Thursday, July 16, 2009

A big deal

The Massachusetts Health Care Commission on the Payment System has proposed ending the fee for service payment approach for paying doctors and hospitals and to move toward paying 'accountable organizations' on the basis of patients for whom they are responsible. This would be networks of docs and hospitals. You could think of it like a PPO getting capitated payment (fixed amount per month to care for you). The providers are then at risk for very high utilization...whereas typically, private insurance or Medicare is at risk now. Massachusetts enacted reforms that have covered about 97% of residents, but the plan did not really address cost increases. This is a second step, to address cost increases.

The point/goal is to incentivize groups of providers to keep patients healthy, and to change incentives. Networks that do a good job at keeping folks well and/or limiting outlays below revenue get to keep profits realized.

This would be a big change on such a large scale in the U.S. In England, the National Health Service did similar in the 1990s with what was called General Practitioner fundholding, the major reform effort of John Major's Tory Party. In GP fundholding, the primary care doctors (who were already paid based on captitation--a set amount per person per month) were given a hospital services budget for the patients they were responsible for and if they saved money, they got to keep it. However, there was a 'net' so to speak and very large overruns experienced in a given doctors patient pool were absorbed by central government. It didn't save much money in part because (1) the gov't was so eager to get GPs to sign up they oversweetened the deal. Also, teh GPs were already being paid largely based on capitation. However, the reform did lead to restructuring of some medical services in ways that many thought were worthwhile. It also paved the way for the development of more community organizations of providers that are similar to 'accountable organizations' imagined here. My main point is that this idea is new here, but not so new in other places. And the idea is mostly about shifting the incentives away from it always being good for providers to do more.

The Labour Gov't abolished fundholding in 1998/99, but there were many changes in local health care markets that remained and were essentially just called something else. The fundholding experiment, for example, paved the way for the ending of the GP cotract only being 'held' by individual GPs or groups, and lead to organizations being able to be contracted to provide care for larger groups of patients. A GP I knew when I lived in England (1995-96) summed up the effect of fundholding as follows. 'I used to struggle to get the surgeons to send me a follow up letter about how my patients were upon discharge. But, after fundholding (and ability to steer patients to different hospitals) the same surgeons who wouldn't send me letters before starting sending me Christmas cards.' Subtle perhaps, but it did increase communication.

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