A Much Better Health Care System
Killingsworth, Cleve, Inquiry
Although some pieces of the new health care law are intended to improve the way the delivery system works, they are fragile, complex, and politically vulnerable. Taken together, they are less than what is needed to reform this complex enterprise. They also vastly overestimate the power of insurance companies over providers.
Failing to think more clearly about what is truly broken in our system is a luxury we cannot afford, especially with the impact of the baby boomers looming on the horizon. If we provide care to this group with the same excesses that exist today, the country will be on the road to a truly unprecedented crisis. This crisis will lead to policies that impose severe constraints on the ability of Americans to get the care they need.
I won't repeat the tired statistics about how expensive the system is and that its cost is unsustainable. I will mention that more needs to be said about what the nation's governors know all too well: the cost of health care is draining resources from the many other programs that need funding at the state level. These include education, infrastructure, and public aid. The more we spend on health care, the less we have for these programs.
Focusing primarily on how to extend coverage--as we have during the most recent debate--may be politically expedient, but it hides the real issues and guarantees an inadequate answer to the nation's health care problems. However, there is another way to think about the problem with the nation's health care system that lays the groundwork for the kind of solution we need. We can think about the delivery system in terms of what we get for what we spend. We can explore the cost, quality, safety, and effectiveness of the care actually provided--revealing how the system truly performs and what it takes to make it better.
Flaws in the System
Such an analysis exposes some serious problems with the health industry, but also offers some clues about how to address them. Most experts in the field agree that at least 30% of the care that is provided in the current health care system is clinical waste (Institute of Medicine 2000). A big part of that figure is medical services that have no demonstrable benefit for the patients who receive them.
Worse still is when these services are harmful. Studies show that as many as 98,000 patients die in America's hospitals each year from avoidable medical errors (Institute of Medicine 2000). Here are a few other examples of the aberrant performance of our system:
 Only 20% of care is based on the results of scientific clinical trials (Heptonstall 1999; Renckens 2002);
 Only half of the 100 million antibiotics prescribed annually are necessary (FDA 2003);
 400,000 unnecessary Caesarean sections are performed annually (Kaiser Family Foundation 2003);
 Only half of diabetics receive adequate care (McGlynn et al. 2003);
 Medication mistakes injure more than 1.5 million people per year (Institute of Medicine 2006);
 15 million incidents of medical harm occur in U.S. hospitals each year (IHI 2006).
Obviously, we do many things well. And many observers struggle to understand how things could be so bad when they are told we have the best health care system in the world.
The answer is simple. Although these problems are only a part of the system, they are big enough to threaten the viability of the whole. They do enough damage to make Americans uncertain about the quality and safety of the care they actually get, and they contribute greatly to making the system ultimately unaffordable.
The good news is that thinking about the system from the perspective of the way it performs shows us that its problems, taken individually, are not impossible to solve. Tackling these issues doesn't require Nobel Prize winning discoveries; it mostly requires that we put in place what we already know works. The question is: Why don't we? The answer is that given the economic incentives in our system, many stakeholders believe they are better off keeping things the way they are than doing things differently--even if the result is often harmful, wasteful care.
Nothing has been more powerful in shaping the system we have today than paying providers on a fee-for-service (FFS) basis. Under FFS, providers are paid according to how much they do. To get paid more, one has to do more (or be in a position to demand higher payment for what one does). As mentioned earlier, much good care has been provided under this payment approach. However, it has also been responsible for many of the excesses and gaps in the care we see today.
In the 2008 book How Many More Studies Will It Take? A Collection of Evidence that Our Health Care System Can Do Better, the New England Healthcare Institute chronicled from published studies more than 500 examples of overuse, underuse, and misuse of clinical services. The institute also pointed out that unwarranted variation in physician practice has cost the nation more than $600 billion each year. FFS has also created a culture in which Americans believe that more care is better. However, as Michael L. Millenson, the author of Demanding Medical Excellence." Doctors and Accountability in the Information Age (1999, University of Chicago Press), is fond of saying: More care isn't better care, better care is better care.
