Wednesday, July 11, 2007

Uh oh, questions keep arising

The good news is that Virginia Mason identified ways to streamline and improve care; the bad news is that the medical center’s bottom line may take a significant financial hit as a result.

Apropos of a post I ran a few weeks ago raising questions about our strategy of improving efficiency and lowering costs, we find the following study summarized on the Health Affairs website. I include the summary in its entirety.

I again ask my loyal readers and business advisors out there, "What does this mean?" Should I be encouraging a movement back to capitation? What if one payer prices services that way and another prices on fee-for-service? We can't practice medicine in different ways depending on who the insurer is. Can the insurers ever get together and decide to cooperate on payment design (if not actually rates)? And, if capitation returns, should it be just for the services we provide, or do we need to include the whole continuum of care (e.g., rehab centers and nursing homes to which we discharge patients but which we do not own or control?)

Health Affairs Article Details Care Redesign At Seattle Medical Center
Virginia Mason’s Quest To Improve Patient Care And Reduce Costs Without Being Awash In Red Ink

Bethesda, MD -- The tale of one Seattle medical center’s quest to improve care and reduce costs illustrates the obstacles physicians face in practicing more efficiently under a fee-for-service payment system that overpays for some medical services and underpays for others, according to a study by researchers at the Center for Studying Health System Change (HSC) published today as a Web Exclusive in the journal Health Affairs.

The article, “Redesigning Care Delivery in Response to a High-Performance Network: The Virginia Mason Medical Center,” takes an in-depth look at Virginia Mason’s efforts to improve care and lower costs for four common conditions: uncomplicated lower back pain; gastroesophageal reflux disease (GERD); migraine headaches; and cardiac arrhythmias.

Faced with exclusion of several physician specialties from Aetna’s high-performance network, Virginia Mason Medical Center (VMMC) officials worked with the insurer and four large Seattle employers -- Costco, Starbucks, King County, and Nordstrom -- to redesign care delivery for the four conditions. Adapting aspects of the Toyota Production System to a health care setting, VMMC mapped out how to improve efficiency per episode of care for each of the conditions, according to the article.

“The good news is that Virginia Mason identified ways to streamline and improve care; the bad news is that the medical center’s bottom line may take a significant financial hit as a result,” said Hoangmai H. Pham, M.D., M.P.H., an HSC senior health researcher and lead author of the study funded by the California HealthCare Foundation (CHCF).

In an accompanying HSC Issue Brief, “Distorted Payment System Undermines Business Case for Health Quality and Efficiency Gains,” also funded by the CHCF, Paul Ginsburg, Ph.D., HSC president, points out that “most efforts to improve efficiency for a specific medical condition usually reduce the number of services per patient that can be billed, posing financial challenges for providers. These challenges are often magnified by the current fee-for-service payment structure, where some services are highly profitable and others are unprofitable.”

Although Aetna and the participating self-insured employers agreed to pay higher rates for certain unprofitable services if VMMC could achieve reductions in highly profitable services, VMMC still faces a financial challenge from applying more efficient care practices to patients covered by other insurers, which account for more than 90 percent of VMMC’s revenues.

And most other medical groups would find it very challenging to do what VMMC did. “Their experience may be the best-case scenario,” Pham said, “because they at least had a large group of salaried physicians to work with, who might not be as sensitive to the loss of revenues from profitable services as physicians in most practice settings, and who had the resources to define the problems and coordinate a plan of action.”

The Health Affairs article concludes on a cautionary note, stating, “Aetna, employers, and [Virginia Mason] used an ostensible business case to motivate [Virginia Mason] to improve efficiency, only to confront the possibility of that business case turning on its head. It is an example of a provider organization attempting to do what purchasers, including the Medicare program, all exhort -- improve care delivery while reducing costs. . . . It also stands as a cautionary example of how fee-for-service payment and uncoordinated payers present stubborn barriers to sustaining cost control.”


Anonymous said...

