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Physician Payment Reform By Capitation, Will It Work This Time?

Paying physicians via capitation was soundly rejected by patients when it was tried in the HMO era a decade ago.

Massachusetts is trying again. According to a state commission, they recommend “replacing fee-for-service with a system that would use a single payment to cover most of a person’s care for an entire year.”

The last time this was tried, patients rebelled as it was perceived that there was a financial incentive for doctors and insurers to deny care. And they were right. Bluntly put, it’s the only way to control health care spending.

Some are skeptical that Capitation Version 2.0 will work. Hospital CEO Paul Levy feels that doctors and hospitals will be at risk of being caught in the middle: “You also need to let the public know what the new environment will be for their care so doctors and hospitals are not caught in the middle, the way it happened during the last experiment with managed care. If the Commission does half the job in its recommendations and leaves the rest to be fixed in the future, it will leave us will a lot of unintended consequences and will undermine the good that might otherwise come from a new payment scheme.”

Health insurer CEO Charlie Baker echoes my skepticism about whether patients will accept the implications of this new model. In addition to the fear that doctors will be incentivized to withhold care, patients will also worry about a possible “restriction on their ability to see any physician they wanted to see.”

But, the bottom line is that saying “no” is the only way to control costs. Whether patients will accept that fact will determine whether these payment reforms will be successful.

*This blog post was originally published at KevinMD.com - Medical Weblog*

Healthcare Rationing: Necessary or Evil?

I met a urologist from another city recently.  Since it had been a much discussed issue recently, I asked him what he thought about PSA testing. His answer was immediate.

“I think PSA testing has been proven to save lives, and I have no doubt it should be done routinely.”

When I mentioned the recent recommendation that prostate cancer screening be stopped after a man reaches 70, his faced turned red.  “That report is clearly an attempt by the liberal media to set the stage for rationing of healthcare.  It was a flawed study and should not be taken as the final say on the matter.”  He went on to recount cases of otherwise healthy 80 year-old men who developed high-grade prostate cancer, suffered, and died.

I chose not to debate him on the subject, but did point out that his view was that of one who sees the worst of the worst.  I personally can recall less than ten patients who died of prostate cancer in the fifteen years I have practiced.  My view is one that sees a non-diseased general public, and not worst-case scenarios.  I also didn’t point out that even the American Cancer Society stopped pushing the test and states, and does not think as highly of the evidence as he does: “Using the PSA test to screen men for prostate cancer is controversial because it is not yet known for certain whether this test actually saves lives.” (1).

But I digress.  What really struck me in the discussion was the way he pulled out the idea of rationing as the end-all hell for American healthcare.  It is regularly used as a scare tactic for those who advocate a “free market approach” to healthcare.  They point to the UK and Canada where people are denied cancer treatment or delayed repair of a ruptured disc resulting in permanent paralysis.  Rationing healthcare seems a universal evil, and any step that is made toward controlling cost is felt by some to be a push of the agenda of the Obama administration toward universal health coverage and ultimately rationing.

So what exactly is so bad about rationing?  The word itself refers to an individual being given a set amount of a limited resource, above which none will be available.  In healthcare, the idea is that each American is given only a set amount of coverage for care and above that they are left to fend for themselves.  Those who are either go over their limit or are felt to have a less legitimate claim on a scarce resource will be denied it.  This is especially scary for those who are the high-utilizers (the uninsurable that I have discussed previously), as they will use up their ration cards much faster than others.  I certainly understand this fear.

But are all limitations put on care really a step toward rationing?  Are limits put on care a bad thing?  The answer to that is simple:  DUH!  Of course not!  Of course there need to be limits on care!  Without control over what is paid for, the system will fall apart.  Here’s why:

  1. Limited Resources – Not only are our resources limited, they need shrinking.  The overall cost of our system is very high and has to be controlled somehow.  Different interests are competing for resources, and by definition whoever doesn’t win, doesn’t get paid.  This means that someone needs to prioritize what is a necessity and what is not.
  2. Lack of personal culpability by patients – with both privately and publicly funded insurance, the actual cost to the patient is defrayed.  They are not harmed by unnecessary spending, so they don’t try to control it.  Only uninsured patients are painfully aware of the cost of unnecessry tests.
  3. Lack of personal culpability by doctors – If I order an unnecessary test or expensive drug, I am not harmed by the waste.  For example, it is common practice by emergency physicians in our area to get a chest x-ray on children with fever.  Most of this is related to defensive medicine which is understandable in the ER, but clinically the test is often not warranted.  Yet the emergency physicians are not really affected by this waste, and the hospital and radiologists are actually rewarded by it if the insurance company pays for it (which they do).
  4. Incentives for other parties – As I just said, hospitals and radiologists have incentives to have wasteful procedures done.  The urologist I spoke to has a huge financial stake in the continuation of PSA testing, as it generates enormous business for him.  Drug companies want us to order their more expensive drugs than the generic alternatives.  This doesn’t mean any of them are wrong, but they sure as heck won’t fight waste if it harms them financially to do so.

