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Tuesday, March 30, 2010

Perverse payment systems as brakes on needed innovation

There is lots of low hanging fruit when it comes to creating a more effective, efficient,  and patient oriented system. In virtually any other realm of business, innovators would be constantly probing and experimenting, looking for opportunities provide better services, with innovators being rewarded for doing a better job. Why does this not happen so readily in health care?

A basic tenant of economics is that people respond to incentives. The most powerful and consistent incentives are financial and there lies the rub. What happens when you take a basically virtuous population and create financial incentives to do only a very narrow set of behaviors and create financial disincentives to do anything else? You end up with a very narrow set of behaviors which happen to be the ones which are rewarded. Seems simple.

In the realm of health care, the payment system pays physicians for a very narrow and unchanging set of behaviors. Value to the physician comes when they see patients face to face and do any number of activities in the presence of the patient. Some of these activities may have value for the patient while others appear to be of value only because they allow the physician to use specific billing codes. Not only does the administrative pricing system pervert medical decision making because it sets prices incorrectly at a quantitative level, it precludes the deployment of novel approaches to care because it locks all parties into  an archaic model of care delivery.

I look though my office visits, particularly my follow up visits, and I have to ask, what value does the face to face encounter actually bring to the patient? What decision that we make (the patient and the doctor) during an office visit actually requires the patient come to my office? What piece(s) of information are an exclusive product of the actual visit to my office and is that information actually required for relevant decision making and worth the patient time consumed? Exactly what part of the information derived from the physical exam is crucial or even consistently reliable warranting the absolute requirement for a face to face encounter for payment for services?

Obviously a face to face encounter is needed for scenarios where a procedure is required. Short of this requirement, technology affords us a wealth of options for collecting information, virtually none have which have been deployed effectively. Telemedicine has made some inroads, but it has been hamstrung by a host of mandates defining specifics of the technologies to be used. I have little doubt that without the brake of the stifling payment system countless models driven by a host of entrepreneurs would spring up to deal with every imaginable patient problem and complaint.

However, at this point it is not clear that those with vested interests in the old service model which delivers mediocre care for a high price are quite ready to move to a model of care which holds the promise for better, faster,  and cheaper. Why not? For doctors it means taking a risk and putting yourself in a position where they must rely on some mechanism other than insurance to get paid. For patients, it means that they might need to pay for their care with their own money.  However, these drawbacks may begin to appear less worrisome and the retail model of medicine may begin to look increasingly attractive, particularly in the low margin, mundane domains of care.

If there is anything that recent history teaches us it is we are dismal at predicting what the world will look like in the future, particularly relating to what people value and which tools will be deployed to best attend to those needs. That will not stop me from making a prediction. What I predict is as the administrative payment system becomes more and more divorced from rewarding innovation in attending to patient needs, it will become marginalized. Patients will begin to invest their own money to pay for care delivered under different care models. How quickly this comes about is hard to predict and what technologies and tools with prove to be dominant is anyone's guess. It will happen.

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