Thursday, February 17, 2011

It all comes back to cost and choice

Those watching the implementation of national health care reform are advised, again, to keep an eye on Massachusetts, which began many of the same programs several years ago. As will be evident eventually at the national level, after you provide universal access to health care by creating a more broad-based insurance program, you then need to focus on two areas: cost and choice. (Remember that President Obama tried to present the case that access, lower costs, and choice were mutually consistent public policy goals. 'Taint so. Eventually, you have to deal with the other two to have a sustainable solution.)

Governor Deval Patrick today offered his legislative proposals in this arena. The key elements are control over provider rates; encouragement for capitation and bundled payment regimes; creation of integrated delivery systems; and transparency of prices and medical outcomes.

I was especially intrigued with the rate-setting aspect of his plan. For some time, I have been suggesting that a return to administrative rate-setting for rates paid to hospitals and doctors was inevitable in a state in which market power had for so long dominated the methodology for establishing those rates. This has been mightily opposed by most industry observers. My point was that rate-setting already existed, but it was in the hands of unaccountable insurance companies.

So the Governor now proposes rate-setting, admittedly through the back door, but substantively so in any event. How will it work? We will not appear to regulate rates paid to providers, except that an insurance company's premiums will not be approved unless the underlying rates paid to providers meet certain conditions. Here's the relevant excerpt from the press release:

This legislation clarifies the [Insurance] Commissioner’s authority to reject premium increases where the underlying provider rates are excessive. Specifically, the Commissioner may disapprove rates that contain provider increases inconsistent with the following criteria:
  • The rate of increase in the state’s Gross Domestic Product;
  • The rate of increase in total medical expenses in the region as reported by the Division of Health Care Finance and Policy;
  • A provider’s rate of reimbursement with a carrier, especially in relation to the carrier’s statewide average relative price;
  • Whether the carrier and a contracting provider are transitioning from a fee-for-service contract to an alternative payment contract.
So, whether you call it six of one or half a dozen of another, we are back to rate-setting.

On the choice front, the Governor adopts the religious dogma of pricing discussed here earlier, stating that "the existing fee-for-service payment system is outdated in the medical field." He apparently understands that doing so is inconsistent with consumer choice and thus he "encourages the formation of integrated care organizations (commonly referred to as Accountable Care Organizations or 'ACOs')". As discussed in the last two paragraphs of this post, insurers and providers better tread carefully here. Unless consumers are confident of getting the same or better quality of care from the restricted network serving them, there will be extreme negative feedback in the future. Transparency of outcomes will definitely help, but the power of habit and reputation is long-lasting.

So congratulations to the Governor for taking steps that are consistent with the state's policy of universal access. The key to legislative adoption of these proposals, unfortunately, is likely to be an attempt to minimize discussion of what they would mean for individuals and families, and for doctors and hospitals. Otherwise, they will be viewed as bitter medicine, even if they are in the service of an overall policy objective -- universal access -- that is clearly the right direction.


Anonymous said...

While I once was a hesitant supporter of ACO models as a way to improve public health, my opinion dims with each specification of policy. Reduce cost, yes. Access, that remains to be seen. But we should be careful not to conflate risk shifts among resource holders with healthier populations. Patients remain spectators here.

Providers (of people who can find PCPs in their neighborhood) may be held to higher standards of provisioning by making sure that cholesterol tests and depression screens are done. Sure, that is value added.

But patient outcomes? A real patient-as-stakeholder package would require insurers and providers to protect and improve access, and critically, to reward outcomes from the view of the patient. Is functional status improved? Is the public healthier under this model?

Will we know if patients are not getting specialist care when they need it? PCPs should not have all of this burden, but there appear to be few mechanisms for integration of decades of reductionist medical knowledge.

Additionally, if patient-centered means improvements on Press-Ganey surveys, we should really despair. Patient information tools lag years behind demographic challenges and communication preferences.

Transparency is admitting that we do a really poor job of capturing the data we need. Outcome data on quality of care is almost nonexistent, except for extremely limited number of hospital measures. And transparency is admitting that little in the ambitions of ACOs fund the infrastructure needed to address the PCP challenge of public health.

