Pay for quality, not quantity

Global payments can keep health costs from spiraling out of control

it is clear in 2009 that fee-for-service medicine is not the most efficient or effective payment system we can devise. It should be pretty obvious to almost everyone, even those who benefit from the current system, that this form of payment hinders patients from receiving coordinated and patient-centered health care.

Massachusetts can and should take an important step to correct the current system by adopting what the Special Commission on Payment Reform recommended last July — a system of “global payments.” With global payments, providers receive prospective payments for all or most of the covered care they provide, along with financial rewards for providing accessible and high quality care.

As a practicing internist and cardiologist for 34 years, and more recently as the chief executive officer of Harvard Vanguard Medical Associates and Atrius Health, I have worked under a global payment system successfully for my whole career. Our organization knows how global payments can improve patient care and keep costs from spiraling out of control, and it is actively working with payers to convert more of our business to global payments.

Most care today is delivered on a “fee-for-service” basis, with providers reimbursed for each individual service, often irrespective of its medical appropriateness. Sadly, this system is fundamentally responsive to economic incentives. It tends to drive health care costs up because it creates incentives to increase the volume of services and pursue business lines that are most profitable and oriented toward illness rather than health maintenance. This shifts focus from primary care to specialty care and from the ambulatory setting into the more expensive setting of the hospital.

As a result, we’ve developed an exceedingly sophisticated yet tangled system of “sick care” — caring for people once they are sick. What we need to do is flip this sick-care system on its head to create an actual system of health care.

When you mention global payments, many recall earlier versions of managed care and assume that setting fixed payments will mean that care will be denied. It’s important to note that we’ve come a long way from the hugely unpopular capitation plans of the 1990s, when many doctors across the country were asked to accept fixed annual payments for each patient under their care. Then, the resources provided to physicians were not always well-matched to the care that was needed by their patients. Today, we have the computational tools necessary to fix the health care system to pay for the quality of care, not the quantity of care.

here’s how global payments work today: First, providers and insurers look back at the actual medical cost history of patients to estimate what future medical expenses will be across different care settings. Payments are then risk adjusted each year to account for likely variations in health status and cost of treatment for the provider’s patient population.

Proper risk adjustment is essential to ensure fair and adequate compensation for providers while removing any financial incentive to avoid high-cost patients. Typical risk factors include age, sex, and geography. More sophisticated models now include adjustments for the health of the patients, too. For example, the payment for a healthy 25-year-old male might be $150 per month, while the payment for an older patient with a chronic condition like congestive heart failure could be in the thousands of dollars.

In contrast to prior managed care contracts, today it is critical to create a link between quality and payment through performance incentives. There are many more accepted measures for performance today that can be compared across providers and shared with consumers. Patients won’t be denied care they need because there is a greater reward for quality and improvement outcomes.

With electronic medical records, we have data to identify and do outreach to the patients who need extra care. The data also allows providers to identify where global payments will allow for infrastructure improvements such as clinical pharmacists, care management programs, and hospitalists who can provide care before health problems escalate.

We also understand that working to keep people healthy is critical to reducing costs and requires services beyond the physician’s office. For example, think about how physicians can provide care under a global payment system in the case of a patient we’ll call Steve Johnson, a middle-aged executive with a history of obesity, hypertension, and elevated cholesterol, who barely has time to see his new primary care physician. At the initial evaluation, Mr. Johnson is prescribed medication to help manage his hypertension and consults a health coach to develop an individual program to control his weight and cholesterol. Through an Internet portal, Mr. Johnson can check lab results and email his physician with questions about the new medication’s side effects. The health coach is also monitoring his progress and will call to check in and help reschedule missed appointments.

Working to keep people healthy is critical to reducing costs and requires services beyond the physician’s office.

This kind of coordination creates the support network Mr. Johnson needs to stick with his new regimen and meet his weight-loss goals. Without it, Mr. Johnson would play phone tag to get answers about medication and to reschedule follow-up appointments. Even worse, he might stop taking his medications or make an unnecessary visit to the emergency room. Without support, Mr. Johnson will likely revert to his old habits without any appreciable improvement in health — a path that leads to more serious illness and more expensive care.

A payment system that rewards focusing on the patient and putting the primary care physician at the heart of care will ultimately rebalance the health care economy and lead to lower-cost, higher-quality health outcomes.

because we are fully committed to moving forward under a global payment system, and because we know that will mean coordinating care from the physician’s office to the hospital and back, we have just announced that Atrius Health is partnering with Beth Israel Deaconess Medical Center to develop a new integrated delivery model of care.

Within Atrius Health, we have known for 40 years that integrated delivery is the right way to provide care, and we’ll continue to do what we know is best for our patients.

History has a habit of repeating itself. We expect the debate on payment reform to continue as it has for generations. All the way back in 1933, a presidential committee charged with finding a way to address the rapidly increasing growth of health care expenditures (then 4 percent of GDP) concluded: “Medical service should be more largely furnished by groups of physicians and related practitioners, so organized as to maintain high standards of care, and to retain the personal relationship between patients and physicians.”

Meet the Author
To paraphrase T. S. Eliot, nearly 80 years later we find ourselves where we started and know that place for the first time. Now we need to take the next steps toward integrated care delivery under a global payment system.

Dr. Gene Lindsey is chief executive officer of Harvard Vanguard Medical Associates and Atrius Health.