Archive for category Accountable Care Organization
Current Procedural Terminology codes (CPT codes) are what makes health care fee-for-service work. The codes function to increase profits for health care providers. Fee-for-service is widely cited as a root cause of high cost in the US health care system. The bottom line is: health care providers work to make money by performing CPT coded services whether the service is needed, whether quality is delivered, and whether a lower cost service would work just as well.
The American Medical Association (AMA) is dominated by surgeons and specialists who do procedures. When the AMA first published a book of CPT codes in 1966 insurance companies were happy to have some basis on which to pay claims. In 1983, for the same reason, Medicare adopted the codes. But, what originally seemed like a good idea, like Dr.Frankenstein’s monster, turned out badly.
The AMA followed simple economic principles and fractionated the health-care market with more and more codes until there are now thousands. Every little thing a health care provider can imagine is now a billable service. Fractionation of a market maximizes profit, and it really worked for doctors but not for patients, insurance companies or the government.
CPT codes in the US have driven fee-for-service to high levels, in fact, that was the purpose. Now, the question for US health care: how to get rid of fee-for-service and CPT codes as the gateway to payment? How to change the incentive system for the benefit of patients and the national budget?
An auto-assembly worker is not paid according to every little procedure — using a wrench (APT code Q70506), installing a radio (APT code F402305) or looking up an exhaust pipe (APT code C403843). No they don’t use Automobile Procedure Terminology, they get paid by the hour with some incentive pay for quantity and quality of the work. There is no reason health care providers should be paid in a different way.
CPT codes or something like them might have a place inside an organization to assess productivity or simply to know what health care providers are doing. The old saying “measure to manage” is indeed true. The mistake is to connect procedure codes directly to payment. Diagnosis, outcome, and patient satisfaction should have input into the payment equation as well.
The way to purchase health care is in the aggregate, like the price of a car, the whole enchilada, or the total amount of care a person might need for a year. The US needs a system of care whereby a patient, a business or a government can purchase health care BY THE YEAR. The incentive is turned around — a profit is present when the cost of care is lower.
Is there opposition to this idea? Of course. Health-care is a huge business. Reorganizing health care takes different forms in different countries. In the US the idea is the Accountable Care Organization (ACO). It’s an organization big enough to actually deliver all the care a person might need in a year and big enough to manage the financial risk. This is not a Mom and Pop operation, this is a huge business almost like an automobile manufacturer. We need this type of care, we need cost containment, we need industrial medicine! The US health care system is like a Dr. Seuss car when we really need a Ford.
Piecework maximizes human productivity. Make more things, get more money. Garment workers and physicians both have been paid under this system — it’s great if the payment per piece is high but miserable if the price is low. Because piecework itself is no guarantee of quality inspectors were invented to reject low quality products. Thus, the little piece of paper in your new shirt pocket “Inspector 23”.
What if you went to a doctor’s office and had to be inspected before the doctor was paid? You had to have that little piece of paper “Inspector 23” to submit an insurance claim. That’s never going to happen but you get the idea. The doctor is paid by the number of services but the service should meet a quality standard.
This example is just the tip of the iceberg. Medicine is discovering process control without much input from the well established engineering field of process control. It’s sad, and perhaps a little arrogant on the part of medical administrators and law makers, to ignore the extensive work on process control. People do not like to be considered as little boxes in a system diagram — understandable — but a failure to think in this way is wasting trillions of dollars. The time for change has arrived.
The black box of medical care is what happens with the doctor-patient interaction. 1) A patient enters the office, operating room or x-ray office then health care happens then 2) the patient leaves. As it stands now the physician is paid by the number of services performed so the possible process control at points 1 and 2 are wide open. Nothing is measured, nothing is controlled, and quality is not guaranteed.
Now, consider modern process control with 5 control points, a measurement point and feedback to control the input to the black box of health care. What is in the black box? Perhaps just one health care provider. Or perhaps many health care providers. Instead of a black box it might be a grey box with lots of individual elements.
At the highest level of abstraction the feedback loop is intended to minimize cost but at the lowest level the feedback loop is intended to maximize quality. To make sure throughput is maintained the providers need to be paid by the number of services performed but the flow of patients is choked off if quality is not adequate.
This is rocket science. But, as Einstein says, a system “should only be as complex as needed”. Health care is very complicated and at the present the garment industry is not the model the world should be using. Simplistic ideas of supply and demand are not adequate to make a rocket fly nor to control cost in a health care system.
Happy doctors seeing fewer patients and making more money — what’s not to like? According to author David Von Drehle’s article “Medicine Gets Personal” in Time Magazine, Dec 29/Jan 5, the results are “intriguing”.