When I was a physician starting out, the insurance companies would pay for pretty much any drug I prescribed.  At that time there were very expensive branded anti-inflamatory drugs that were aggressively pushed by the drug companies.  When the first drug formulary came around, the first thing that happened was that they forced me to use generic drugs of this type.  Before, there was no reason not to prescribe a brand, I had samples, and they were a tiny bit more convenient.  But when I changed there was really no negative effect on my patients.

One of our local hospitals just built a huge new cardiac center.  Statistically, our area is a very high-consumer of coronary artery stents compared to the national average.  Yet there are many cases in which an asymptomatic person will get a stent placed simply because they have abnormalities on their cardiac catheterization.  Logically this may make sense, but the data do not suggest that these people are helped at all.  Do you think that the hospital wants these procedures halted?  Do you think the cardiologists do?  Yet if they are truly unnecessary, shouldn’t they be stopped?  Couldn’t the $200 million they spent on their state-of-the-art facility be used in better ways?  Someone has to be looking at this and making sure the money spent is not wasted.

Without cost control a business will fail, and the same goes for our system.  Yet any suggestion at the elimination of clinically questionable procedures is met with cries of rationing.  Right now we are not at the point of rationing, and the act of trying to control cost by eliminating unnecessary procedures does not necessarily imply that the end goal is rationing.  The end goal is to spend money on necessary procedures instead of waste.  I sincerely doubt there is a left-wing conspiracy to push us to deny care where it is needed.  I doubt that the American Cancer Society is in favor of rationing.

Let’s just spend our money wisely.  It’s just common sense; not an evil plot.

*This blog post was originally published at Musings of a Distractible Mind*

Patients Do Not Want Their Doctors Paid On Salary

One question that occasionally comes up is whether doctors should be paid a flat salary or not.

Currently, the majority of physicians are paid fee-for-service, meaning that the more procedures or office visits they do, the better they are reimbursed. This, of course, gives a financial incentive to do more, without regard to quality or patient outcomes.

One proposed solution is simply to pay doctors a flat salary, with bonuses for better patient outcomes.

Well, according to a recent Kaiser/NPR poll, that idea is a no-go for patients. 70 percent of patients think its better that a “doctor gets paid each time they see you,” while only 25 percent think a yearly salary is better.

As an aside, I find it interesting that any public poll result that goes against the progressive health policy agenda is considered a “weak opinion,” but really, this isn’t a surprising result.

Economist Uwe Reinhardt hinted at the cause when he said that most Americans believe “that they have a perfect right to highly expensive, critically needed health care, even when they cannot pay for it.”

Perhaps the public believes that a salary is similar to the capitation debacle in the 1990s, where doctors were paid a fixed fee, which gave them an incentive to deny care. And any perceived attempt to restrict care will be met with visceral opposition by the American public.

Which again shows how difficult it will be to engage patients with any dialogue that involves cost control.

*This blog post was originally published at KevinMD.com - Medical Weblog*

Beyond the Five-Digit Codes: The Art of Putting Patients First

By Steve Simmons, M.D.

Last week my partner wrote about The Funnel, and illustrated how patients are squeezed through a healthcare system that focuses on specific problems without allowing enough time to treat patients as individuals.  We have shown how frustrating this is for doctors and demonstrated that a shortage of primary care physicians is a reality.  However, we don’t believe it’s too late to reverse this foreboding trend. Today, my partner and I at doctokr Family Medicine are building a practice to care for our patients as individuals first.  We have also added our voice to a growing chorus of physicians sounding ever louder, explaining the necessity of a healthcare system that places the art of caring for patients first.

The next time you sit in a doctor’s waiting room, look around and consider what, and more importantly who, you see.  You might see a sick child or his worried mother. Our healthcare system does not see two people, rather it sees a 5-digit CPT and ICD-9 code.  ICD-9 (International Classification of Diseases) codes were originally created by the World Health Organization (WHO) to track diseases across the globe. Today, CPT codes (designating patient difficulty) are combined with the ICD-9 codes by third-party providers to standardize the reimbursement process. Although over 17,000 ICD-9 codes exist to classify various illnesses, there is no code for compassion. More concerning, the system does not allow any time to ease the worries or fears of a mother.

The focus of a primary care doctor’s medical practice should be on the art of patient care. An individual should be treated as a whole and not the combination of their individual problems.  But, a time may come when we must focus on one specific medical problem and seek the help of a specialist; such as an endocrinologist for diabetes or an orthopedist after an accident.  Yet, without a primary care physician to coordinate our care and speak on our behalf, a patient’s wants and needs as an individual might not be considered in reaching a particular treatment decision.  I can speak as a doctor, son, or patient when I say that anyone’s health can suffer at the hands of brilliant physicians working without the guidance of a coordinating physician who knows us well.

