Prospective Payment Good, Fee For Service Bad, Right? Unless You're a Patient That Is.....

Applying the brake in the name of patient care?

The Disease Management Care Blog poses a simple question: knowing that, despite the best of care, things can occasionally go wrong following surgery (for example, inpatient MRSA infections can still happen and readmission rates will never go to zero), do you really want your doctor or hospital to not be paid for the additional care that you may require?

Go to the websites of organizations like Robert Wood Johnson or The Brookings Institution and you'll find impressive expert papers that extol a variety of "payment reforms" designed to "align incentives," "reduce waste" and "achieve cost savings."  Dig into these reforms and readers will encounter admiration for payment approaches like "prospective payment," case-based," "bundling," and "shared savings."  You'll also find a deep disdain for "fee-for-service" (FFS). 

Prospective good, FFS bad, right? 

"Not always," replies the DMCB. It depends on your point of view. Like, if you're a patient.

The DMCB explains.

The DMCB learned long ago to simplistically think of provider payments in terms of "gas" and "brake" pedals.  FFS applies gas and accelerates provider services; that's because each time a "service" is provided it subsequently generates a "fee." 

In contrast to FFS, case payment, bundling and capitation apply the brakes, because providers receive the payments up-front. Since the money is in hand, providers have an economic incentive to preserve it and withhold services.  The DMCB thinks of "shared savings" in terms of brakes because the up-front payment is essentially held in escrow until the savings (versus a targeted level of utilization) are achieved.

The simplest example of how this can be applied is to hospitalization.  If hospitals are paid for each day that the patient is in a hospital, that's FFS (otherwise known in the industry as "per diem"). 

Instead of per diems, most hospitals are paid with a different payment mechanism based on "diagnosis related groups" (DRGs). Every time a patient is admitted, that generates a payment (similar to FFS).  That payment, however, is not pegged to the number of days the patient stays in the hospital. Instead, the payment is bundled to pay for the entire hospitalization.  That's why hospitals are always willing to admit patients (the gas) and then in a hurry to discharge them (the brakes).

Under the payment reforms championed by Robert Wood Johnson or The Brookings Institution, the inpatient payment bundling would be expanded to pay for the entire case after discharge from the hospital.  Under this system, if the case had to be readmitted, the hospital and providers are SOL.  After all, why should they be rewarded for shoddy care?

Unless, of course, you're the patient.  The DMCB worries that a one-size-fits all approach to payment policy could have unintended consequences. Patients battling unanticipated outcomes would likely prefer that their providers be incented to give additional care.  They want to be back in the hospital.

The payment policy may be good from the point of view of health reform, but it can be bad for patient care. 

The DMCB asks if we are on the verge of another round of unintended health care consequences.

We'll know soon enough when anecdotes of patients being inappropriately denied readmission begin to appear.

It's Not Just the Costs, Stupid, It's the Technology. Insight from the Robert Wood Johnson Foundation

When the Disease Management Care Blog gets an email from the Robert Wood Johnson Foundation, it pays attention. Heck, maybe it is just an internet version of junk mail, but it still makes the DMCB feel good and it’s testimony to how RWJ is correctly paying attention to us bloggers. Are we the internet’s chattering version of AM radio talk shows, or do we perform an important service by providing insight not available elsewhere? RWJ (and Kaiser, by the way) seem to think it’s the latter.

What newsworthy morsel would prompt the RWJ to virtually reach out and touch the DMCB you ask? Paul Ginsburg, President of the Center for Studying Health System Change has authored a report on ‘High and rising health care costs: demystifying U.S. health care spending’ that is posted on the RWJ site. The piece is a well written literature review with no new insights. The good news is that those insights are repackaged with emphasis on all the right places.

There is much to digest here, but the DMCB zeroed in Dr. Ginsberg’s views on the impact of technology. This is the number one driver of cost and includes things like new types of gadgets (e.g., heart catheters for angioplasty), approaches to surgery (e.g., robotic), imaging (e.g., PET scans), monitoring devices (e.g., continuous glucose monitoring for Type 1 diabetes) and pharmaceuticals (biologics). Dr. Ginsberg correctly points out that not all technologic advances are of equal value, but that’s not the problem. The problem is that technology that is intended to be substitutive (that replaces open heart surgery, open prostate surgery, regular x-rays, blood tests and pills) often ends up being additional or expansive (patients who wouldn’t have had open heart surgeries can now get angioplasties, men who would opt to not have prostate surgery agree to robotic, PETs and all the other x-rays are done together and all persons with Type 1 diabetes end up being potential candidates for CGM).

Dr. Ginsberg offers up three options for your consideration:

1. Effectiveness research that separates the wheat from the chaff. He notes this means not only shielding the research from unseemly political or industry pressure to jigger its assessments, but using that tedious, obscure and dreaded metric that has been demystified in a prior DMCB post, the ‘QALY.’

2. Payment reform that puts the brakes on the morphing of substitutive into additive technologies. He notes that the profit margins on angioplasties, robotic surgery, PET scans, continuous glucose monitoring and biologics can be reduced by enlightened fee schedules that make it less attractive to go to market.

3. Consumerism with incentives and support that enable individual patients to avoid new low value technology in favor of the good old stuff or truly valuable new stuff. Think transparency, changes in the tax code, cost sharing, and altering the insurance benefit to cover care that has a low ratio of dollars to QALYs.

The DMCB offers up three thoughts for your consideration:

1. The DMCB has given many Grand Rounds, taught many young physicians, talked to many policy makers and quaffed brewskis with many captains of industry. It can say with great certainty that 99% have idea none what a QALY is or how to apply it in the day to day business of healthcare. That’s not necessarily insurmountable, but it speaks to the specter of a priestly class of Brahmin healthcare economists using a functionally opaque methodology to decide if little Johnny can get cancer treatment. The DMCB gives the idea a ‘C’ grade and advice to proceed with caution.

2. Through much of its career, the DMCB has parked its primary care Toyota next to its specialist colleagues’ Caddies in the doctor’s parking lot, but isn’t resentful. However, it’s not sure making the specialists drive Tato Nanos is necessarily the best answer. Rather, the DMCB remains partial to Porter and Teisberg’s ideas on global payments for episodes of care (a.k.a, conditions and care cycles), which go unmentioned by Dr. Ginsberg; it thinks the docs can sort things out for themselves under such an approach. A ‘D’ grade for not recognizing the merits of others' approaches.

3. What is more valuable than an informed, savvy patient that understands the benefits, risks, alternatives and costs of all the various testing and treatment options? The DMCB would like to point out, however, that provider ‘framing,’ thanks to conscious or unconscious bias, is an under-recognized driver in patient decision making and that there is a huge science on the topic outside the mainstream of medicine. A B+ which would have been an ‘A’ if disease management had been mentioned.

By the way, the DMCB expresses its gratitude to RWJ for the email and for making its report available on line. It would also like to point out that the RWJ is hosting a webinar on Friday, Nov. 14th from 1:00 to 2:30 to discuss this paper and health care costs. In addition to Dr. Ginsburg, David Nexon from AdvaMed and Helen Darling from the National Business Group on Health will provide comments. You can register by e-mailing egarland@gymr.com.