Looking ahead, we need to reduce the harmful clinical waste in the system, encourage the provision of safe and effective care for every American, and back it up with an appropriate underlying economic incentive. The only way to do this is to phase out the FFS system.
Global Payment: A Better Foundation to Build On
Although there are several alternatives to FFS, none has more potential to encourage the delivery of safe and effective care as global payment based on improved clinical outcomes. Global payment puts the national delivery system in the business of providing safe and effective care, not just doing more. It rewards the elimination of overuse, underuse, and misuse of care, and focuses the system on the delivery of better clinical outcomes for patients.
Under global payment, insurers would pay providers--or for that matter, accountable care organizations (ACOs) a fixed amount per month or per year for each plan member who chooses that provider as his or her caregiver. This payment would be based on the total amount the provider is paid today. Providers would be required to administer clinically effective care within this amount unless the group of patients turned out to be in greater need than the insurance company had thought. In that case, the insurance company would make up the difference. If costs were less and outcomes good, the providers would keep the difference.
Best of all, under global payment fixing patients is as important as fixing the payment scheme. Today, most quality-incentive programs are based on process measures. These measures are designed to determine whether certain things are done for patients with specific diseases. In contrast, global payment would place much more emphasis on whether patients actually got better. For example, consider diabetic patients. Instead of receiving a bonus based on how many patients got their eyes checked, the doctor would get a bonus based on how many patients had a hemoglobin HA1C below seven--a measure of how diabetic patients actually are doing.
Clinical practices that lead to improved outcomes should become the basis for a new community clinical practice standard. This new standard would have implications in a variety of areas such as malpractice, where the community practice standard is a major consideration in court rulings. It also would set a new high-water mark for quality, even for providers who continued to get paid under other methodologies--FFS included. Thus, wherever patients went to see a doctor, they likely would get a consistent, evidence-based assessment of the care needed and a treatment plan based on our current understanding of what works best. As a result, we would see a significant reduction in antibiotics prescribed for viral infections or patients unnecessarily admitted to a hospital, no matter which physicians they saw.
Patients clearly have a stake in reforming the system in this way but so do members of the industry themselves. Just as FFS payment has been the underlying force shaping the performance of the delivery system in the past, global payment will lead the system to improve itself at levels and in ways no national policy or planning can accomplish.
For insurers and their customers, the benefits of global payment are clear. The elimination of clinical waste should materially reduce the need for large premium increases. In fact, given the amount of waste in the system, these increases should ultimately be no higher than the inflation rate in the general economy. For providers and their patients, it would eliminate insurer involvement in medical decisions, which has been a bone of contention for these groups for decades under FFS. Under global payment, doctors alone would be accountable for the medical decisions they make. However, they would make these decisions in the context of what is known to be the most effective treatments. Global payment would also significantly reduce the administrative cost in the system for everyone. Since it is not based on claims, it would eliminate the massive expense both insurers and providers spend on claims processing and billing.
Finally, the most important change of all: global payment would compel providers to invest differently. Looking at the capital budgets of delivery systems today, you find they are designed, by and large, to increase their capacity to do more. If you ask hospital CEOs how much of their capital budget is committed to improving the clinical outcomes of the care given patients and by how much, you rarely get a definitive answer.
Global payment would allow these resources to be used to produce better clinical outcomes. These outcomes would inform institutions and reveal to the rest of the world how good they are at making patients better. This. would usher in a new era where superior outcomes--and not a brand--would become the measure of how good a provider is. As Michael Porter and Elizabeth Olmstead Teisberg suggest in Redefining Health Care." Creating Value-Based Competition on Results (2006, Harvard Business Press), this is the real basis on which we want providers to compete.
