Why the SGR Fix Won’t Work and Could Actually Make Things Worse

Partisan gridlock in Washington regarding health policy has been so pervasive and bitter that any bipartisan co-operation on any important health issue should be applauded by a frustrated public.

That is why the emerging bipartisan compromise regarding the fifteen-year long policy embarrassment known as the Sustainable Growth Rate (SGR) problem needs to be taken seriously.

Remarkably similar solutions — a new hybrid physician “value-based” payment methodology — have emerged from three of the four key committees in Congress, and seemingly the only stumbling block is finding the $115-120 billion to pay for it.

Moreover, key physician interest groups, including the American Medical Association, appear to have signed off on this approach.

This makes it all the more troubling that the approach taken is unsound health policy that will damage practicing physicians in diverse settings: private practice, medical school practice plans, and hospital employment.

This is because the proposed legislation casts in concrete an almost laughably complex and expensive clinical record-keeping regime, while preserving the very volume-enhancing features of fee-for-service payment that caused the SGR problem in the first place. The cure is actually worse, and potentially more expensive, that the disease we have now.

The SGR fix would basically freeze or severely limit future physician fee updates for Medicare Part B (a serious problem for primary care), while permitting physicians to earn modest “value-based” bonuses if they can document quality measure attainment, cost reductions, participation in alternative payment schemes, practice enhancement activities, or meaningful use of EHRs.

Physicians who meet all these standards could expect to supplement their existing Part B fee by about 4 percent in 2016, going to 10 percent in 2020, with the aggregate bonuses subtracted from the pool of total Part B physician payments to preserve budget neutrality.  Non-compliant physicians would see corresponding reductions in their updates.

There are sensible opt-outs for physicians who can report in groups, virtual or real, as well as for physicians who participate in as yet unspecified “advanced payment models” (APMs).

Slogans Over Evidence

Building on failed models. With this legislation, Congress is preparing yet again to enshrine in statute another payment strategy that is both unproven and highly controversial. A prototype of the controversial Medicare Shared Savings program was failing a CMS demonstration test — the Physician Group Practice demonstration — at the very time the ACA wrote it into law.

The SGR reform legislation is yet another triumph of slogans over evidence.  It builds upon a modified version of the current Physician Quality Reporting System (PQRS) system.  Critics have commented on the heavy reliance of the current PQRS and other federal value-based initiatives on process measures that are poor surrogates for actual patient risk reduction.

The Congressional plan actually ups the ante over the current PQRS and value-based modifier (VBM) programs by basing as much as 10 percent of an individual physician’s compensation on it. The legislation mandates that GAO evaluate the new Value Based Payment System in 2018, two years after it is implemented.  Is it too much to ask that we actually validate that a payment approach actually delivers claimed societal benefits before we enshrine it in legislation?

The value-based approach may work as a slogan (“fee for value’, etc.) but falls apart quickly when applied to individual physician practices. The pillar on which this approach rests — that we can meaningfully differentiate physician performance and quality at the individual physician level based upon claims data and self-reported clinical indicators — is not load bearing.

Usurping consumer and provider autonomy. For people who believe the purpose of transparency is to help consumers make better choices, an individually determined physician payment level is objectionable policy, because it relies upon a federally mandated variable unit payment to determine which physicians make more. Why should a paternal, all-knowing federal government decide that cardiologist A is worth more than cardiologist B?   Why shouldn’t consumers decide who earns more by using relevant criteria to select their own physicians, leaving increased physician income to come from increased patient panels, not a variable unit price?

But it’s the core modus operandi of “fee for value” — the idea that it is appropriate policy to use micro-incentives to manage physician behavior to foster quality improvement — that is most offensive. The emerging legislation imposes an elaborate, multivariate Skinnerian “operant conditioning schedule” on physicians. There’s a big difference between requiring, say, an airline’s pilots to USE a preflight checklist vs. giving them the federally approved checklist and paying them $10 a box for each box they check off, which is essentially what the SGR legislation does.

There also has been in the emerging regime of micro-accountability a heedlessness of the cost in professional time of providing all this “quality” information.  Talk to practicing physicians about how they spend their days, and they will tell you that they spend almost as much time coding and documentingtheir encounters with patients as they do actually practicing medicine.

We are actually helping creating a clinician shortage by commandeering scarce professional time, not merely that of physicians, but advanced practice nurses and the entire clinical support team, to comply with record keeping requirements.  As we’ve seen with the “meaningful use” incentives, the 10 percent upside for compliant physicians is probably going to be outweighed by the clinician time and support cost of compliance.  We need clinicians to do more caring and less typing.

A Better Approach

Measure quality at more aggregated levels. What is a viable alternative to the approach taken in the SGR legislation?   If you want to differentiate physician payment based on quality measurement, as Pronovost, Krumholz and Berenson suggested, do it at the level of larger aggregations of practices.  This should not be an “opt-out” but the core approach. Why not aggregate physician quality measures at the level of hospitals (which must privilege them), a group practice (which must decide to employ them) or an IPA (which must credential them to accept them as members)?