"Can the insurers ever get together and decide to cooperate on payment design (if not actually rates)?" --- Did you just imply that you'd prefer this power to fall to the laps of the insurers? Shouldn't the question be: in this heavily regulated shouldn't the regulators require a payment design? As for the "actually rates". I think the movement towards a national healthcare model would better address this issue.

Anonymous said...

Hi, this is not a comment on any past post, but a request for information.
Could you please do a post, or posts, on how to choose the best hospital for particular issues and procedures--for example, if you have protate cancer, or breast cancer, or COPD, or arthritis, or whatever, how do you select the best doctor and hospital? Yes, you can google everything in sight, and visit all kinds of websites, and hope for the best, but aren't there any rules of thumb or shortcuts for the uninformed?
The trouble is, you can always make a mistake on your sofa or car, and trade it in on another one, but once you've had the surgery, there's no going back. It has to be right for you the first time.
Thank you!

Anonymous said...

After reading the Health Affairs article, my two takeaways are: (1) everyone needs the right kinds of good and accurate information if we expect to get good value for our healthcare dollars and (2) it is critical to get the incentives right for both providers and consumers. If I were an insurer (or a self-insured employer), I would want the following:

1. Consumers need to understand exactly how much their health insurance premium costs – the sum of the employer and the employee contribution. The consumer also needs to understand the connection between health insurance costs increasing faster than the inflation rate, increasing copays and deductibles (if applicable) and slower than expected or hoped for wage growth (if applicable).

2. It is important for consumers to receive care from the most cost-effective hospitals, doctors, imaging centers, labs and drugs. Assuming these can be properly identified by payers, meaningfully differential copays should help to steer patients toward them.

3. Robust price and quality transparency information based on actual insurer reimbursement rates should be available in an easily accessible, user friendly format, especially to referring doctors (mainly PCP's). Referring doctors should be rewarded for consistently steering their patients toward the most cost-effective specialists, hospitals, imaging centers, labs and drugs.

4. If a hospital can demonstrate a clear competitive advantage in a given category of care based on both quality and cost, it should not be shy about communicating that fact, especially to the physician community.

Anonymous said...

So I am a know-nothing here, as in I know (sadly) what decapitation is but...maybe all your in-group readers are up on all these tech terms but pas moi. (While you're at it, maybe a graf on "single payer" and what that would do to the insurance industry--all in a graf, of course :).

Anonymous said...

You did notice the article in the Wall Street Journal this morning about a new specialty, "proceduralists" which mentioned BIDMC most favorably?

Hafsa said...


My friend's mom is in the hospital - long term care actually.. and i don't know what i can do for her. Can you suggest anything I can do to make her feel better?

Anonymous said...

Anon 1:40,
What regulators do you have in mind? I don't know of any who review the rates set by insurers.

Anon 2:18,
I don't know any shortcuts. Also, I think the websites don't yet tell you very much. You ceratinly can't rely on magazine listings and the like.

So for the most part you are left relying on the advice of your primary care docter, and reports from friends and associates.

Please go back to one of my earliest posts last August, on the single payer issue. On the insurance jargon issue, I apologize. Scary that I actually have started to understand it! But it is not fair to impose it on normal people . . .

Anon 8:31,
Yes, thanks.

The hospital should have a social work department that can be of help.

Anonymous said...

this link contains interesting views from gary kaplan, the ceo of VM..

Anonymous said...

I would be very interested to hear Delores Mitchell's response to your question: How does a provider seeking to deliver the most efficient care succeed financially in what is still a fee-for-service environment?
Clearly, transparency and small copay incentives are not enough. And this market still doesn't accept limited network choice - at least not yet. The reimbursement model needs to shift more dramatically to reward overall efficiency in the delivery of health care - not just through the use of DRGs which does reward hospitals for reducing length of stay. Employers - like Delores and the GIC - should be pressuring payors to reward more efficient providers with direct financial benefits.