Sanjaya Kumar, MD, MSc, MPH, and David B. Nash, MD, MBA

Thanks to the fragmented compensation system, we are already paying more. The new payment system must elicit cooperation and coordination.

Sanjaya Kumar, MD, MSc, MPH, and David B. Nash, MD, MBA

Unexplained clinical variation accounts for much of health care’s excessive costs. What are payers doing about it? They’re trying plenty, but their efforts are not enough. Payers are trying to sweeten physicians’ and hospitals’ paychecks to inject a bit more quality, safety, and efficiency into their care. They have embraced a form of bribery known as “pay for performance” (P4P) to try to get physicians and hospitals to do the right thing.

Here’s how it works: “Dear physician, if you prove to us that you follow these proven clinical processes for good care or achieve this level of successful outcomes for your patients, we’ll reward you with a little extra money.” Sometimes payers supplement the carrots with sticks, like withholding some money if providers commit avoidable errors.

Who can argue with such an approach? Payers ante up to prove to their customers that they care about quality; physicians and hospitals make a little more money; and patients get better care. The P4P concept is rapidly evolving, and new initiatives are cropping up around the country. We’ll take a look at some of them.

But we believe it’s not enough that P4P is a bandage on a gushing wound. Physicians’ practice patterns are notoriously difficult to change. Most P4P incentives tend to be too weak. Research demonstrates that at least 20 percent of the physician’s annual income needs to be on the table to motivate him or her to change practice patterns. Most P4P programs don’t come close.

The chief driver of wasteful and harmful clinical variation still remains: a piecework reimbursement system that rewards more care and more intense care. P4P programs are grafted onto that dysfunctional payment system.

Another glaring problem is fragmented care, and it continues to pose a huge challenge. It’s partly the price we pay for the deeply embedded culture of autonomy in physician training. It’s partly the hierarchical pecking order among surgeons, specialists, primary care physicians, nurses, physician assistants, pharmacists, physical therapists, and others. Does it make sense to think that paying each of these caregivers separately, even with P4P bonuses, will reduce miscommunication, waste, and error stemming from poor coordination among them?

Only the beginning

P4P tinkers on the edges of these problems. We believe that P4P is a transitional model to a more fully integrated payment approach. If we’re serious about encouraging physicians and hospitals to curtail unexplained practice variation, we’re going to need to bundle their payments somehow.

That means tying together payment for physicians, hospitals, and other caregivers so that they are jointly motivated to get patients’ care right, catch errors, work cooperatively, and track whether what they did worked. Some sort of bundled payment approach essentially gives a fixed amount of money to all providers involved in a patient’s care and tells them to divvy it up.

P4P incentive programs are proof that our health care payment system is becoming more sophisticated, but they must ultimately be folded into some form of bundled payment structure to fully transform the quality and efficiency of our health care. That transformation has begun.

Demand Better! book coverThis is an excerpt from Demand Better! Revive Our Broken Healthcare System by Sanjaya Kumar, MD, MSc, MPH and David B. Nash, MD, MBA. Published by Second River Healthcare Press, February 2011.
All rights reserved.

David B. Nash, MD, MBA, is the founding dean of the Jefferson School of Population Health at Thomas Jefferson University in Philadelphia.
Sanjaya Kumar, MD, MSC, MPH, is founder of Quantros Inc., which provides Web-based health care data management and decision-support tools.

Managed Care’s Top Ten Articles of 2016

There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

Major health care players are determined to make health information exchanges (HIEs) work. The push toward value-based payment alone almost guarantees that HIEs will be tweaked, poked, prodded, and overhauled until they deliver on their promise. The goal: straight talk from and among tech systems.

They bring a different mindset. They’re willing to work in teams and focus on the sort of evidence-based medicine that can guide health care’s transformation into a system based on value. One question: How well will this new generation of data-driven MDs deal with patients?

The surge of new MS treatments have been for the relapsing-remitting form of the disease. There’s hope for sufferers of a different form of MS. By homing in on CD20-positive B cells, ocrelizumab is able to knock them out and other aberrant B cells circulating in the bloodstream.

A flood of tests have insurers ramping up prior authorization and utilization review. Information overload is a problem. As doctors struggle to keep up, health plans need to get ahead of the development of the technology in order to successfully manage genetic testing appropriately.

Having the data is one thing. Knowing how to use it is another. Applying its computational power to the data, a company called RowdMap puts providers into high-, medium-, and low-value buckets compared with peers in their markets, using specific benchmarks to show why outliers differ from the norm.
Competition among manufacturers, industry consolidation, and capitalization on me-too drugs are cranking up generic and branded drug prices. This increase has compelled PBMs, health plan sponsors, and retail pharmacies to find novel ways to turn a profit, often at the expense of the consumer.
The development of recombinant DNA and other technologies has added a new dimension to care. These medications have revolutionized the treatment of rheumatoid arthritis and many of the other 80 or so autoimmune diseases. But they can be budget busters and have a tricky side effect profile.

Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

More companies are self-insuring—and it’s not just large employers that are striking out on their own. The percentage of employers who fully self-insure increased by 44% in 1999 to 63% in 2015. Self-insurance may give employers more control over benefit packages, and stop-loss protects them against uncapped liability.