Gather and publish specialty-specific clinical outcomes (severity-adjusted mortality and complication rates, infection rates, etc.) for these diverse organizations, as well as financial information (case-mix adjusted cost) for key procedures and services, and pay all the specialists (including independent practitioners) in the highest performing collectivities at a higher rate.

Then give Medicare beneficiaries incentives in the form of forgiven deductibles or Part B premium rebates for selecting the highest value providers.  This will foster competition both to reduce avoidable errors and attract the highest performing specialists.

Clinical excellence is most reliably found in physician-directed enterprises large and small; that it is leadership, strong professional values, and an excellent supporting cast, that produces higher quality.

If we really want to improve healthcare in the US, we need more Johns Hopkins and Penn Medicines, more Geisinger and Virginia Mason Clinics, more Kaisers and Hill Physicians and Atrius Healths, more HealthCare Partners and CareMores and a lot more high-quality smaller physician groups.

Replace fee for service, don’t build on it. And if we’re really committed to getting rid of fee-for-service, then let’s actually get rid of it. The new advanced payment models being tested by the CMS Innovation Center layer complex shadow systems on top of the current fee-for-service system.  This approach creates yet more costs and record-keeping challenges, while preserving fee-for-service’s underlying volume-based incentives.

What is needed is to replace fee-based models with simpler and more consolidated payment schemes — medical homes paid for by a monthly subscription payment; bundled payments with a single, severity-adjusted lump sum, accountable care as a fixed capitation payment — shifting the burden of process and quality control to the accountable entity.

If we’re not sure new advanced payment schemes actually work, if we haven’t actually gotten them right, then we have no business compelling or incenting 680 thousand practicing physicians to use them. We’re not going to get clinical practice where we want it to go with an elaborate, individualized operant conditioning schedule with four domains and sixty eight “core measures”, and billions more spent on the IT systems and clerical support to document them.

We need to reward teamwork, not box-checking.

A Legislative Hippocratic Oath

Senators and Representatives, before you vote on an SGR fix that could actually make things worse, visit your own physicians in person and ask them three questions:

  1. How Much of Your Practice Week Do You Actually Spend Seeing Patients?
  2. What Are You Doing the Rest of the Time?
  3. Will You Please Show Me My Electronic Health Record?

Then, try to explain to them in English what you intend to vote for — how you want to pay them — and ask them what you should do.   Base your vote on that conversation. It isn’t just physicians that should be guided by Hippocrates’ maxim, “First Do No Harm,” but our policymakers as well.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends.

Goldsmith, Jeff. Primum Non Nocere: Congress’s Inadequate Medicare Physician Payment Fix, Health Affairs Blog, 24 January 2014. Copyright ©2014 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

57 replies »

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  3. Patient satisfaction = giving them narcotics and antibiotics on demand.

    How is that working out for us so far?

  4. “if physicians don’t do it, someone else will.”

    And that will make healthcare costs go up, not down because that “someone else” is going to extract their filthy lucre from the system without providing any true value to the system.

    There’s a famous graph out there showing the number of doctors vs the number of administrators in healthcare. Number of doctors are basically flat, number of administrators and so-called healthcare “experts” growing exponentially.

    How is that working out for us so far?

  5. “One of the many difficulties will be how to deal with physicians not amenable to education on costs and quality”

    I look forward to the local hospitals educating me on the economics of facility fees, $300 throat cultures, and fountains in the lobby.

  6. Thanks Retired MD and legacyflyer. That’s the best discussion of defensive medicine I’ve ever seen.

  7. I’d say he SGR formula failed because it is a bad idea that I suspect Congress never really wanted to implement — it was window dressing. So in a way it hasn’t “failed” — it was never expected to “succeed”. But it continues to pay dividends in political theater.

    RetiredMD I think has it right — I hope he and some other retired MDs (and still-working) can start the next revolution in American Medicine. Physician leadership is desperately needed. And as I say (over and over) if physicians don’t do it, someone else will.

    legacyflyer: have you seen cases where it was alleged that unnecessary tests were not done? 😉

  8. Here is my estimate of the % of imaging studies that are “unnecessary” = 50%. And I make my living interpreting them.

    1) Fear of malpractice:
    I have reviewed many malpractice cases over the course of the last 25 years. I have NEVER seen a case that alleges that an unnecessary test was done. I have seen many that allege a necessary test was NOT done.

    2) Treat em and Street ’em.
    It is much more time efficient to order all test that you might need up front. Seeing the patient, then ordering the test slows down turnaround time. Most ER docs are rated by the hospital on turnaround time. Enough said.