My mentor in medical school was an experienced family physician near retirement who offered me the following insight.  There are two types of doctors and I would consciously or sub-consciously choose which one to be.  One type of physician makes medical problems central in their patients’ lives and thus forces the individual to revolve around their problems.  The other type works to keep the patient’s life central and tries to make problems rotate around the individual.

Those policy makers determining the future of healthcare should follow my mentor’s advice.  Today’s health-care system has devolved to focus solely on problems and disease, often to the detriment of individuals and families.  As decision-makers explore revamping our current healthcare system they could continue, unaware, in this same direction. But, I have to believe they would choose the other direction if they could remember how it feels to sit in a doctors waiting room surrounded by other people – individuals all.  Nothing will change the fact that healthcare is ultimately about people, and not codes or a specific problem.  Healthcare should help patients and their primary care doctors make good health and wellness decisions while basing them on an individual as a person.

Until next week, I remain yours in primary care,

Steve Simmons, MD

Health Care Policy Summit Brings Together Unlikely Allies

Better Health’s policy writer, Gwen Mayes, caught wind of an interesting new conference being held tomorrow in Miami. She interviewed Ken Thorpe, Ph.D., one of the conference organizers, to get the scoop. You may listen to a podcast of their discussion or read the highlights below. I may get the chance to interview Billy Tauzin and Donna Shalala later on this week to get their take on healthcare reform initiatives likely to advance in 2009. Stay tuned…

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Mayes:  Tell us about the upcoming conference in Miami on January 28th called “America’s Agenda: Health Care Policy Summit Conversation.”

Thorpe:  The conference will start a conversation on the different elements of health care reform such as making health care more affordable and less expensive, finding ways to improve the quality of care and ways to expand coverage to the uninsured.  The conference is unique in that we’ve brought together a wide range of participants including government, labor, and industry for the discussion, many of whom have been combatants over this issue in the past.

Mayes:  Will there be other meetings?

Thorpe:  This is the first of several.  There will others in other parts of country over next several months.  President Obama and HHS Secretary Designee Tom Daschle have talked about engaging the public in the discussion this time around.  So part of this is an educational mission and part of it is to reach consensus among different groups that have not always agreed in the past.

Mayes:  What encourages you that these groups will be more likely to reach consensus now when they haven’t in the past?

Thorpe:  The main difference is that the cost of health care has gotten to the point that many businesses and most workers are finding it unaffordable.  In the past, most businesses felt that, left to their own devices, they could do a better job of controlling health costs by focusing on innovated approaches internally.  What we’ve found, despite our best efforts, working individually we haven’t done anything to control the growth of health care spending.    The problems go beyond the reach of any individual business or payer and we need to work collectively.

Mayes: How will health care reform remain a priority in this economy?

Thorpe:  The two go hand in hand.  As part of our ability to improve the economy we’re going we have to find a way to get health care costs down.  Spiraling costs are a major impediment to doing business and hiring workers.  To the extent we can find new ways to afford health care it will be good for business and workers.

Mayes:  Health information technology is also an important aspect.  What are the common stumbling blocks to moving forward?

Thorpe:  There are three issues we have to deal with.  First, we have to have a common set of standards for how the information flows between physicians and physicians, and with payers and hospitals.  What we call interoperability standards.   Second, we have to safeguard the information.  Finally, cost is the biggest challenge because most small physician practices of 3 or 4 physicians don’t have electronic record systems in place.  To put in a state-of-the-art system can cost $40,000 per physician and most cannot afford this expense.  I think the stimulus bill will provide funds to help with these costs.

Mayes:  There’s always growing interest in the patient’s role.  How will this be addressed?

Thorpe:  We have to find a better way to engage patients in doing better job of reducing weight, improving diet and those with chronic disease to follow their care plan they worked out with their physician.  We also want to make it more cost effective for patients to comply with the plan.  Patients who comply with health plans will have better outcomes at lower costs. 

Mayes:  Who’s on the agenda in Miami?

Thorpe:  It’s at the University of Miami so it will be hosted by President Donna Shalala who was Secretary of HHS under the Clinton administration so she is well versed on health policy.  Also attending is the head of PhRMA, Billy Tauzin, a former Congressman and former majority leader of the House, Dick Gephart.  There will be some lay people as well for a nice cross section of consumers, labor, providers, business and others.

Mayes:  How can people learn more about American’s Agenda and the conference?

Thorpe:  The executive director of American’s Agenda is Mark Blum.  He can be reached at 202-262-0700 or at America’s Agenda.org.

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