Monday, January 19, 2009

Can we learn together?

A dramatic cease-fire was announced over the weekend. No, not the one in the Mideast, but rather in the health care market in Massachusetts. As documented in this Boston Globe story by Scott Allen and Jeff Krasner, Tufts Medical Center and Blue Cross Blue Shield of MA reached an agreement on a payment contract. What's the big deal? Well, Tufts had threatened to pull out of the BCBS network when it felt that it was not being offered sufficient compensation for its medical services.

The context was important. The Globe had previously reported that payments to Tufts and its doctors were substantially below those received by, in particular, the hospitals and doctors in the Partners Healthcare System, and often below those received by BIDMC and its doctors. As I have noted below, there is really no justification for these differentials, if one considers the actual quality of care delivered by the major academic medical centers.

Well, I guess Tufts felt that enough was enough and stood its ground in its contract negotiations with BCBS. This was a gutsy move, in that BCBS has more subscribers than all the other insurance companies combined, and Tufts and its doctors stood to lose a lot of business if the dispute was not resolved.

We should all be pleased that the issue was settled, apparently to the satisfaction of both parties. It is difficult to believe that Tufts could have followed this path absent the Boston Globe stories, in that those stories created the moral high ground for a different kind of negotiation. After all, there is no data to support the contention that a patient at MGH or Brigham and Women's Hospital will receive better care than at Tufts.

But where does that leave the state? On its face, the Tufts-BCBS deal seems to contradict the hopes of Governor Deval Patrick, who, it is reported, wants the hospitals and insurers to slow down the growth rate in health care premiums. BCBS, for its part, has been pursing adoption of a capitated insurance reimbursement approach to control those costs, and adoption of that plan was announced as part of the Tufts deal. But clearly some compromise must have been reached. The plan offered to Tufts had to be more generous than the one previously offered, or the deal would not have been done.

We have been discussing this alternative contract idea with BCBS for several months, too, and both parties are trying to figure out how it might be designed to work in the environment of our medical center and our physicians. One key issue is that such a plan transfers a portion of the insurance risk of health care to the providers and away from the insurance company. Some element of this risk-sharing is probably essential to align incentives between the providers and the insurer, but the specific design and implementation plan is important, lest the hospital and doctors find themselves with a major revenue loss at the end of any given year. After all, providers do not have the kind of financial reserves that insurance companies have.

Another important issue is that we do not control the delivery of the full spectrum of care, from primary care to hospitalization to skilled nursing facilities. A capitated contract requires some kind of relationship among providers across that spectrum, so that risk can be appropriately monitored and shared.

Nonetheless, people of good will can work through these issues, and I am hopeful that we can, too. In the meantime, as I have noted often on these pages, there are many steps that hospitals and doctors can take in the current fee-for-service reimbursement environment that also help to control cost increases. My passion for reducing harm that you have seen repeatedly on these pages is an important part of that process. See below, for example, the post about reducing ventilator associated pneumonia. That program not only saved lives: It saved millions of dollars in medical costs. That most of the savings went to the insurance companies did not preclude us from adopting this standard of care. Our job, simply, was to reduce harm and save lives.

As you can tell from my post below, I am frustrated that the medical profession in this city has not adopted an aggressive and transparent approach to this kind of quality improvement. As noted by one or more comments under that post, in its delays, the profession risks abdication on these matters to governmental authorities, who will impose standards that will inevitably lack the subtlety and effectiveness of those that the profession could otherwise design for itself.

Also, on these pages you have seen an emphasis on BIDMC Spirit, our process improvement program based on the Toyota production system. We engaged in this program to improve the work environment for our staff and to improve patient care, but it also has the effect of controlling costs and improving efficiency. Again, a great portion of the cost savings will flow through to the insurance companies, but we still pursue the effort because of its advantages to the organization. I want to acknowledge here that our progress on the front was greatly aided by technical support and assistance from BCBS, as part of a pilot program involving five hospitals in the state. The program gave us exposure to people and ideas and resources that we might have encountered otherwise, but that probably would have been delayed by several years.

As a result of these joint efforts with BCBS and with other helpful people like the Institute for Healthcare Improvement, we find ourselves to be in the vanguard with others around the country in the implementation of these approaches. Through this blog and other presentations, we are doing our best to share what we have learned. As I have often stressed, quality and process improvement and transparency is not a matter of gaining competitive advantage.

As long as the distribution of health care reimbursement revenues is viewed as a zero sum game, the likelihood of cooperation across the hospital and medical community is likely to be minimal. If Tufts Medical Center got more, must everyone else get less? No. My hope is that the presentations here and elsewhere of what we and others have learned will help people understand that it is not a zero sum game. Society as a whole can benefit from the kinds of quality and safety and other process improvements with which we have been experimenting. But we need all participants to shed their defensiveness and fear of disclosure, to acknowledge the areas needing improvement, and to share what they have learned for the greater good.


citizentools said...

