Report on annual hearing of the Department of HealthCare Finance and Policy

 

• Complex system requires complex changes
• Consumer involvement needed, perhaps through tiered plans
• Standardization and transparency in price and quality reporting needed
• Coordinated care, medical homes, bundled payments—all mean rewarding value and outcomes rather than services
• IT is critical
• A slow transition is needed

 

 

In June, the Department of Healthcare Finance and Policy (DHCFP) held its second set of annual hearings mandated by law. The hearings were held over four days at Bunker Hill Community College.  Although I was only able to attend half of one day, I have reviewed all of the materials (available on line at http://www.mass.gov/?pageID=eohhs2terminal&L=6&L0=Home&L1=Researcher&L2=Physical+Health+and+Treatment&L3=Health+Care+Delivery+System&L4=Health+Care+Cost+Trends&L5=2011+Health+Care+Cost+Trends&sid=Eeohhs2&b=terminalcontent&f=dhcfp_researcher_cost_trends_2011_cost_trends_agenda&csid=Eeohhs2).

 

Although much of the content of the hearings was similar or identical (albeit in more detail) to the Attorney General’s recent report on healthcare cost trends and drivers (see my report http://willbrownsberger.com/index.php/archives/8183), there were several other issues discussed as well.

 

The single biggest take home message of these hearings is that the healthcare system is incredibly complex, and there are no simple “fixes” for its spiraling costs.  Changes in one area, such as payments, will not control costs unless other changes are made.

 

The Attorney General’s report made clear that simply changing the form in which payments are made, from “fee-for-service” to “global payments” does not in and of itself change overall health costs.  It is therefore imperative that any legislative changes address more than payment types.  Similarly, simple price controls will, of course, control prices, but will not change the dynamic of the system unless other changes are made.  Sacrifices will instead be made in the quality or type of services provided in an effort to reduce costs. Thus, while I personally generally support the work of such groups as Health Care for All, I cannot support their recent call for a premium freeze (see http://www.wbur.org/2011/06/30/health-premiums).  Simply freezing premiums would not change the dynamic of the system and would simply push the inevitable rise in premiums into the future.  We must undergo a systemic and comprehensive change in our healthcare system, and that will take a combination of legislation, innovation, investment and, perhaps most importantly, time.  I m afraid that those looking for a quick and easy to understand fix will be disappointed.

 

Nevertheless, many of the presentations at the DHCFP hearings offered insight into ways in which our healthcare system can be remodeled into a lower cost system that is focused on “value not volume.”

 

One major area that was discussed was the area of consumer involvement.  Because we buy health insurance rather than paying for healthcare directly, the normal market forces (supply and demand, etc.) that we see in other markets are masked in the healthcare system.  Consumers in general do not choose providers using price as a consideration.  There are exceptions to this.  Consumers with high deductible plans, for example, often forgo healthcare due to out-of-pocket cost.  This is generally not seen as a good thing, as the care that is skipped is often preventative.

 

So-called tiered plans involve consumers in cost control by asking them to pay more to see higher priced providers.  The consumer is empowered to make an informed choice and to bear the cost of seeing a more expensive provider. This is definitely seen as a way to help lower overall costs by making consumers think twice, as it were, before opting for higher priced care.  The caveat here is that in order for a tiered system to work, consumers must have clear, understandable, accessible, standardized information on which to base these decisions.

 

Another area for change is moving toward a “bundled payment model.” In this model a single fee is paid to a provider group for the care of a patient, either for a period of time or for a specific condition.  The provider group gets the same payment regardless of whether the patient is hospitalized once and has no complications or is repeatedly hospitalized with every complication possible.  This provides an incentive for the provider group to coordinate care, prevent complications and errors and so on so as to reap the savings.

 

Another model is so-called “medical homes.” These involve the coordination of all areas of a patient’s care.  Thus, an asthma patient would be seen by doctors and nurses, but also by outreach workers visiting the home and perhaps school to help eliminate triggers or to propose lifestyle changes; the goal is a comprehensive care approach that avoids hospitalization and major intervention as much as possible.

 

Note that medical homes require a bundled payment system. Under the current fee-for-service plan, providers actually lose money by avoiding hospitalization, since they are paid for hospital care but not for home visits.  Also note that coordinating care in any of these ways requires a strong primary care provider who is coordinating everything else.

 

All of these changes requires significant investment in communication infrastructure-primarily IT (Information technology).  IT allows patients to communicate with providers outside of the office (for which current payment schemes do not reimburse doctors) and allows providers to communicate with each other and thus coordinate acre.  It also allows record sharing so that repeating tests is not necessary.

 

So what is the role of government in all this?  Recommendations include mandating transitions to global/bundled payments and tiered products, investments in IT and the privacy controls it needs, mandating transparency and standardization in price and quality reporting, and continuing to study the roots of disparity in prices.  A careful and slow transition is warranted, since these really are major changes, many of whose effects are still somewhat unclear. A single bill seems unlikely to make all the changes needed, as “tinkering” will most likely be needed in the future.  The hearings did not address the need for a comprehensive public health and wellness plan to encourage and facilitate individual wellness so as to reduce the need for health interventions in general.

 

The bottom line definitely seems to be that there is no panacea and no quick fix.  Our healthcare system is complex and changing it will be as well.  Reining in healthcare costs will require changes from consumers and providers as well as government and will take considerable effort, investment and time.