As I was waiting to teach the second half of a Boston University MBA class (HM710, here) last night, I heard a student near the end of the first half saying that doctors would never focus on quality and efficiency improvements until the fee-for-service payment system ended and was replaced with a global, or capitated, payment system.
This, of course, is not so. You can look at our record and that of many hospitals to see dramatic improvements in quality and enhancements in efficiency under a fee-for-service payment system.
Our experience is that finances and methods of payments are not highly motivational to health care providers in the hospital setting. Instead, people are motivated by a genuine desire to improve the quality and safety of health care delivery. The problem is often a lack of knowledge of process improvement, requiring some training and encouragement from clinical leaders. Fortunately, once learned, there is a virtuous cycle between those activities and efficiency and cost-effectiveness.
So, while capitation may have important attributes, let's be careful not to underestimate the good intentions and ability of doctors and nurses to achieve worthwhile things under other payment regimes.
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Sure, there can be a "virtuous cycle" involving doctors' decisions, efficiency and the quality of care. But unless we disconnect physicians' salaries from treatments they might administer, like infusions and surgeries, a conflict of interest clouds their recommendations.
Moreover, there is no necessary link between capitation and quality. You can ration without increasing efficiency. Quality innovators have dramatically increased the value of care patients receive under fee-for-service. But I wonder if the incentive question is more closely allied to their advantage: physicians are most often employees of the institution. It seems that plenty of physicians have taken little interest in reducing variation in care - until required by CMS and state or paid/penalized by insurers. This, I think, is the real incentive problem.
Change is energetically and psychologically expensive, and individual variation in practice is very rarely transparent, especially to those outside. Any real payment shift for quality has to incorporate these obstacles.
Perhaps this is true at the hospital level, but there are plenty of doctors in non-hospital environments.
Further, no one argues that docs don't care about quality care-- just that in some cases, quality can just as easily be defined as NON treatment- something which doctors that depend on reimbursement to pay the mortgage are hesitant to embrace.
Since the student you overheard didn't claim to be speaking only of hospital-based physicians specifically, I think he's got a point when you broaden to small group practices, solo docs, etc.
What are your thoughts on the planned payment reform here in MA?
See here: http://runningahospital.blogspot.com/2010/08/unanswered-questions-on-payment-reform.html
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I agree, but have also seen how physicians operate in other places. Admit a patient on Friday, so they have to stay through the weekend for "observation" and get Medicare reimbursement for each day the patient is hospitalized. Refuse to do circumcisions on Medicaid babies because the reimbursement is so small. Tell the patient that she needs an annual upper endoscopy because she has reflux, even though the evidence says this is unnecessary, yet the doctor gets reimbursed more for the procedure. I could go on and on.
Yes, give credit to the majority of doctors and nurses who truly want to give high quality care with only the best intentions. But don't ignore the reality that not everyone is that noble.
Your comments are very consistent with Daniel Pink's POV related to knowledge workers; that they are motivated by 3 main drivers: mastery, self direction/autonomy, and purpose. Of course, compensation needs to be fair and of value. If comp is taken out of the equation, higher order motivators are the key drivers of behavior change.
Based upon personal experiences in a wide variety of hospitals and clinics throughout New England, I have to agree that global payment structures alone will not ensure quality care. I also agree that a fee-for-service reimbursement structure creates financial conflicts of interest that often have a negative impact on the quality of patient care. In fact, until recently (when CMS began penalizing hospitals for the costs of certain preventable complications), investing in systems re-design and spending adequate time in delivering care at the patient level ran contrary to the financial well-being of a health care organization.
However, one must take into account non-financial incentives. In many places where I have worked, non-physician OR staff--who are not typically paid a fee for the volume or type of services rendered--seem mainly driven to "get the work done" (ie, increase patient throughput). Hence, a hurried, haphazard culture develops from the desire to leave the hospital earlier--or at least retire to the break room. I believe that the quality of care in a hospital is relatively independent of physicians; it is essentially the quality of care provided by a team of providers, and the systems supporting their work. In addition to debating how best to pay physicians, perhaps we should be discussing the pitfalls of incentive structures (and extraordinary job protections that vastly diminish the impetus to perform the role well) for non-physicians.
My biggest concern with expanding capitation is the fact that it takes insurance risk away from the insurance companies and places it on providers. Sure it is a strong incentive for providers to manage within a fixed budget but what is the purpose of insurance companies if they no longer hold the risk of the policies they write? Basically they become entities that take 10% of the premium dollar to largely pay claims and process referrals. Further, how many providers out there even have the financial reserves to cover this risk should things go badly? Fee for service has problems incentivizing over utilization but capitation has a lot of problems as well. The state actually tried putting Medicaid patients into tightly run HMOs in the past and it was a very tough patient population to manage under fixed budgets.
Providers are also protective of their reputation and want to be viewed as offering quality medical care. There is certainly motivation to provide this quality as part of ones reputation and to do best by your patients.