Link to "post below" busted, should probably be

On a more substantive note, in what areas and ways does your hospital, and others you see as respected peers, seek to gain competitive advantage?

Anonymous said...

Paul, your steadfast passion and energy on the issue of quality improvement is key to the changes that are happening at BIDMC. It is true, that the institution is bravely treading into new territory, but patients are becoming increasingly educated on medication error and preventable harm, and they, too, will push for a safer healthcare system. Many institutions around the country have taken this path and the benefits are remarkable. These hospitals have become the leaders in their respective markets.

You state that many healthcare savings from process and safety improvements go to insurance providers. True. But physicians, nurses, and support staff directly benefit from an enhanced work environment, greater team work, fewer hassles, better communication, and more time spent in direct care of patients. They see the experiments unfold around them, and become ambassadors for accelerated change. You have strong support of the BIDMC board, staff and key provider leaders. They will push with you to reach the tipping point.

Anonymous said...

Dear citizentools,

I think the main competitive advantage one can hope to get in a marketplace like Boston is by providing good service to referring doctors -- quickly accepting their patients, treating them well, and then reporting back to those MDs about the status of their patients.

Anonymous said...

Again, nice to read writing with such clarity of thought. So simple but so muddied in today's healthcare environment.

Thanks for the continued wisdom from this ED director.

Anonymous said...

Captitated arrangements between a corporate group of physicians in practice (group model or IPA), when combined with a reasonable hospital partner, can lead to very good care and financial solvency of both. Boston sounds a little atypical in that you have one gorilla (BCBS) and many mice. The transition is difficult when you have some physicians capitated and some FFS. It can be done; it takes time a progressive trust in each other.

Anonymous said...

Thanks for your thoughtful post. As a marketer, who works with health care providers and technology providers, it's always interesting to watch the dynamics of the Boston health care market. On both the payer and provider side, we have several large players which makes it hard to control prices through competition. We're also looking at a "product" where it's hard to measure quality (complex) and cost(too little information). For this reason, we need the Fourth Estate to be more vocal than they have in the past--and perhaps Government too. You've provided a great list of areas where they can focus to shed light on underlying factor--and in so doing keep this issue high on the radar of the general public. In my opinion, it will take an active, informed, motivated, and perhaps much more organized public to effect real change.

Tom said...

Paul -- Recent discoverer of your wonderfully informative blog; Always enjoy reading your candid, insightful pieces on so many challenging topics. I continue to read articles about the BCBS Alternative Quality Contract, but have yet to see too many details. Can you share any information on how the contract is designed to save health care dollars. As a hybrid capitation-P4P model, does it rely on P4P "efficiency" measures such as reduced pharmacy cost, etc., or does it rely more heavily on the capitation side to control costs? Love to hear your thoughts.

Regards, Tom

Anonymous said...

I have a link to a document prepared by BCBS embedded in this post:

Hillary St. Pierre said...

I do think a cease fire and peace accord could be in the future. I enjoy your perspective very much. You used my favorite word "transparent." I agree that if the political world of health care was more transparent more would be accomplished. I also believe if people from all walks of health care were invited to participate collaboratively with the similar goal of health transparency, something may actually be accomplished. I'm happy to know you're working hard in the world, specifically, in Boston

Michael Pahre said...

Not being an expert on the health care industry, I have two broad questions about the new "capitated insurance reimbursement" that shares insurance risk between the HMO and the health care providers:

(1) Doesn't such an arrangement now make Tufts a health insurer (at some level) and thus directly subject to capital requirements and other regulatory oversight for insurers?

We've all seen recently how companies that engage in contracts resembling those of insurers (e.g., through credit default swaps) -- but subject to no regulation whatsoever as an insurer, since they didn't fall under the strict definition of what is an insurance company -- have the potential to sow widespread uncertainty about the financial risk at many inter-related banking companies and upend the financial markets. Is the healthcare industry testing those waters?

(2) If this capitation model becomes widely adopted and broadly applied, doesn't it encourage health care providers to delve more deeply and directly into the health insurance market themselves, thereby bypassing the middlemen?

Anonymous said...

As a Blue Cross subscriber I am appalled by capitation. This will do nothing but give the hospitals and doctors a financial reason not to treat patients. With the initiation of pps and drg's hospitals are already over incentived to discharge very sick people out to save costs. Before 2005 how many patients were released to skilled nursing facilities early because the hospital received the full drg payment for these patients? How many hospitals own skilled nursing facilities now that hospitals get transferred drgs? I see no patient benefit the Blue Cross Alternate Plan.

Mark Graban said...

Paul, I'm thankful for your mentions of the Toyota Production System and the "Lean" methodology in your hospital.

President Obama mentioned the need to improve healthcare quality and costs in his inaugural address. But he said "technology" was the way to get there.

How do we get the Obama Administration to see that process improvement can also help???