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Saturday, May 21, 2011

Pricing and Value: When will lessons be learned

I was stumbling around the blogosphere today and came upon a piece published on the ACP Advocate Blog:

http://advocacyblog.acponline.org/2011/04/we-wont-get-fooled-again.html

It provided a great, succinct summary of the the various attempts to reform the health care payment system over the past thirty years. They key insight and questions identified are:

The challenge, then, for those of us who believe that change is necessary and even inevitable, is to show that the PCMHs, ACOs, and other ideas for reforming payment and delivery systems can really work for the doctors in the trenches. Articles in prestigious journals, white papers from policy conferences, and well-meaning policy papers from organizations like ACP won’t hack it. We will instead need to demonstrate that the new models really, really, really can result in better payment, more time with patients, and fewer hassles for real doctors in real practices. We will have to fight to make sure that what seems like good ideas aren’t hijacked by insurance companies and other special interests into something entirely else, like we saw with gatekeepers and the resource-based relative value scale.

Like the legendary refrain from the legendary rock band, The Who, primary care doctors are screaming that they won’t be fooled again, and policy advocates would have to be deaf, dumb and blind not to hear them.

Today’s questions: What do you think the history of other failed policies tell us about the latest ideas for saving primary care?

This is easy. The history of these particular failed policies tell us that attempts to create command and control economies of any sort do not work...ever. They tell us that attempts to use administrative and non-market based approach to assign value via administrative pricing mechanisms don't work....ever.  Centralizing how prices are set and putting this power in the hands of a limited number of people simply sets the stage for the entire process to be hijacked by those most interested in money.

If I had an hour to save the world I would spend 59 minutes defining the problem and one minute finding solutions - Einstein
A problem well defined is a problem half-solved. – John Dewey

When the previous attempts to align the activities of health care providers with activities  which delivered value to patients and control costs were deployed, they simply failed miserably. Costs ran out of control and we created a system that did things to patients and only inconsistently served their needs. The fixes deployed served the immediate needs of the those involved in the deployment. In the short term, costs associated with particular books of business were reigned in but the cost control mechanisms simply was not match for the literally millions of system gamers probing for easy money.

In each case the diagnosis of the problem was wrong. In each case there was a belief that value could be defined independent of the party receiving the service. Furthermore, the ever expanding insurance model upon which each reform was built increasingly attempted to insulate the insured from the cost of whatever they received. It created the false impression among patients of unlimited resources which drove increasing and uncontrolled demand.  The most recent iteration of this in the form of ACO's explicitly rewards health care providers and health care organizations for stinting on care as the preferred approach to reign in demand. Seems odd to say the least and perhaps ethically dubious.

For the most part, health care is much like any other good or service. It involves people and resources and scarcity. To identify why we have such a mess, perhaps it would be useful to look at other activities which involve human effort and other scarce resources. There is no contesting that in the entire history of the human race, no human institution has proven more effective at the deployment of scarce resources and the motivation of humans to serve each other than markets.
While markets are imperfect, they virtually guarantee that value will be defined, not by the few, but by the many outside of the political realm, unless we are foolish enough to move the value assignment into the political realm (which we have).

The fee for service system is not flawed inherently. That private parties enter into agreements where one party is paid to deliver services to another party is fundamental to human exchange and complex economies. The inherent flaw in the present health care fee for service system is how value is determined.

The most important element of the health care system for any given individual who seeks care is that the services they desire need to be available. That things that people desire and need will be available is not a given.  Again while markets and price coordinated economies are not perfect, they do a better job of making a variety of goods and services available than any other approach. The perversion of pricing has made primary care increasingly unavailable. It has been administratively priced below where it should be in order to preserve supply.

How primary care will respond is unclear. There are those who believe that solutions will be found in the political realm. Primary care beware! This type of thinking is like Charlie Brown trying to kick the football held by Lucy. Don't be fooled again.

The alternative is to decrease your reliance on politics and third party payers. Other models such as SimpleCare and Retainer based medicine are much better approaches to fix the price problem than another politically based price fixing scheme. They have the best potential to restore your relationship with patients and have the prospect of beginning to change the culture to where patients have financial skin in the game.

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