There is another benefit for providers under global payment, though it may be time-sensitive. During the health care reform debate, when the focus was on coverage, providers avoided the kind of harsh criticism insurers received. However, as a result of this scrutiny, many people learned perhaps for the first time that insurers were only a part of the problem--and maybe not the biggest part. They realize now that, in fact, insurers were limited in their ability to curtail the rising cost of care. This is because employers demand for their employees broad networks that include most providers. Within these networks, providers with strong brands and those with geographic exclusivity essentially demand whatever level of reimbursement they want, even though they cannot prove that their quality is better. This tends to increase the overall cost of care in the community and encourage other providers to push for higher payments, too.
Looking ahead, as these factors become more broadly known and data on clinical waste and poor quality continue to emerge, private and governmental payers will become more critical of all providers and take new measures to limit their payments. These measures will be increasingly invasive, especially for physicians, and will make independent practice more difficult than ever. It also will heighten the fierce competition among providers as they struggle to get the volume they need to support the capacity they have.
Global payment changes the game. The faster providers adopt this approach, the less vulnerable they will be to criticism of their clinical practice, and the more likely they will be to retain more of their current payment level.
The concept of global payment has been carefully examined recently by a number of parties. In Massachusetts, global payment was endorsed over other alternatives by the Massachusetts Payment Reform Commission as recently as June 2009. What is remarkable about this endorsement is that even though the commission consisted of stakeholders representing various interests (most notably doctor and hospital groups), the endorsement was unanimous. In fact, over 44% of Blue Cross Blue Shield of Massachusetts in-state HMO members receive care from providers under its new global payment contract. Although this contract arrangement is fairly new, the early results are promising. As recently as August 2010, after its own review of the concept, Harvard Pilgrim Health Plan independently decided to seek global payment arrangements with its providers.
Standing in the Way of True Reform
Unfortunately, there are some hurdles to the adoption of global payment. One of the greatest is confusion with its cousin, "capitation," which was unpopular and ultimately maligned during the managed care era. Global payment is not the capitation of those early years of managed care. Global payment is not about shifting risk to providers. Insurers must continue to be responsible for underwriting risk for their members.
Under capitation, it was easy for insurers to pretend that providers would actively manage the care of their patients and thereby reduce cost, so they negotiated contracts at payment levels that assumed the cost of care would be reduced. Predictably, these contracts often led to provider losses, and the mistrust among doctors, hospitals, and insurers deepened. To avoid this in the future, global payment contracts should start at the current level of payment because that rate reflects the actual cost of providing care today. It also includes a savings for providers as they reduce clinical waste.
Providers contributed to the failure of many early contracts by using capitation as a way of simply continuing FFS payments. For example, independent practice associations were often formed to receive the capitation from the insurance company and then pay it out to their members as fee for service, ultimately doing very little to actually manage care. Another cause of the failure of early capitation programs was a lack of information needed to monitor and manage the amount and quality of care provided. Today, however, information systems and care management tools are far more reliable than in the past. We are now much better at evaluating important factors like severity of illnesses, disparities in quality, and varying resource use at the group and individual physician level.
Still, to truly break from the past, providers under global payment arrangements should start on day one with the information resources they need to succeed. These resources--case management, utilization review, pharmacy management, mental health screening tools, evidence-based clinical protocols, and many others--often reside within health insurance companies. These resources should be virtually or literally turned over to providers who are under global payment and actually accountable for the care.
This small innovation will effect a massive change. Instead of the ongoing conflict between insurers and providers about the care to be given, providers should own the resources and make these decisions themselves. If paid fairly, rewarded for providing safe and effective care, and supplied with the tools they need to get this done, providers would practice very differently from what we see today.
Some providers, however, will resist moving to global payment--or any other system, for that matter. It's easy to understand the reasons. Most stakeholders know how to make money based on the current system. They fear that they might fare more poorly under a new payment methodology. For them, the test is not whether the change makes health care better, but whether it preserves or furthers their interests. I believe that global payment passes both tests for providers who commit to delivering effective care and improved clinical outcomes.
