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.

HHS Secretary Leavitt Quotes: Legacy Building, P4P, Networks and Others

One of the Disease Management Care Blog’s favorite WSJ columns is called The Middle Seat. It was reminded of that because that is precisely where it is destined to be once it gets out of the Red Carpet Lounge today in O'Hare. That isn’t so bad, because that'll be a chance to catch up on a lot of reading. In the meantime, kudos to the Lounge for no longer charging for wireless internet access.

On the way out to Chicago, the DMCB made a head start by looking at the print version of the Health Affairs 'Web Exclusive' wide-ranging interview of HHS Secretary Mike Leavitt. The DMCB didn't detect any particular overarching theme in this read, but this does make for some interesting quotes. They give good insight into this very smart Secretary's point of view. Furthermore, perhaps one of these nuggets can be used in a DMCB reader's future PowerPoint presentation:

Never mind the 80-20 rule. In the public sector, it’s the ’40-40-20’ rule. ‘Success is 40% what you decide to propose, 40% is now you describe it and 20% who you tell in advance of proposing it.’ That may be true in parts of the private sector too. The DMCB recommends that readers keep that last 20% in mind if they ever get a call from HHS.

Secretary Leavitt learned from the Olympics that what happens long after the games are finished is what is important: ‘And I took my 10,000 day horizon and said, where do I want this to be 25 years from now.’ Think about the big commitment to information technology and value based purchasing and it makes sense. This is an interesting contrast between notions of short-term political expediency and long-term legacy. Really long term legacy.

Here’s an interesting example of applying the realities of the government calendar to an initiative like the American Health Information Community (AHIC): ‘The executive order gave the group a two year life because we wanted to transition it to a successor organization….The government runs in four-year cycles, but its really not four years. Because when it starts, there’s about a 6 month period when no one’s in place… then the last year, there’s an election.’ For those readers wondering why things don't get done quickly or are calling campaingn staffers offering to be in the next McCain or Obama Cabinet, this is sage advice: if it doesn’t happen in that two year window, forget about it.

There’s a new social phenomenon afoot everywhere called ‘networks’ (maybe a spill over from military thinking: consider Israel and it's star-crossed foray into south Lebannon) that should be recognized as the emerging health care paradigm: ‘So as you start to approach the way health care needs to work, it should work more like a network of PCs rather than a mainframe. Now, Medicare and Medicaid and big socialized insurance programs are still mainframes.’ Maybe the DMCB should change its naming of 'Coordinated Delivery Systems’ to Networked Delivery Systems.’ The underlying principles are the same, but it sounds cooler, more informationish techoid, don’t you think?

Here’s a reality dose for pay for performance: ‘We are not very good at the basics [but] we need to do this…. What we’ve got is a little pile of wheels and a small chassis and a Briggs and Stratton motor… We’ll do it by creating a little go-cart that evolves into a race car.’ Putt..putt… vroom!

How do you run an organization with a $750 billion budget and 67,000 employees? ‘Twenty seven people report directly to me. I have no undersecretaries.’

As an aside. the interviewer was Leonard Schaeffer, formerly of WellPoint. Check out his brief quote that tells volumes about IT, the physicians and 'the system': 'We received awards for attempting to accelerate health IT adoption, but the truth was, we tried and failed. WellPoint gave away $42 million worth of hardware and software to doctors, many of whom happily took their laptops home to their kids. All we got from that effort was a letter from the California Medical Asociation (ed.comment, an autonomous physician association that participates in the AMA) accusing us of unfairly imposing a gift tax on recipients of free IT supplies.' He makes a good point: if physicians are given monetary or other services in kind to support IT or the Medical Home, what assurance is there that they will not fail to invest the resources in the kinds of improvements necessary to improve quality and reduce cost? Will some docs will be tempted to take the money and run, while continuing dysfunctional one-on-one care?

More on Coordinated Delivery Systems

The Disease Management Care Blog truly appreciates any and all written commentary on prior posts. The best so far is an insightful observation from Anne. She doubts a modular approach to social services has much merit. Unlike the manufacturing of planes or computers, she argues these services can’t be ‘widget-ized’ at several levels. It obscures accountability between the provider and the contractor. Health care providers are not necessary postured to manage administrative and oversight roles. Finally, the modular approach doesn’t have a very good track record; while lead paint in toys is one example, another could be the recent heparin catastrophe.

