No room for error

We need to make global payments for everyone involved in health care

part one of Massachusetts’s courageous leap into health system reform offered something for everyone. It brought health care coverage to uninsured residents; it promised (but could not deliver because of the soured economy) improved reimbursement for care to providers; and it brought more than 100,000 new members to insurance companies. It also required something of everyone: Most employers had to offer insurance or pay a penalty, and most individuals had to purchase insurance or pay a penalty. Providers continue to play a leading role in caring for these newly enrolled individuals while suffering significant and harmful cuts to our Medicaid rates.

Intentionally set aside for Part Two were the matters of payment and care delivery reform. Now, thanks to the work of the state’s Special Commission on the Health Care Payment System, we have begun to tackle these challenges in tandem. Doing so makes sense because the way medical care is delivered is tightly intertwined with how we pay for it. And to bring about the cost containment so needed in our system, we must get these reforms right. Just as with Part One of health reform, it will take global participation to do this, with everyone doing their part and sacrificing a little.

Massachusetts hospitals agree with the Special Commission’s primary points: The current fee-for-service system is not the most efficient way to pay for healthcare, nor does it encourage the best care for patients. The commission’s recommendation — a move to “global payments” — will revolutionize the way care is delivered.

We know that revolutions can tear down vital systems or they can energize and rebuild them. What we want to avoid is tearing down our world-class health care system, which now employs one in five Massachusetts residents. The way the next set of reforms is implemented will go a long way toward determining what type of revolution we have. The Massachusetts Hospital Association is leading the way to make sure the Part Two reforms are translated from theory to action in a responsible and thoughtful way.

so just what are “global payments?” Under a global payment system, insurers will make single payments to providers intended to cover all the care an average patient should need over a fixed period of time. Right now, providers bill insurers for each procedure, test, and visit. Anyone can see our current system has misaligned incentives.

For those with long memories, global payments may sound a lot like “capitation,” a payment system HMOs embraced in the early 1990s. Under capitation, providers were paid a strict per-patient, per-month fee. This system substantially limited the risk of insurance companies and transferred much of the insurance risk to doctors and hospitals. Patients didn’t like it because they suspected that their doctors were withholding needed treatment from them. For providers, it was a mixed bag. Some had contracts that enabled them to be creative to keep patients well. Other providers did not receive adequate payments and support from insurers to care for their patients. In the end, the capitation system fell apart, and we saw health care costs skyrocket more dramatically than before, with consumers demanding unlimited choices even as they struggled with premium hikes.

We can’t afford another failed experiment with capitation. That is why hospitals, doctors, and other patient advocates share a keen interest in ensuring that global payments work for everyone involved. We know the devil is in the details. Current models for global payment contracts include bonuses to providers for meeting quality measures — an important improvement over old-style capitation contracts. Such incentives are critical to ensuring that doctors and hospitals are able to offer patients the right care at the right time.

A well-designed global payment system could offer patients more coordinated care while stemming the increases we are seeing in health care costs. For example, global payments may make it easier for providers to establish “medical homes” for patients. A medical home isn’t just a primary care practice; it is a care network in which health care providers communicate seamlessly and are able to do more to keep patients well rather than just treat them when they’re sick.

Medical homes are especially effective in helping patients manage chronic diseases, which cost $1.5 trillion to treat annually in the United States. Consider a patient with diabetes, one of the most costly, widespread, and disabling diseases among the US population. In addition to their doctor, diabetic patients treated in a medical home could have access to nurse practitioners who monitor their blood sugar levels closely, nutritionists who help with diet, and care coordinators — an entire team that will help the whole system of care run smoothly and avoid unnecessary tests and emergency care.

Taken alone, global payments in no way guarantee cost savings or better care delivery. The Massachusetts Hospital Association is raising and addressing foundational issues to ensure successful implementation of a global payment system that will work for all of us.

A successful global payment system must generate better and more accessible information about our health care system. That should include more transparency about quality measures, more transparency around pricing by insurers and providers, and more information about consumer behavior and satisfaction. We can only know if the system is working for everyone if we collect and publish that data.

The new payment system must also enable providers to control the new insurance risks transferred to them. Insurance companies hold billions of dollars in reserves to cover financial risk. If insurers are passing a portion of these risks on to providers, they should be responsible for passing on the reserves as well. This would be a significant system change that could require reforming some of our insurance laws.

Significant infrastructure will have to be created — and paid for — to handle global payments. Accountable Care Organizations (ACOs) would encompass networks of doctors, hospitals, and other care providers to coordinate care and share the financial risk of treating patients. These provider organizations will need more than computer networks and electronic health records — although those will be necessary — to enable them to meet quality and cost goals. They will also need actuarial and data analysis capabilities to manage global payment contracts.

health plan designs must be changed to be consistent with the goals of reform. Right now, most consumers are given a health insurance card through their employer that entitles them to a vast array of choices, which often results in fragmented, uncoordinated care. To make ACOs work to coordinate care and contain costs, employers and insurers will need to partner with providers in the education of consumers. Consumers will need to truly understand the value of seeking their care within their ACO, and will need to understand that unlimited choices do not equal better, more cost-effective results.

Our medical system also performs other critical functions besides caring for individual patients, and those societal needs must be accounted for under a new payment system. Hospitals offer emergency and trauma services that may not fall neatly under a global, per-patient payment. A number of other services also don’t fit neatly into a global payment system. Some of these include training the next generation of physicians, performing life-saving clinical research, and providing a health care safety net for the uninsured and underinsured. We also need to protect services for special needs populations, such as those in need of behavioral health services. All of these services are vital, and we cherish our access to these aspects of our health care system — but we must understand that none of it is free.

Meet the Author
Meet the Author
How will this system look through a patient’s eyes? It is our hope that patients will get more coordinated and better care with a primary care provider to function as their health system navigator. They will get support for a healthy lifestyle and appropriate access to the world’s best tertiary care when they need it, along with the peace of mind that our health care system is ready for whatever emergencies and trauma befalls us. If payment and care delivery reform is conducted thoughtfully and prudently, we will succeed in containing costs and, most important, providing even better care.

Ellen Zane is the president and CEO of Tufts Medical Center and chair of the Massachusetts Hospital Association (MHA) Board of Trustees. Lynn Nicholas is the president and CEO of MHA and served on the state’s 10-member Special Commission on the Health Care Payment System.