Honoring Healthcare’s Heroes

The Harvard Business Review has been the scene recently of an epic expert battle about how best to pay for health care. Everyone agrees that the old fee-for-service model only promotes waste and inhibits innovation. But some of the top minds disagree about how to fix it. 


Many believe that offering a series of carrots and sticks to healthcare providers gradually over time will transform healthcare. But at Imagine Health, we insist that enough top-notch innovative providers now exist to immediately honor these healthcare heroes with inclusion into large employers’ premier healthcare teams.


In an article entitled “How to Pay for Health Care”, Michael E. Porter and Robert S. Kaplan write that the best payment reform option is bundled payments – which focus on a care episode or chronic condition for an individual patient, incentivizing doctors to treat that condition or acute episode in the most efficient way possible. One problem with this approach is that health care providers still get paid based on the number of cases, so cases might unnecessarily be created to boost revenue. 


The other problem is that with siloed treatment of each condition, the health care system may miss the cause-and-effect “connective tissue” between the comorbidities. For instance, providers treating patient for diabetes and migraines separately may not quickly realize that a diabetes medication is exacerbating the migraines, or that diet modifications to keep blood sugar drop more stable might help alleviate them.


A rival article called “The Case for Capitation”, by Brent James, M.D. and Gregory Poulsen, argues that a per-patient budget is the way to go, because it focuses on the whole patient and allows providers to use economies of scale of large patient populations to eliminate waste on a grand scale. However, the race for volume has a tendency to fuel mergers on both the provider and insurer side, eliminating choice for consumers and potentially eventually driving up prices as regional monopolies are created.

But neither article comes clean about a very pointed truth – it doesn’t matter which payment method is used if the providers included in the network are inefficient, have poor safety records or overcharge for services. In fact, all the new payment reform methods in discussion have one thing in common. They don’t clear the decks and build budgets from the ground up, but instead “bake-in” the high prices of our failed pay for volume system. The HBR article on bundled payments, for instance, even acknowledges that “numerous bundled payment programs are already in place, using prices based on modest discounts from the sum of historical fee-for-service payments”. 

And let’s remember: providers were often able to extract higher reimbursements from insurers by threatening to withdraw their providers from broad panel PPO networks. Insurers would often cave, in order to preserve these wide but inefficient networks. So simply translating high fee-for-service rates to bundled payments or capitation will do little to bring prices down immediately – especially because they often include a pilot year or two, where they hold providers harmless for losses, before hospitals and doctors truly take on risk-sharing arrangements.


These payment reform transitions have another consequence. They also bake in inequities between those doctors and hospitals that insurers have always paid well, and those that have traditionally scrambled for scraps in the insurer negotiation game. These disparities in payments often have nothing to do with the actual quality of care, as demonstrated in Massachusetts and elsewhere.


The Bay State was the first to enact broad scale health care reform to extend coverage to the vast majority of its citizens. However, the state has still not won its fight against the highest health insurance costs in the country. It’s an issue that has real consequences for employers wishing to expand their workforces. Massachusetts boasts some of the best hospitals in the country, but also the most expensive. 


As the largest insurer in the state, Blue Cross Blue Shield of Massachusetts shifted a large portion of volume to the Alternative Quality Care payment reform model. The result? Some hospitals that had historically been paid less than pricey rivals cried foul. 

They had good reason: publicly available data showed that insurers were routinely paying two to three times more for high-volume services such as MRIs, cesarean section deliveries and angioplasties at one hospital than at another two miles down the road. Data showed the hospitals had the same high level of quality for these services.


At Imagine Health, we have a different plan to win the war on rising healthcare costs. We are laser-focused on honoring healthcare’s heroes. We include only the best providers in our network in the first place. We don’t care about whether those providers have historically been underpaid or overpaid by our broken system that traditionally has been paying for quantity, not quality. 


We want to reward the innovation that is already happening in the healthcare marketplace – instead of hoping to pressure large swaths of inefficient providers into doing better – simply by putting in place new payment rules. While the approaches cited above may eliminate some waste around the edges, they won’t truly transform the way care is delivered – and in all likelihood will prompt providers to game the system even more to extract higher prices, as has been the case in previous models over the past few decades.  


The competing articles in the HBR both give examples to show the success of their respective models. But the examples that show the biggest savings include just ONE health care facility or system. For instance, the article in support of bundled payments lauds the performance of physician-owned OrthoCarolina’s 2014 contract with Blue Cross and Blue Shield of North Carolina for bundled payments for joint replacement, where costs fell an average of 20%. Another example, describes an impressive 30-percent reduction in costs for a similar bundled payment arrangement with Twin Cities Orthopedics. Both healthcare organizations also provided superior quality.

These are terrific results! We at Imagine Health applaud OrthoCarolina and Twin Cities Orthopedics for their innovative care. But what happens when a bundled payments approach is applied to a broad swath of providers? 

The HBR article offers an example, this time from CMS, called the Heart Bypass Demonstration. This included bundled payments across five different hospitals, with a total savings of just 3.1 percent under expected costs over five years. Another CMS bundled payments initiative achieved savings of 10 percent, but still far below the two orthopedics examples above.

While these patient populations are very different, the contrast does show the difficulty of achieving great savings and high quality across a broad array of facilities, where the lower quality providers water down the potential for true value-based care.

The bottom line is that different payment rules don’t instantly create quality or efficiency where it didn’t exist. For the cream of the crop – those healthcare heroes mentioned above – they simply make it easier to get paid fairly for doing what they do best. Lower quality providers and organizations may suffer losses in these new models, but they will still be part of these networks, dragging down their overall performance.

At Imagine Health, we select only the best quality providers and hospitals, the true healthcare heroes, and then offer them the guaranteed population – big workforces – that allows them to benefit from economies of scale and keep innovating.

Our employers want the best doctors and hospitals to secure their most important resource, their human resource. Join us.

Rick AbbottComment