Anne’s perspective has a lot of merit. However, the DMCB isn’t sure that the current system doesn’t also perpetuate the same lack of accountability. Lapses in care are common among persons with chronic illness and it’s even hard to figure out who the responsible doctor is. Enter the government, employers and insurers who are out to fix the lapses by coordinating care, working with/for the PCP, helping patients choose self care and bringing back versions of capitation with clinical and financial performance guarantees.

What’s more, there are the increasingly complicated benefit designs. While the health care consumer is supposed to be ‘empowered’ by the right combinations of deductables, co-pays and Health Savings Accounts, the DMCB thinks patients could use help to navigate it all. Just because that’s not a traditional role for providers doesn’t mean it couldn’t be achieved. That’s especially true if who is ever paying for the care insists on it and health information technology is tasked to assist this.

As for the lead paint theory, the DMCB has seen clinical outsourcing with performance metrics built right into the contracts. While this kind of patient protection is not necessarily perfect, it’s a heluva lot more accountable than usual medical care, which has its own issues with patient safety.

None of the elements above necessarily depend on a modular approach in a coordinated delivery system. However, the DMCB wonders if government, employers (like Boeing) or health insurers couldn't impose accountability metrics on each contracting entity, perhaps assign one entity with coordinating oversight (maybe to a disease management vendor) and pull the contract(s) if lead paint starts showing up in the product.

The DMCB agrees that the coordinated delivery system is untested has a lot of naïve assumptions built in. That being said, there still may be some merit to the notion. Thanks to Anne for stressing the model.

A New Term: Coordinated Delivery Systems. Better than Integrated Delivery Systems?

In a prior post, the Disease Management Care Blog described how Boeing was ‘assembling’ a medical home initiative. In thinking about this some more, the DMCB wonders if Boeing is assembling something far greater with important implications for population-based health care.

Large employers are increasingly becoming self-insured. To manage their insurance risk, they use a standard benefit, rely on a provider network, have wellness programs, may use prior authorization and/or concurrent review, contract an outside disease management vendor and, as Boeing demonstrates, are starting medical home projects. Considering the spectrum of need in an insured population, this is a reasonable approach, right?

The approach of employers (and many mainstream insurers, by the way) is not only to have those components but to sponsor interlocking combinations of wellness, prevention, episodic care, primary, secondary and tertiary care, chronic illness care management, complex care coordination and catastrophic illness care. In some areas of the country, a single source can provide the full spectrum of services. They are called ‘integrated delivery systems.’ In the remainder of the country, however, IDS are simply not available.

None of the above is necessarily news. What is news is the advent of an ‘outsourced and modular’ approach to health care that resembles the modern industrial processes. As mentioned before, many manufacturers in the U.S. have foregone ‘owning’ the entire factory and are instead relying on global network of suppliers who provide the ‘just-in-time’ components made to precise specifications. The result, in the case of Boeing, is a jet that really consists of parts (according to Wikinomics) that are practically ‘snapped’ together. The approach to health care isn’t turning out to be all that different. Employers are ‘assembling’ outsourced care components.

Note that in a typical supply chain, failure to deliver the components means giving up the business. The DMCB has watched employers literally fire health care entities and ‘insert’ new ones, much like swapping a turbine made by GE for one made by Pratt and Whitney. These employers are more than willing to ‘swap out’ hospitals, physician groups, disease management vendors and wellness entities based on price and outcomes. While the fired vendors have protested that this disrupts patient care, the vendors taking their place claim to have processes in place that will minimize the disruptions. In looking at the processes, they have a reasonable point.

The DMCB isn’t sure all this is necessarily bad. Integrated delivery systems’ transfer pricing and loyalty to their own systems don’t consistently translate into the best value for the health care consumer. Maybe an alternate approach is 'coordinated delivery systems' typified by the Boeings of this world. A quick Googling didn’t define ‘CDS’ in this new context: the DMCB would say these are organizations that hold the health insurance risk, have fiduciary responsibility for their enrollees, have separate access to all the components normally owned by an integrated delivery system and can force a market dynamic, mutual interlocking and substitution of the components in their health care purchasing decisions.

If Boeing is not alone in this new trend, the Disease Management Care Blog suspects CDS' (or what ever they are best called) will be a force to be reckoned with.