The bbigger and maybe more important question is how to provide quality in a more cost efficient manner, and this is where fee for service lacks. Indeed, your surgical results may be stellar and your complication rates low, but if you are subjecting patients to procedures of no or limited value, have you produced quality results? Maybe by the simple measures that we are currently using, but this does not really give us a true measure of quality. What we really need is measures of value that combine quality with cost.
I never thought the evolution of software would go as fast to where we are today. We need both clinical and cost and a happy medium that is functional and easy enough for all to work with. Everyone today is trying to build the better mouse trap with the best algorithmic formulas to return the maximum dollar values, meanwhile transaction fees for use or purchases keep rolling up profits and sales.
It's a mess and I try to see both sides and even hospitals like Tenet are getting into the business of being a software house too with their announcement today via subsidiary companies.
http://ducknetweb.blogspot.com/2010/09/tenet-subsidiary-conifer-health.html
I invited Paul to my BU MBA class last evening because I wanted students to hear from a CEO of a major medical center whose first priority was providing high quality patient care. I think it is important to recognize that a commitment to quality is not driven only by financial incentives. I've had the opportunity to study many health care institutions that have made quality of care a top strategic priority. A common characteristic among them is a leadership driven by a commitment to quality, starting with the CEO and CMO. But to accomplish this they need to convince their medical staff, board, and others that the hard work of organizational transformation to achieve consistently high quality care should be undertaken, even if they don’t see a direct financial benefit. Most of our current payment systems not only don’t reward quality but in many cases actually penalizes it (for example, by not risk-adjusting payment for enrollees with complex medical conditions). If these systems were structured to reward quality (and to adequately adjust for risk), we would see many more health care leaders trying to achieve this type of transformation
I agree with you, Paul, that no one payment system provides a direct correlation with quality, but the student may have been half right for the wrong reason. That is, s/he may have been confusing mechanisms to improve coordination of care with payment mechanisms. Inasmuch as capitation in the inpatient setting does incentivize better care coordination if only for financial reasons, it has somewhat greater potential, at least outside of the academic setting, to improve quality.
Whatever payment system leads to the crucial cultural change where physicians, hospitals and yes, insurance companies all feel like part of the same team dedicated to providing high value care (value = quality of outcomes per dollar spent) instead of adversaries in a zero sum game, will be the most satisfactory system.
nonlocal MD
Hi Paul,
I work in health service improvement in Western Australia and am also studying an MBA (at Curtin Graduate Business School). Is there anywhere interested people can access your lecture material? Love your blog.
Tristan
Here's the only one I know about: http://bidmc.org/CentersandDepartments/Departments/Medicine/Divisions/GeneralMedicineandPrimaryCare/HospitalMedicineHospitalistProgram/MediaGallery.aspx
Hi Paul,
It was a pleasure having you in class and hearing you speak, but being the aforementioned student in this posting I need to clarify my comments you posted. I didn’t say that doctors would never focus on quality and efficiency in the current fee for service system, but rather that the current fee for service payment system is not designed to focus on quality outcomes and create efficiency in the health care system. A new global payment model needs to go beyond traditional capitation to achieve results. It has to have incentives based on quality and outcome data in order to drive change in the cost and quality of care we receive. Some providers have found success under a global payment model. In fact, Atrius, has devoted a section on their website to discuss their experience with global payments.
http://www.atriushealth.org/news/ExaminingHealthcareHome.asp
Hi Paul
I clicked on your link back to 4th October 2009 and was interested in the comments re Clay Christensen and lean/six sigma.
This where I have got to with this:
1. The basic stability of clinical microsystems in health is poor. We don't have constanty of purpose, ability to analyse and improve process tec. But we definitely need to build these skills - this is our foundation without we can't progress - so we must not wait!
2. Once we have this and the benefits - we can start to really use what Deming taught us about end to end value and flow. This gives us integration and the skills and mindsets required are a further evolution from getting your team working - these provide the next platform
3. Clay was really clear in Chapter 6 of his book - disruptive innovation will only deliver after integration - the role of what he termed the 'visible' hand.
This looks like a compelling vision to me as a doctor looking to the future.
I think you would also like 'Costing and an arm and a leg' by Margerat Hannah NHS Fife - an article that gives us a generic way of thinking about conceptualising our future challenges
A provocative comment on this subject from Richard Wittrup on his blog Health Care Anew yesterday:
'.... moving to global payments will mark the end of medicine as an independent profession.'
Food for thought.
nonlocal
I agree. You can find examples of misuse. But thats not the norm. We have made the US the leader in health care because of fee for service. Comments about a doctor not performing a service because they do not get paid is ignorant. How many of you would work for nothing.
CMS affect has been to reduce reimbursement to levels that are not sustainable to keep a practice open. The cost of running a practice continues to increase, while payment decreases. That is why physicians have to focus on procedures/treatments that pay. To keep the doors open. Furthermore, the obstacles placed by CMS and others have made the cost of care rise as well. Whole industries have been created to deal with billing, collections, HIPAA etc. This chews up significant health care dollars.
Physician salaries are a small percentage (around 10%) of health care dollars.
Focus on simplifier the system. This will reduce cost....and just as important reduce errors. How can you give individed attention to a patient when there are countless forms to complete, hoops to jump through.
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