community. Primary care docs simply bill the province for patient treatment. No layers of insurance companies or management agencies. Care co-ordination between disciplines is an on-going issue from a cross communication point, but probably no worse than here.

MD as HELL
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MD as HELL

If the patient pays nothing for care, they will all be getting care and not working. Right now my ED is full of people who would not be here in the ED at all if they were paying the bill. And they do not need to be here. They need to get lives. Make care free and you will have a clusterf**k.

Peter Nesbitt
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Margalit, As usual your questions test my concepts. We contracted with physicians across the U.S. From Michigan to Florida, New York to LA. We never had a national fee schedule. We recognized that physicians in various parts of the country had different existing fee schedules. We tried to ensure that all providers were paid fairly for their services Fees were not the cost drivers, utilization was. The insurer’s role would be the same in a single payer system as it is currently I suspect. The only change would be to move care management and claims payment to the single payer.… Read more »

Margalit Gur-Arie
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But Peter (Nesbitt), if the single payer contracts with all providers in the country, that implies one national fee schedule for everything. If the single payer manages all medical care standards and claims, what exactly is the role of the private insurers?
In your experience, when you provided this single payer service, and realized all these savings, where did the savings go? Did they go to the insurers as profit, or back to the patients as rebates on the premiums?

Peter Nesbitt
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Barry and Peter, Barry, thank you for the questions. They are helpful in forcing me to think through my single payer ideas. In the single payer model all care providers would be invited to join the network. They must voluntarily agree to follow the basic guidelines and would be paid fee for service the same as any other practitioner. Logically, in a single payer model there are no competing medical networks. All patients throughout the U.S. would be managed by the single payer. Frankly, I haven’t thought through the implications of competing “single” payer systems such as Medicare. I have… Read more »

R Watkins
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R Watkins

“I think we need to do more to support primary care.”
So, is Harvard Pilgram paying primary care docs at a significantly higher rate than other plans? If not, why not?

Healthcare Guru
Guest

Because we have made the system so complex, the solutions have to be manifold. Solution to healthcare crisis is not complex….as we have said that make PCPs as health managers, and run wellness center. Leave specialist care to private industry. There are a lot of other things that need to be done but this one is crux. We wrote a white paper on how to reduce cost by proactivvely reducing the number of investigations that are going on against physicians. When I started thinking of the business case, it is mind boggling how much money insurance companies and hospitals end… Read more »

Peter
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Peter

Peter Nesbitt, on your web site you stated that the insurance company paid your agency and the agency then paid all medical expenses. Did the insurer pay you a flat fee and then was the agency responsible to pay all medical bills? Did you only manage care for workplace injuries but not other medical claims? You also said that there were no patient law suits, but your agency was providing care for injured workers, how did Workmans Comp play into this. Usually when a worker signs onto Workmans Comp they give up any right to sue. How do you see… Read more »

docanon
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docanon

You know, I never, ever thought I’d consider voting for a Republican for governor. But damn, do you know your stuff on health care…which is important enough to look past other positions you’ll no doubt find yourself defending. Now that MA has made major progress in coverage, the focus must shift to delivery system reform. Your post anticipates this perfectly, and if you can make progress on just a few of these points, you will have done a great service. (I suppose it goes without saying that it would be wise to avoid the behavior of certain other governors. I’d… Read more »