    3) Patient satisfaction:
    A) “Sir/Mam, you are a very special person and I am going to do everything possible to evaluate all the possibilities that could cause your complex symptom pattern – because you are so special and I care so much.”
    B) “You probably don’t have anything. Take some Tylenol, go home and follow up in a couple of days if you don’t feel better.”

  9. Here is a reference to a poll of physicians. http://www.jacksonhealthcare.com/media/8968/defensivemedicine_ebook_final.pdf. The numbers are 26-50% of health care dollars spent. A major area is the unnecessary quarterly follow up by specialists for stable conditions with unnecessary tests that the patient has been taught are necessary. Most of this could be handled by competent primary care physicians on a less aggressive schedule. It is not necessarily seen as defensive care, but if anything happens, even if cared for properly, the primary physician will be blamed. I think a lot of this started in the 1990’s with the advent of primary care physicians as gatekeepers, and the specialists responded with “if only you had been sent to me earlier.” It is part of a turf battle that the specialists have won.
    In the ER as many as 20% or more of the patients have a CT scan, many of which are unnecessary. Better coordination with the primary care physician for follow up could eliminate a lot of this.
    Patient education and malpractice reform could help.

  10. Has the SGR formula failed because congress refuses to enforce it or for some other reason or reasons?

  11. Retired MD,

    I’m interested in your estimate of how much of U.S. healthcare costs are attributable to defensive medicine. I recognize that the concept is impossible to quantify precisely because some decisions to order tests, refer to specialists, etc. may be partly money driven and partly an attempt to satisfy patients as well. Patient satisfaction often comes into play with imaging because it’s not invasive or painful and can rule out serious conditions even when it’s extremely unlikely that the condition is present. Besides, someone else is usually paying and it’s profitable business. I’ve seen estimates of the cost of defensive medicine that range from less than 2% to more than 15% of healthcare costs.

    In ER’s, the docs often don’t know the patient and have no immediate access to prior tests and procedures the patient may have had. The hospital also wants to generate revenue, at least under the fee for service payment model, and there is pressure to treat patients quickly and send them home if appropriate – treat ‘em and street ‘em.

  12. Whether you want to call organizations of the future ACO’s or not is not material. What you need are organizations with 2 basic silos for payment. One capitated payment goes to the hospital and the physician employees, and the other goes to the non employed physicians. The two groups will need to talk to each other to determine local criteria for quality, safety, cost, etc., since insurance companies and Medicare have different rules for different localities. One of the many difficulties will be how to deal with physicians not amenable to education on costs and quality. It will be difficult to remove them from a panel, just look at the issues in Connecticut now with United Healthcare.
    There should also be a national organization to more broadly define quality and safety, and it should be funded by the physicians and the hospitals, and can use funds from the government channeled through the capitated payments. There are already some organizations like the U.S. Preventive Services Task Force, and AHRQ (but make them non governmental) in existence, but unfortunately too many other groups are based on self interest who will want part of the say and pay. In the next few years you will have a number of academic and clinical physicians to get this started, and that would be all of the physicians who will retire soon. Many of them have had solo or small practices, and have had to deal with all of the changes in healthcare by themselves. They would be paid separately, and there should not be any conflict with practicing physicians who think they will take their jobs away. I know this is a stretch, but if one could start such an organization with sufficient infrastructure backing, and funds supplied by the physicians and hospitals, it might help. It would get the government and insurers out of the business of having to rate physicians from afar, and have local individuals who know the physicians deal with the ratings.
    There will always be outliers within the physician and patient populations and that could be a self pay fee for service for the patients that select that kind of care. The other pipe dream is a Medical Court for malpractice and other such issues to help reduce the costs of defensive medicine, which is higher than most non physicians understand, particularly in emergency rooms.
    Then, of course, there is the money issue.

  13. I really haven’t been paying attention to them lately but I have a long string of rejection letters from them, back to 2006 I think. One thing I do know they’re trying to do is act as a sort of angel investor and first customer to startup device makers. That’s interesting. But I don’t know about them and the ACO idea. MG here knows way more than I do.

  14. Barry – Don’t have a comprehensive corporate strategy regarding ACOs. They already formed a number of commerical and Medicare ACOs but it has varied considerably depending upon the market. Some of their IDNs such as Seton Healthcare Family in Austin have mutliple ACOs including ones with commerical payers (UHG) and an Medicare MSSP ACO.

    The numbers I have seen/run basically state the most aggressive organizations have multiple commerical ACOs (usually with a Blues plan and a national carrier such as Aetna, Cigna, and UHG) and a Medicare ACO (usually an MSSP). Unfortunately, there isn’t any reliable data available on what percentages of an organization’s revenues are ‘at-risk’ and how this will affect hospital cap-ex spending and net patient revenue.

  15. Tom,

    What is Ascension Health doing on the ACO front? They’re a huge hospital system with presumably significant resources and expertise at their disposal. No?

