The Innovator's Dilemma, Bundled Payments and the Prognosis for Disease Management

Many years ago, the Disease Management Care Blog was involved in a doltish exercise in planning how to prepare specialist physicians for careers in primary care. As part of this work, we faux experts predicted an oversupply of physicians in light of the rationalizing of medical services thanks to ascendant managed care. Boy, in those heady pre-backlash days did we ever get it wrong.

However, one trend became apparent to the DMCB at that time and it still holds true: the increasing ‘upward competency’ of health care providers. We assumed, thanks to technology and market demand that the expertise and skills required of specialists could be acquired by non-specialist physicians and that primary care physician expertise and skills could in turn be acquired by non-physicians. Think of it as a medical form of the ‘innovator’s dilemma.’

We are seeing versions of this trend today. For example, invasive cardiac surgery performed by intensely trained cardiac surgeons has been supplanted by stents from cardiologists, while highly accurate coronary artery imaging that could only be obtained via a cardiologist-performed catheterization can now be obtained directly by primary care physicians in the form of multi-slice CAT scanners. In the meantime, many of the traditional diagnosis and treatment roles of primary care physicians have been taken up by professional non-physicians, while at the end of the line, we’re finding that patients can assume many of the day to day duties of education and management. Patients aren’t ready yet to remove their own appendices, but the trend in many areas of health care – including chronic conditions – is definitely there.

Unfortunately, the ‘defined benefit’ of typical fee-for-service (FFS) insurance has trouble keeping up with these shifts in physician competencies. That’s because the coverage of any given service typically hinges not only on the nature of the intervention itself but on the entity or physician performing the service. Approval of the physician is often contingent on their credentials, which are reviewed by the ‘credentialling’ process of health insurers. Not credentialed to bill for a service = not covered.

What can change this pokey nature of FFS style health insurance? The DMCB likes an editorial from our friends at MedPAC in the July 3 2008 New England Journal of Medicine (and it's not online at the time of this posting). Hackbarth and colleagues describe the MedPAC recommendations about the use of bundled inpatient payments by Medicare. They argue that global payments that include the hospitalization itself as well as all the physician services and several weeks of post-discharge care will lead to better coordination or services, higher quality and lower costs. This is a limited version of Porter and Teisberg's recommendations for payment for 'episodes of care.'

The DMCB thinks this is a good idea. If the global payment approach fulfills its promises and physicians do not end up being disenfranchised (think backlash Ver 2.0), similar payment approaches for the outpatient management of chronic illness may eventually follow. Simplistically thinking, if there is a similarly contrived reimbursement for the ongoing care of chronic conditions, it would be up to the specialists, primary care providers, non-physicians and even the patient to sort out who does what with the resources at hand. Services within the care episodes would move to the appropriate level of care without having FFS process and financial disincentives get in the way. Given its efficiencies and effectiveness, the DMCB is confident versions of disease management would be sought out as one component of a coordinated delivery system (a.k.a. Dr. Casalino’s ‘accountable care organization’) for chronic illness, leading to the emergence of partnerships between physician-organizations and vendors. The upward competency/innovator’s dilemma wouldn’t need to wait for fee schedule updates from health insurers.

The DMCB agrees this sounds naively utopian but there’s something to this. Cheers, MedPAC.