Thursday, March 19, 2015

Huh? HUH?

I've written at length about the push given to capitated contracts by Blue Cross Blue Shield of Massachusetts--and have suggested a number of public interest-related questions about this corporate policy.

The company doesn't like it to be called capitation. You decide.  Here's the short summary from an article in Health Affairs:

Its principal elements are a five-year term; an annual global budget based on each group’s historical per member per month spending; a quality-based system of performance bonuses; and regular reports from Blue Cross on the group’s spending, service use, and quality of care. 

Ok, so let's just call it capitation with the potential for some bonuses based on tracking sixty-four measures (thirty-two each for inpatient care and for ambulatory or outpatient care) covering the process of care.  Why do I call it capitation? Because it is.

And I'm also not going to comment on whether tracking 64 separate quality metrics can actually influence doctor and nurse day-to-day behavior on the floors, the ORs, and in the ICUs to improve quality over what would occur anyway.

That's not what brings me back to the topic today.  It is this line from the same article:

Although the medical groups each have an annual global budget, Blue Cross pays them fee-for-service throughout the year. All payments for medical care are debited against the group’s budget, whether the services are delivered by providers inside an Alternative Quality Contract group or by unaffiliated providers. At the end of each year, Blue Cross conducts a reconciliation exercise with each group, paying it any money left in the budget or recouping what the provider spent over the agreed-upon global budget. 

Read that again: "Blue Cross pays them fee-for-service throughout the year."

Now, BCBS of MA has been going around the state (and the country) for many years decrying the use of fee for service--and yet it maintains this underlying billing system.

It must costs millions of dollars each year to process the claims from provider groups and compile this information in this form.  Simple question:  Why is it necessary?  Why not just send a check each month for 1/12 of the annual budget?  There is simply no need to do a reconciliation.  If the provider group beats the budget, they keep the money.  If they exceed the budget, they absorb the loss.

Is there some information need that BCBS is providing?  Well, no.  Maintaining the FFS fiction clearly is not necessary to inform the provider organizations of the quantity of work they've done.  They already know what work they are doing.  (In fact, they use that information for internal transfer pricing purposes to compensate their individual doctors and hospitals.)  In short, the providers already have it within their sole power to analyze activity levels and choose or not choose to make changes in clinical patterns to achieve greater efficiency and quality. 

Why doesn't the "insurer" here act to reduce transaction costs?  (I call it an "insurer" because it has essentially shed its risk-taking function.)  Maybe the answer is that, if the "insurer" always gets to keep a fixed percentage of the premium dollar for administrative costs, it might as well incur those costs.

Or maybe it's just some form of corporate paternalism, indicating the company's fundamental lack of trust and faith in the provider organizations.  If I had a choice where to put my trust, I know which I would choose.


Barry Carol said...

I was under the impression that fee for service payments based on contract rates with BCBSMA would help multi-specialty group practices better track utilization by individual doctor and other providers authorized to bill for services. It presumably should also give the practices information on services, tests, procedures performed outside of its system and potential insight into possible opportunities to reduce costs by switching referrals to more cost-effective outside providers and identify high utilizers among its doctors. Does the internal system provide all of this information?

There is also presumably the matter of keeping track of the individual insured member’s deductibles, copays, and total incurred covered expenses in order to determine when or if the annual out-of-pocket maximum amount is reached. If fee for service claims processing is necessary for this function, the incremental cost to provide utilization information to providers should be quite small. Shouldn’t it?

That all said, I do agree that it’s a capitated arrangement with an opportunity for bonus compensation as well as shared downside risk.

Anonymous said...

Paul - Two things specific to BCBS of Massachusetts. 1) They actually dangled INCREASED fee schedules to networks in order to get them in to the AQC contracts. So they offered higher cash flow to physicians both private and hospital owned. This was a lot of money. Cape Cod joined the Steward AQC contract specifically to get the increased fee schedules and the potential for AQC quality bonuses. Cape Cod has no clinical relationship with Steward... this was all about the enhanced fee schedules and AQC quality bonus they were offering to get networks to join the AQC and essentially transfer risk from the insurer to the provider networks. This would be one reason to maintain their fee for service cash payments that go to providers. 2) I am sure you saw that California just stripped BCBS of California of its tax exempt status (I guess they already paid Federal taxes). How long until the state of Massachusetts comes knocking on BCBS of MA front door looking for their state tax share..... most of those BCBS plans are similar in nature. This might go the same for Tufts and HPHC too although Charlie Baker may oppose this type of move given his history.