  16. I like the concept of doctors being paid on a salary + bonus / incentive basis. I also like the idea of doctors playing a key role in determining the metrics and the evaluation process that would drive their bonus compensation. However, if the healthcare system moves toward ACO’s that control the entire continuum of care, it seems that hospitals would be most likely to have the management infrastructure to carve up the bundled payment in a fair and acceptable way including to any non-hospital owned / controlled providers with whom it may have to contract for services that the ACO can’t provide in house. If the ACO is paid on a capitated basis, the incentives would shift to providing less care vs. more care under the fee for service model.

    The biggest challenge, I think, will be in defining healthcare quality in a way that’s acceptable to both doctors and patients. I think quality should encompass following evidence based guidelines and protocols (process), outcomes with appropriate risk adjustment, minimizing hospital acquired infections, preventable readmissions and the like (safety) and patient satisfaction. All four factors would have to be appropriately weighed.

    To the extent that doctors may be reluctant to spend the time to help develop appropriate metrics, perhaps their resistance could be overcome if the time needed to serve on the relevant committees were spent during the normal workday which means their expected patient load would be reduced from what it would otherwise be while their salary and potential bonus compensation would not be.

  17. > The doctors would need to be the ones determining the requirements
    > for incentive payments, and not have them imposed by others for this
    > system to work

    Certainly for it to work well. I have been for about a decade more or less begging docs to do this work — if they won’t then guys like me will do it, and not nearly so well as they would. Search THCB with my name and the word “Guild”. But no, it can’t be solved on a website.

    I live in St. Louis, and there is one big physician group (not owned by a hospital) that seems to be positioning itself to be an ACO. This is my own doc’s group — I hope they’re successful and manage to be a sort of model for other docs, especially for primary care. But I’m pessimistic about it…

    Thanks for your comments.

  18. There is a form of payment called direct payment that is like the old indemnity plan. In general the fees are lower, and they are clearly posted for the patient to see. It is catching on a little. Patients, however, are now used to their $20 or $30 copays, and have little understanding or desire to pay a deductible. Going back for most will not be possible. There also needs to be a degree of oversight of medical care, and the best way might be for all physicians to be salaried, and then to get bonuses based on quality, etc. However, these payments would be from the organization they belong to, and not the insurer. Sort of like an ACO with budgets. The physician needs to take more of a role in running these organizations, because the hospitals will keep as much as they can if they are in charge. The doctors would need to be the ones determining the requirements for incentive payments, and not have them imposed by others for this system to work, but few physicians are interested in taking the time and effort, since in most cases they do not get paid extra for these services. Can’t solve this on a website.

  19. Ah, very good, thanks RetiredMD. The doc I was working with had >90% Medicare beneficiaries (and a lot of dual-eligibles around 10% — I really do admire the guy’s commitment to the elderly poor) and he/we toyed (briefly) with this idea — that’s where I learned about it. It was a long time ago. Also looked at locating in an underserved county. He went with the guarantee fifteen miles closer to home.

    How `bout this: Amend the law to let a doc charge whatever he wants to. The government decides what level of insurance Medicare Beneficiaries get for whatever premium they pay. The doc can decide to TWIP if he likes but the patient has to pre-pay or the doc extends credit and the patient forwards the sum (as in the old days — the patient is insured, not the doc). If the doc thinks someone is trying to take advantage, he can always drop him.

    SGR problem solved or not?

    Are docs better off or worse off under an old-fashioned indemnity arrangement?

  20. Tom Leith almost got it right with nonparticipating vs non participating fees in Medicare. A good explanation can be found at http://www.aafp.org/practice-management/regulatory/medicare.html. Simply, you can opt in or out of Medicare. Then if you opt in, you can participate and accept assignment and get 80% of the Medicare fees from Medicare, and 20% from a secondary insurer or the patient. If you do not participate, your fee schedule is really 5% lower than for a participating physician, so the 115% you can charge is really only 9.25% higher than what the participating physician gets, not 15%. The physician must still file the claim, and the patient will get the money directly, but only at the 80% nonparticipating fee level from Medicare. The physician still can accept assignment if he is nonparticipating, but then he will only get the 80% Medicare part of the non participating fee, which is 5% less that what the participating physician would get, or 76% of the participating fee, but it comes to him directly. The physician then has to get the rest from the secondary insurer or the patient. This is helpful with patients with payment problems who might not be able to afford the bill. So much for doing a good deed. If the nonparticipating physician charges the limiting charge, which is 115% of the nonparticipating fee, and 109.25% of the participating fee, the physician risks getting nothing since the patient gets the money and may decide not to pay the bill, just like in the old days. This is just one of the reasons I am retired.

  21. That pretty much says it all, legacy. I say “if it didn’t happen, at least it’s documented that it did”. That’s the upshot of all this mess.

