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Friday, November 27, 2009

New models for care of whom?

* The Wall Street Journal

* NOVEMBER 27, 2009

Insurer Aims to Alter Health-Care Fee Model


Blue Cross Blue Shield of Massachusetts Inc. is expected to announce Friday a deal covering 60,000 members of the Caritas Christi Health Care system, marking one of the country's largest experiments in fundamentally changing the way doctors and hospitals are paid.

In most of the U.S. health-care system, doctors and hospitals generally earn money when people get sick, under a reimbursement system known as "fee for service." But Blue Cross is trying to change the payment model to a system in which doctors and hospitals earn more by keeping patients healthy and out of doctors' offices and hospitals.

If successful, the approach offers a potential model for the rest of the U.S. Legislation to overhaul the health-care system pending in the Senate calls for Medicare to set up small experiments to change reimbursement in ways similar to what Blue Cross is attempting....

Full article at:

I am not a fan of the present payment scheme in American Medicine...far from it. However, the idea that a what amounts to be a capitated network controlled by hospitals would end up delivering better service and care to patients has serous flaws. In order to understand the almost certain breakdowns which will occur using this model, you need to first think about who is contracted to who.

Ideally, contractual arrangements are constructed between two parties and some sort of exchange happens between the two parties. Each party controls their own resources and has the ability to continue the relationship or to end the contract. The decision to invest their own resources and continue to relationship is based upon their own criteria which may or may not bear great semblance to criteria established by someone else. You can decide what is important to you and allocate your own resources accordingly

In the case of a capitated health care network proposed, there are patients who relinquish or are granted financial resources through some mechanism (wages withheld, taxes, government largess) and this money goes directly to some third party, generally some variant of insurance company. Thus from the start, those who supposedly are the final recipients of any health care services control none of the resources. Patients ultimately must be dependent upon the kindness of strangers unless the incentives of those who hold the money are aligned with the needs and wants of patients. Fat chance that will happen consistently.

Next the real contractual arrangements are negotiated between the insurance company and some sort of health care delivery agent. In the Massachusetts plan outlined in the WSJ story, the insurance company develops some sort of prepaid agreement with hospitals based upon the assumption that for a set amount of money, hospitals will deliver complete care to a set of patients. The idea is that hospitals can function as some sort of accountable entity. The question becomes accountable to whom?

Ultimately hospitals (or integrated health care systems) in this scenario are accountable primarily to legal entities with whom they have entered into contractual obligations, that being the insurance companies who hold the money. Any actual obligation to patients, who hold a limited ability to control resources, must be secondary.

One of the basic tenants of moving to a capitated model in an integrated system is that physicians will no longer be paid for doing more things to patients, thus ending a perverse incentive structure which rewarded some physicians for over utilizing lucrative activities. However, the new system will replace one set of perverse incentives with a second perhaps worse incentives. Physicians (and presumably non-MD extenders of all types) will be employees of of the specific entities which have primary contractual obligations not to patients but to insurers.

Will (or should) all encounters between patients and providers be preceded by the equivalent of the reading of the "Health Care Miranda" statement which might read like:

" I may appear to be your personal physician (physician extender, nurse practioner..) and have your best interests in mind. However, I am an employee of the XXXXXXX Health Care system with whom I have a contractual obligation. You may have specific wants and desires relating to your health care and our priorities at XXXXXXX Health Care system hopefully overlap to some degree with your priorities. My entire compensation and benefits are paid by XXXXXXX Health Care system. My year end bonus is primarily based upon specifically measurable end-points which may have little to do with your specific health or well being. It is our mission to deliver what we have convinced our contractual partners that you need, not necessarily to deliver what you want. I am incentivized to avoid making you particularly unhappy but there is little financial reason for me to aim to go much beyond this goal since I do not actually work for you".

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