It may be a Rumsfeld excuse: you work with what you have. All we have are insurer and provider incentives. Let's stop fooling ourselves that it has much at all to do with patients. That will take ambitions greater than demonstrated yet.

Paul Levy said...

Wow. This may rate as the all-time best comment I have ever received on this blog, both in style and substance. Thank you, whoever you are.

Anonymous said...

I think anon's point concerning patient as stakeholder is an excellent one, and elegantly stated. However, I do not believe the patient will be given a stake in any future form of health care, be it ACO's or something else, unless he demands it. Without being melodramatic, I believe this struggle will proceed along the lines of civil rights or gay rights - it will take way longer than it should, rights will be wrested from a reluctant status quo, and progress will require organization, tenacity and, unfortunately a bit of a hard edge.

Although the patient advocacy movement is taking shape, I have yet to see the emergence of the three elements listed above. Patients can be immensely assisted in this effort by knowledgable and committed enablers, such as Paul in his new role, and others. It cannot begin too soon.

nonlocal MD

Brian Rosman said...

We agree that the key metric is patient confidence/patient engagement. ACOs and Medical Homes and the rest will not be successful unless payment incentives include performance on patient confidence measures.

We recently hosted Dartmouth's Dr. John Wasson for a talk on this (see report: His tool appears to be robust and relates to improved outcomes. Providing real-time feedback to practices seems to make a big difference. We came away more convinced that this is critical.

Governor Patrick's bill recognizes this, and requires performance payments and penalties to ACOs to include "patient experience satisfaction and engagement measures." There's also lots and lots of transparency in the bill.

The proposal also sets up a way to control restrictions on choice. The state is authorized to regulate "deficiencies in patient choice of provider" from moving to ACOs.

Our Campaign For Better Care ( is working to be the patient voice in this debate. We welcome participation by others.

Brian Rosman
Health Care For All

Paul Levy said...

Thanks, Brian. It is great to know you are there doing that.

I have some concern, though, as I look at your list of corporate and government funders on page 15 of your annual report ( How we can be confident that your positions on legislation are not influenced by these large donations?

Perhaps you could explain the controls and protections you have in place to make sure that is not happening. As this moves forward, it will certainly be important to have confidence that your views are truly independent of organizations with major vested interests.

Anonymous said...

What if legislation looked like this:

(1) insurance rate approval by state is scaled to performance as measured by either (a) IMPROVEMENT in the objective health, or (b) improvement in the value of quality (e.g. great palliative care, coordinated cancer treatment) as determined by subscribers.

(2) Hospitals are reimbursed by CMS based on IMPROVEMENT (not existing) in the health status of the community that surrounds them, as determined by the community, with titered demands based on the existing wealth of the institution.


Consumers and outcomes measures would become very popular.

Payors and providers would reward medical industries and non-profit organizations that provide effective and efficient consumer-level and community-level results.

Perpetuated conflicts of interest between industry profit and individual/community health would not be so heavily rewarded.

And, NIH and venture capital funding would quickly follow the best technologies and the best providers.

Anonymous said...

You can read the Governor's proposed law in controlling health-care costs. I did.
An act improving the quality of health care and controlling costs by reforming health systems and payments

The law does allow the insurance commissioner to regulate provider rates [Sec. 17], but that is just a Band-Aid on a fee-for-service system. It does not regulate amounts of services delivered and billed.

The law does not require or set a timetable to require capitation payments. They remain voluntary. It only sets up a process for adopting payment regulations [Sec. 14] and a "pilot program" [Sec. 21(d)]. If no organization signs up for it, the "pilot program" is an empty program.

There is an attempt to include Medicare in the payments system [Sec. 21(a)], useless because the state is not a participant. Surprisingly, there is no provision for Medicaid, where the state has a major role.

Anonymous said...

Anon 7:37:

It would appear that your reading of this law supports Paul's comment in his subsequent post of Feb 19, to wit:

Changes in payment rate structures, penalties for "never events," and the like can cause some changes to occur. Their main political advantage is that they give the impression of action, and their major financial advantage is a shift in risk from government and private payers to health care providers.

nonlocal MD