  22. P.S. I don’t belong to the AMA although they are always trying to get me to join.

  23. A little insight into PQRS –

    In my specialty, we had to do 3 of about 10 things to get our PQRS money. So we chose the 3 easiest to do.

    One was to make sure that we stated in the report how much fluoro time (= amount of radiation) was used. The other was to state in our interventional reports that we had cleaned off the skin in a particular way before each interventional procedure. Don’t remember what the 3rd thing was. So, not wanting to stop the march of medical progress we complied.

    PLEASE NOTE: WE DID NOT CHANGE ANYTHING THAT WE ACTUALLY DID. We were already using best practices in prepping for procedures and we try to use minimal fluoro time anyway. We just added another line or paragraph to the report to satisfy the government.

    Now some bureaucrat in DC can pat themselves on the back about all the progress being made in reducing radiation exposure and cutting procedure related infections

    To paraphrase what the Wizard (more or less)said to the Strawman

    Wizard: “I can’t give you a brain, but I can give you a diploma.”
    Feds: “We have no idea how to measure the quality of what you do but, we can make you document more things in order to get paid.”

    It is so rewarding to be documenting more things for the Feds – which make absolutely no difference to patients – that it makes it all worthwhile. 😉

  24. Ah yes — I have refreshed my memory. A physician who takes assignment from Medicare is called a Participating Physician. This (for now at least) is the normal mode.

    When he does not take assignment he is called a Non-Participating Physician. He can’t be Participating for this patient, and Non-Participating for that one: he’s got to pick — he “participates” or not. I think this carries across practices too — he can’t have two practices, one Participating and the other not. It works at the physician level. Same deal for opting-out entirely. And I think if he switches status, he can’t change back for three years.

    Non-Participating means “does not accept assignment”. Non-Participating Physicians may bill Medicare Beneficiaries up to 115% of the Medicare schedule. The Physician is required to send the claim on the patient’s behalf to Medicare, but the payment goes to the patient not the doc, and the patient pays the doc. But it is illegal for the doc to bill more than 115% of the Medicare schedule — that’s a government price cap if Medicare’s going to pay anything. I think it was Teddy Kennedy that pushed that through.

    Opt-Out means the physician must not file a Medicare claim for any patient, and if the patient (Medicare Eligible) files a claim it won’t be paid. It would probably be best for opt-out physicians to have in their contract with patients that they shall not file a claim with Medicare for any of his services (just in case). But he can bill whatever he wants.

    I’m not a lawyer — standard disclaimers. But I think this is how it works.

  25. Tom —

    I never knew about that option for Medicare patients to pay docs up to 115% of Medicare if the doctor doesn’t take assignment. Interesting.

  26. `sall true Barry.

    If I remember right, here in the USofA docs can charge Medicare patients as much as 115% of the schedule so long as they don’t take assignment. In other words, the patient either pays up front (or the doc extends them credit??), the patient files the claim, Medicare pays the patient 100% and the patient pays the doc 115%. But they’re limited to 115%. If I remember right. So when a patient likes the doc’s hours or waiting room better, or the way the doc explains things, he might pay the 15% and go through the hassle of getting the reimbursement. But patients really have no way to know what “technical quality” is. We need the Guild for that. Or payers. Somebody’s got to do it. Halfway knowledgeable patients would pay for that too.

  27. Tom –

    I agree about the need for quality transparency to go along with price transparency.

    George Halvorson, recently retired Kaiser CEO, makes the point in his new book, “Don’t let Health Care Bankrupt America: Strategies for Change,” that transparent prices also need to be relevant to the patient. Currently, any price for care above the deductible or out-of-pocket maximum amount is not relevant because the patient remains insulated from those costs. There is still a widespread perception among patients that more expensive care must be better care so lots of people would choose to go to the more expensive hospital even if they knew the prices in advance in the belief that the care is better even when it’s not. In most other areas of commerce like cars and houses (in the same zip code at least) that more expensive does mean better though not necessarily enough better to justify the full price difference.

    To get at this issue, Halvorson suggests some version of reference pricing that would allow providers to charge more than the government mandated fee schedule or the price an insurer agrees to pay but the patient would have to pay the difference between the reference price and the higher charge.

    He also noted that the French healthcare system has no deductibles but doctors are allowed to charge more than the official government fee schedule if they want to but they have to make the fee transparent and attempt to convince patients that the additional charge is, in some way, worth the extra money. The French also require patients to pay the bill up front and then get reimbursed for the government approved amount. They do it this way to maximize price awareness among patients. I’m not sure that last part is completely necessary as doctors would likely have to wait for financially constrained patients to get reimbursed before they got paid.

  28. I am not so sure that capitated HMOs “failed”. It was certainly true that lots of people didn’t like them.

    Your True Reform Template Template admirably calls for price transparency. But Price Transparency without Quality Transparency is a non-starter.

