Every strength has its intrinsic weaknesses, and every weakness its own strength.
Although health care reform is just the beginning of a process to improve the quality and value of health care, it is definitely a compromise, with all the imperfections you would expect with multiple committees of designers.
The major focus of the legislation was on expanding access to insurance (and hopefully therefore timely and effective care) and increasing the regulation of the health insurance companies to end some of their most pernicious practices.
However, fundamentally the system keeps its multiplicity of stakeholders and all of their conflicting interests, most of which are still only partially aligned with society’s interest in having a high-value health care system.
Thus, although we are pleased to see implementation gathering steam for the Medicare reforms authorized under the legislation, those of us who deeply feel the limitations of the current payment and delivery system in the care of older adults still can’t help worrying.
While Medicare fee-for-service is infamous for the fragmentation and atomistic approach to care it breeds and the many things it discourages/fails to encourage, it does incent providers to provide more (covered) services to beneficiaries. More. Not less. Quality may not factor into the equation, but providers believe what they sell is good for their patient/customers or at least “does no harm.”
The various new Medicare pilots (medical homes, accountable care organizations, bundled payments, and P4P [pay for performance] programs) are all ways of moving away from the traditional fee-for-service, more-for-more payment approach. These new entities get pots of money to deliver services and achieve certain outcomes and keep some share of the surplus if target outcomes are met at lower prices than might have occurred in fee-for-service.
I think of the models as partially capitated, where for a length of time or kind of service, the delivery entity takes on some of the functions of an insurer, i.e., where the more-for-more incentive is reversed and the entity makes more money the fewer services it provides.
The proponents of these partial capitation ideas (which most days includes me) see them as giving flexibility in what services are provided coupled with incentives for quality and cost control that will overall increase the value of medical care. But I worry that there are lots of ways things could go wrong.
Take bundled payments. What if a hospital taking the payment bundle and full responsibility for a 30- or 90-day episode of acute and post-acute care uses its market share power to make its weaker partners--home health agencies, skilled nursing facilities, and primary care providers--take payments below their costs? What if these other providers are either driven out of business or periodically refuse to contract their services to the hospital?
For the most part this is what managed care in the commercial sector has done. Instead of actually changing how care is delivered, insurance companies perverted the idea of managing care to a business model focused on negotiating discount payment rates with providers.
Looking at another pilot in the works, the focused efforts to reduce readmissions to hospitals (something we care a lot about at the Foundation), I get nervous again. What if penalties and bonuses for readmission rates lead some hospitals to “game the system” by avoiding admission of complex patients?
Already there are brewing complaints about excessive use of “observation” units and other administrative fictions that look and feel like a hospital admission, but try to pretend otherwise (with all kinds of pernicious consequences). To make matters worse, what if ethical hospitals that try to serve “really sick patients” are unable to meet the performance benchmarks set by regulators and seemingly met by hospitals that cherry-pick their admissions?
Unless regulators adjust target outcomes to reflect the underlying sickness of the population served (risk adjustment), these good hospitals could go into adverse selection death spirals where they get less and less payment (or bigger penalties) for their sicker patients, and are able to provide fewer and fewer services, and therefore perform worse and worse. (In medicine, the Lake Wobegone effect is reversed--it is not that every provider’s patients are “above average” but rather below average, sicker, and more complex.)
All of this is not to say that these reforms can’t work. I just think we need to plan implementation carefully. For the new value-oriented Medicare reforms to be useful, we need some important things:
- Good quality measures that are meaningful and feasible. We have to know if we are buying the right things that are meaningful to older adults and their family members.
- Good measures of health status and predictors of future utilization of care, without which adverse selection phenomena will just drive good practices out of the game.
- Regulatory flexibility and public trust. Health care providers need the ability to try to meet more patient needs with new configurations of staff. Without the trust of regulators and patients, this will not be possible.
We believe that Foundation grantees have a lot to contribute on these three issues, and we want to find ways to bring them into the planning process. The people who know the most about caring for frail older adults should have a seat at the table as we try to redesign their care.