If we are going to make any progress on this issue in our lifetime, we must also avoid the trap of perfectionism in health care reform. We should not have to present a flawless alternative payment system, a direct and unobstructed path for getting there, and a 15-point plan on how to preserve everyone's best interests before we are willing to take a few steps forward. After all, in view of the way health care works today, how can anyone defend the status quo?
Of course, there are legitimate questions about global payment that need to be answered. The experience at Blue Cross Blue Shield of Massachusetts is teaching us that the best questions and answers emerge as one actually tries to make global payment work with real institutions in real care settings.
There are a number of ways that others can help speed the transition to global payment. For example, practice management firms can help physicians figure out how to organize themselves for more collaboration. Informatics experts can help providers understand what information technology is needed to support a delivery system newly committed to improving clinical outcomes and eliminating clinical waste. Management consultants can work with providers and insurers to develop a variety of contractual options for global payment.
Clinical specialists can work with insurers and data analysts to define new outcome measures more quickly, insurers and employers can think through ways that global payment can work along with other payment approaches and design new products supportive of global payment. Financial institutions can work with insurers to develop sources of capital to help providers raise funds necessary to change their business practices and succeed under this new payment system.
Health administration programs can inspire students by helping them understand that with change on this scale, a future career in health care will not look like what it is today. Instead, it will be about helping our national health care system transform itself to perform at levels never imagined. Medical schools can change curricula so students are taught skills that meet this new challenge.
This is just the beginning of the many ways we can all support the transformation to a new outcome-based health system.
Making Global Payment a Reality
In June 2009, I wrote President Barack Obama, encouraging him to make adoption of global payment the central payment model under Medicare. This step alone would have rationalized our payment system more quickly than any other. If we move forward today, we may be just in time to mitigate the impact of the baby boomers on the cost and quality of care. By eliminating wasteful services, we can create the capacity we need to meet this new demand without huge increases in cost.
As we implement the new reform law or debate ways to make it better, testing these ideas against how well they would deal with clinical waste is critical. Imagine what we could accomplish if we could eliminate $600 billion in clinical waste. America can afford the best health care system in the world. However, it cannot afford to have the best health care system and clinical waste at the same time.
Food and Drug Administration (FDA). 2003. Antibiotic Resistance Information on Drug Labels. FDA Patient Safety News, Show # 15.
Heptonstall, J. 1999. Traditional Chinese Medical Science. eBMJ November 11.
Institute for Healthcare Improvement (IHI). 2006. Protecting Five Million Lives Campaign website. www.IHI.org
Institute of Medicine, Committee on Quality Health Care in America. 2000. To Err is Human: Building a Safer Health System for the 21st Century. Washington, D.C.: National Academy Press.
Institute of Medicine. 2006. Estimates of Rates and Costs. Washington, D.C.: Office of News and Public Information, Institute of Medicine.
Kaiser Family Foundation. 2003. Kaiser Daily Women's Health Policy. November, p. 1.
McGlynn, E. A., S. M. Asch, J. Adams, et al. 2003. The Quality of Health Care Delivered to Adults in the United States. New England Journal of Medicine 348:2635-2645.
Renckens, C. N. M. 2002. Alternative Treatments in Reproductive Medicine: Much Ado about Nothing. Human Reproduction 17(33): 529.
Cleve Killingsworth, M.P.H., is the former chairman and CEO of Blue Cross Blue Shield of Massachusetts, and an adjunct lecturer at the Harvard School of Public Health. Address correspondence to Mr. Killingsworth at firstname.lastname@example.org…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: A Much Better Health Care System. Contributors: Killingsworth, Cleve - Author. Journal title: Inquiry. Volume: 48. Issue: 1 Publication date: Spring 2011. Page number: 9+. © Not available. COPYRIGHT 2011 Gale Group.