    I would dearly love for physicians to control medicine, but if docs can’t police each other, payers will do it. Take your pick. Here’s a comment of mine from back in 2010 on the same topic.


  29. Prepaid care (HMO’s) and buying care by the package instead of by the piece seems to work pretty well for providers like Kaiser, Health Partners and Group Health of Puget Sound. Buying care by the package also gives providers an incentive to re-engineer their care processes to take cost out, introduce care management approaches that aren’t reimbursable under the fee for service model like e-visits, phone consults, and more intensive follow-up care by nurses for patients with chronic conditions. To the extent that more intensive disease management can reduce hospital admissions and crisis events as well as improve hospital care to reduce the incidence of pressure ulcers and sepsis all help providers to take cost out of the system so they can make more money while providing as much needed care as is necessary and appropriate.

    The potential incentive to withhold needed care from sick people can be mitigated by transparent data that evaluates providers based on risk adjusted outcomes as well as how well they follow evidence based guidelines and protocols, improve patient safety and give patients a satisfying experience.

  30. Capitated HMO’s have been tried and have failed most of the time. They place the physician in moral and ethical jeopardy because the more tests you do, the more procedures your perform, the less money you take home. Withholding care may not be harmful when a patient is healthy, but obviously it can be disastrous vis a vis early diagnosis and treatment. The end result is selection for the healthiest patients and avoidance of the truly ill. Few of us physicians will voluntarily place ourselves in that position. The pilot ObamaCare ACAs were this model and about half of the hospitals backed out because they found they were financially non-viable. The galling thing about almost all of these discussions by non-medical politicians, insurance gurus, policy wonks, national organizations with conflict of interest monetary arrangements is that they speak of physicians as if we are enslaved to the payment rubric of the moment because we have hard won skills that people need in some of life’s most significant and critical moments. By increasing the distortions to the doctor-patient relationship and the practice of medicine as Medicare is doing, and with further implementation of ACA, the patients will be the real losers. 80% of the products offered on the ACA exchanges are HMO type products with limited access to specialty hospitals and physicians. A free pap smear and a well baby check may be great, but don’t get cancer or MS. Too long to go into here, but for a look at patient centered, physician guided, free market driven reform, go to AmericanDoctors4Truth.org. One thing will become very evident. For true transparency, for true reductions in cost, for true quality of care (not just EMR box checking for your cash reward), the Federal government has a very small role- the safety net for the truly indigent awarded to states in block grants.

  31. If you clean out the medical students and residents, AMA has about 90 thousand dues paying members. That’s about equal to the combined dues paying membership of the Texas and California Medical Societies. It’s not clear who the 90k dues paying members are, exactly, but that isn’t even 20% of the practicing physicians in the US.

    The above posting says, basically, AMA supports all the record keeping requirements of the three committee bills. AMA just don’t want them tying all that box checking to individual physician comp.

    Which is a terrible solution because practicing physicians bear all the costs of value-based purchasing/meaningful use, etc. and get their fees frozen. . . and maybe, somehow, get to make more money. It’s like ten years probation and tens of millions of hours community service a year (checking boxes).

    Congress ought to be embarrassed after ACA about their lack of understanding of the health system and . . . . there they go again.

  32. If the AMA is really working in the interest of physicians, why are less than 20% of practicing physicians members? And with so few members, where does all that money come from with which you lobby? Your reliance on your monopoly CPT income has clouded your vision so severely that you are becoming less and less relevant. You are not the voice of America’s physicians. Anything you supposedly do for physicians should be viewed with great skepticism.
    If you had let the SGR cuts go through years ago we wouldn’t be having this recurrent boondoggle. But you milk it year after year with your bandaid fixes. If only CMS would abandon the CPT code set…

  33. The failed sustainable growth rate (SGR) formula must be eliminated now and replaced with policies that promote both better quality and lower costs in Medicare. Bills approved by Senate and House committees to repeal the flawed SGR formula also include important financial and administrative proposals that represent short-term improvements over current law governing quality reporting and pay for performance programs, which include value-based payment methodologies.

    The AMA has repeatedly argued that the value-based modifier is a flawed concept that cannot be equitably applied across the board to all physicians. The AMA will continue efforts to repeal the value-based modifier initiative, while also seeking to move toward a positive incentive structure and eliminate the two-year lag time between quality assessments and payment adjustments.

    As the AMA President has previously noted, nothing is set in stone in the current legislative process. While the recent advance of bipartisan bills out of three congressional committees is a huge step in the right direction, much work remains. The AMA is working with lawmakers to move past the annual SGR crisis and toward a Medicare program that ensures access to high-quality and efficient health care for patients and a stable and professionally rewarding practice environment for physicians.

  34. Oh yes, I have these questions too, and recognize all these problems. But then you knew that. I don’t mean to say big regional centers of excellence and all that would not exist — I’d just prefer they were accountable to my PCP somehow. I think. I recognize the need for “big enough” (minimum efficient scale in econ speak) but I don’t think bigness should be a goal. And Ideally (I think) the big enough center would not be *THE* ACO responsible for the patient’s medical welfare and that there would be several of them for PCPs and other docs to refer to.

    I am told that these days even CABG surgeries can be competently done just about anywhere. As technologies develop and techniques are refined (and docs get disgusted with big centers and move to community hospitals), one would expect this.

  35. Tom,

    The question I have is how do you define a good result? I would like to see good outcomes at a reasonable cost. As compared to other countries, our biggest cost differential seems to be in the areas of hospital based care, brand name drugs and medical devices. Our doctors also earn more money than their counterparts in other countries but they didn’t have the benefit of medical education completely subsidized by taxpayers and the opportunity cost of what people can earn in other fields like finance, real estate and law is also higher in the U.S.

    For medical organizations to take on actuarial risk, they have to be big and to have sufficiently large reserves to handle a bad year when costs exceed their revenue. The capital costs associated with electronic medical records can also be quite large as I’m sure Kaiser can tell us. Small independent practices don’t fee’ capable of taking on that risk.

    If I look at it from a personal perspective as a patient seeking treatment, my biggest concern is access to big ticket care like organ transplants, sophisticated surgery and treatment for rare cancer. For that level of care, I want to think that I have access to a regional center of excellence and surgeons who have done a lot of procedures of the type that I need. For primary care, routine screenings like colonoscopies and mammograms and diagnostics, that can all be provided quite competently just about anywhere. As one veteran doctor told me, community hospitals do common things commonly and well every day.

  36. This isn’t “two Kaisers”. Unlike UPMC, Kaiser isn’t making its margins by selling $4500 CT scans out the back door. It may have 2 million health plan lives but only a small fraction of their total system revenues is “at risk”.

    I’ve looked at their financials and it’s a complete mystery where there are making their margins. My guess: they are losing nine figures on their huge physician group, breaking even at best on their health plan, and making 120% of their margin on hospital services. . . .

  37. The problem I’ve always had with the ACO idea is “Accountable to Whom?”

    I have no idea what ACOs will turn out to be. Around here, it looks to me like there’s going to be a battle between “Insurer as ACO” and “Health System as ACO”. We have one example of “Big Multispecialty Group as ACO”.

    I think I vote for the first option. The ACO/Insurer takes on the analytics, sharing the results freely with their members, and with independent primary care docs who are contracted with them. Best to only contract with independent primary care docs I think. But the ACO provides no medical services. Its accountability is to the state.

    If the Big Multispecialty Group were limited to diagnostics and primary care, I think that could work and may have some advantages. They could always contract for the analytics. But this leaves open the question of who they’re accountable to.

    In any case, bad people in a good system will produce bad results, and good people in a bad system will produce good results. The only thing a system can to is make it easier to get a good result. It all comes to the people. Sometimes I think too much effort is wasted on trying to invent the perfect institution when I think the best institutions would grow naturally out of the commitments of docs, nurses, techs, and even admins. But they’re not being cultivated and frankly the law works against them.

  38. Its about Highmark members (especially Medicare Advantage) having access to UPMC facilities. Right now it is supposed to end of 2015.

    The 4-year ongoing lawsuit which West Penn Allegheny Health Network initially filed against Highmark and UPMC (and then UPMC when Highmark acquired them) was only ended supposedly due to a lot of back door intervention directly from Gov. Corbett’s office. Corbett is from Western PA and the former State AG and took a pretty active role in it to get it resolved.


    As for Allegheny Health Network, they just struck a really interesting deal with John Hopkins for oncology care recently. Allegheny though is still bleeding cash though and they have to dramatically shift market share in the next 2 years with almost completely unrealistic growth rates in patients among the commercial segment.


    I would need to take a better look at the quality and cost-effectivness standpoint numbers to make a more informed statement especially regarding the Medicare Advantage market in Western PA which has a noticeably older population.

  39. MG –

    What’s the nature of the political interference?

    If Highmark BCBS / West Penn Allegheny and UPMC wind up largely controlling the healthcare market in the Pittsburgh CBSA, how do you see it playing out from a healthcare quality and cost-effectiveness standpoint in both the short term and the intermediate to longer term? I know that UPMC is currently the dominant hospital system in Pittsburgh with costs and prices (contract rates) to match that status.

  40. MG –

    If every CBSA winds up with between two and four ACO’s that resemble Kaiser, the traditional PPO options will fade away. However, if I were insured by Kaiser and needed, say, heart surgery or a hip replacement, there are presumably numerous surgeons within Kaiser that can perform those procedures and at least several hospitals as well. Hopefully, my PCP could refer me to a surgeon and a hospital that he thinks is good enough to treat himself or a member of his family if he or they needed that operation. For sophisticated procedures like an organ transplant or treatment for a rare cancer that may not be able to be performed within the ACO’s network, it hopefully has a relationship with a regional center of excellence that can do the job safely and well.

  41. Barry that is we are headed already in most major CBSAs. Pittsburgh is probably the best case example in the US of what you describe.

    In one corner, it is Highmark BCBS and West Penn Allegheny Health System vs UPMC. There are almost no free-standing physicians left in the Pittsburgh metro area and every health system in Western PA west of Harrisburg is having to choose a side and either get acquired or affiliate with one vs the other.

    It has been pretty ugly so far on both sides and initially brought in a ton of political manipulation from city and state gov’t.

  42. Barry but how do you put those payment systems in place and yet preserve PPO type options for access?

    More of the large hospital systems and IDNs are getting into the health insurance business too. They are just dipping their toe in the water right now in several varieties and seeing how the exchanges play out in ’14 and ’15.

  43. Hi Tom. I always appreciate your comments.

    The single biggest aspect of the ACO concept that I worry about is exactly the point you made. Ideally, with price and quality transparency tools, the PCP, as a referring doctor, should be able to identify the most cost-effective high quality providers in real time and direct patients to them. I wouldn’t want the doc to feel compelled to only refer patients within his or her ACO network whether to drive revenue to the mother ship or for some other reason.

    I wonder if the ACO idea, carried to its logical extreme, would leave most places with two Kaiser-like organizations providing care and perhaps three or four Kaisers in the largest cities. I’m not sure if that would be a good or bad thing. I do note, though, that in most retailing categories, two big box retail chains seems to be sufficient to provide vigorous competition and good value for customers. Think Wal-Mart vs. Target and Sears / Kmart a weak third competitor, Walgreens vs. CVS and Rite Aid a weak third, Staples vs. Office Max / Office Depot, three or four supermarket chains in each region, etc.

  44. Hi Barry, long time. Proceduralists, sure, that could work. But I never want to see hospitals (health systems, whatever) owning primary care. Ev-Er. Someone has to be able to advise us patients. When the docs are all owned, that leaves only the insurers. What insurers do can be helpful, but a primary care doc who is paying attention (even to what the insurers are saying about a hospital) is way better for a patient.

  45. For years I have been begging doctors to recover the Guild mentality they had at the end of the 19th century. With the freedom, though, comes the responsibility that doctors(!) threw to the spineless, toothless state medical boards. I personally do not imagine a world without insurance financing and without contracts, but if doctors can’t grow a pair and start saying no to “customers” and policing their own we are all doomed.

  46. Bundled payments in this context means not just the surgeon’s fee plus the follow-up management but also the pre-admission testing, the hospital charges for the OR, the patient room, drugs, any other services required including dealing with any complications and post-discharge rehab if needed.

    Since some of these services are likely to be provided by doctors and others that are not hospital employees, the hospital would have to work out agreements ahead of time regarding how much these providers would be paid from the bundled payment that would presumably flow to the hospital since it is most likely to have the management infrastructure to handle dividing up the payment. It would be an easier process, of course, if the hospital controlled the entire continuum of care and any doctors involved were salaried employees of the hospital system.

  47. Toward bundled payments? ? Hello? Many unintended consequences.

    Surgeons’ fees are bundled now. Medicare pays for an operation that includes the pre op, operative, and post op care (for 1 month).

    Most surgeons get a glimpse of their patient preoperatively, and do not show up post operatively, having residents or low level paraprofessionals manage the care.

  48. We need to move away from the fee for service payment model and toward bundled payments for surgical procedures and capitation for primary care. Unfortunately, the doctors and hospitals aren’t prepared to embrace that because they fear that they can’t estimate their costs with sufficient accuracy a year in advance.

    Maybe more of the large hospital systems and integrated delivery systems should get into the health insurance business. Try their hand at estimating actuarial risk. Then, at least for those patients who buy their health insurance through them and get their care through the hospital or the IDS’ network, the providers can use any transfer price mechanism they want to price their care on the delivery side and charge it to their insurance side. However they do it though, have the decency to inform the patient in advance just how much a given service, test, or procedure will cost so patients can make informed decisions and have the opportunity to comparison shop at least for care that doesn’t need to be delivered under emergency conditions.

  49. Not just testosterone, but reason as well. No Congressperson should abet this type of policy without meeting their own doctor face to face and asking them how it will affect them. Otherwise, they are simply practicing B-52 health policy. The scary thing about this solution is that there are a lot of Republican docs in Congress that have apparently signed off on it.

    As a newly enrolled Medicare patient, simply blowing off Medicare creates a giant problem for us. I’m not opposed to “transparency”; I just want the info I need to make sound decisions.

  50. We have to start leading. Patients with us need Patient Benefit Organizations that lobby against all these distractions and collusions to skimp on care. There is no slavery. We can bill for our labor any way we want including demanding all cash. Testosterone needs to return.