The story is about Qliance Health in Seattle founded by two doctors who were dissatisfied with fee-for-service medicine and all the associated paperwork. So, they developed a model of care where the patient pays $65/month and receives all the primary care they need. And, as a twist, they also agree to see Medicaid patients for the same cash amount (the details of the arrangement were not stated in the article). Of course, insurance and medicaid pay for all other services like tests, x-rays, drugs, hospitalizations and specialists.
The doctors are happy because they have less oversight from insurance, don’t have to collect any data to prove they are delivering quality care, get steady income, treat patients over the phone to minimize visits, and are able to “run” their own business with no boss. For the libertarian-minded physician it’s nirvana.
Piece-work is indeed a hard life as physicians and many in the garment industry know. A monthly salary is much easier on the worker. And, the salary model is not new in terms of primary medical care. The physicians working for the National Health Service (NHS) in the UK have had this system since WWII. However, the NHS found it was necessary to add financial incentives to get the doctors to do enough work. And, they found it necessary to monitor quality since quality slips without oversight.
So, this “Direct Primary Care” is not new in the world. In fact, it may be an important part of an Accountable Care Organization (ACO) as being tried the US. But, physicians need to realize they need to be part of a large organization to ensure quality care. The future for primary care is to be an employee, not a mom-and-pop store. Most of doctor’s patients work as employees, is that so bad?
$65 per month would be too much to pay for poor quality care (the cost of poor care is always too high!) So what does “Direct Primary Care” need to do for patients and payers to be confident quality care is being delivered?
- Measure and report quality in a transparent way — like on the office website. And, keep it updated.
- Deliver patient-centered care and prove it. Survey patient’s expectations and record whether the expectations are met with office visits.
- Report quality indicators other doctors must do like for diabetes, hypertension and smoking.
- Report primary care specific indicators regarding the most common diagnoses — skin conditions, joint pains and respiratory infections.
- Take a financial stake in what is prescribed or ordered. Pay some fraction of the cost of all medications prescribed and all tests ordered. They need to have some “skin in the game”. (So there is a connection to the larger world of health care cost — ordering a $1000 MRI scan for every ache and pain must have some consequence).
Here is the list:
- Pay doctors more
- Let the government pay subsidies to families not covered by the employee’s health insurance.
- Get rid of fee-for-service payments
- Smooth the transition from Medicaid to subsidized health insurance
- Transparent pricing
There are obviously some problems with this “consensus”. To begin with, who is part of the consensus? And who benefits from the 5 suggestions? On the face the ideas seem OK but where is overall cost reduction — the real crux of our health care problem?
So, to address each point:
- Pay doctors more — if the payment is not tied to reducing health care costs and increasing quality then it is money down the drain.
- Covering families — seems simple enough but why should business be exempt from doing what they have traditionally done? Employer insurance needs to cover the whole family — that’s simple.
- Get rid of fee-for-service. Yes that payment method is a problem but there must be an incentive for health care providers to provide a high volume of work and an incentive to do quality work. The simple solution is to pay a health care system (an accountable care organization) to provide care for a large group of people for a yearly fee. The organization must meet quality and budget constraints as opposed to our current “the sky is the limit” fee model.
- Smooth the the transition away from Medicaid. At this point Medicaid is less expensive than standard indemnity plans — why think about a change? If the person enters the workforce the employer just pays the cost — simple. Changing providers is not easy but if quality is uniformly better there would not be such concern.
- Transparent pricing. This is presented to suggest people could decide on what tests and treatments to buy if only they knew the prices — patients have never had the knowledge to make that decision and never will. The transparency of pricing should be the price for ALL the healthcare a person needs per year. Market forces may be helpful on the macro level (like for a healthcare system) but there is no free market for healthcare on the micro level — imagine a person being asked to choose between various methods of treating diabetes or the best way to remove an appendix (the decision is either random or biased by what the very person asking the question tells them).
The U.S. is experiencing something its citizens have not witnessed before: the transition away from population healthcare decisions being made behind closed doors at insurance companies to those decisions being made in the political arena. Other countries experience this all the time — just look at newspaper headlines in the UK or France over the past 20 years!
Elisabeth Rosenthal reported “Patients’ Costs Skyrocket; Specialists’ Incomes Soar” in the New York Times today 1/19/19. She particularly targets one of the most popular specialties for US trained physicians, dermatology. Good hours, great pay, and compared to other specialties, easy to learn.
A highly trained thoracic surgeon can only do 2 bypass surgeries per day but a dermatologist can to 20 lesion removals per day and make almost as much money. Patients choose to go to a dermatologist when most primary care doctors can just as easily solve the problem at a fraction of the cost (like benign skin lesions, sun related pre-cancers, and acne). And, when infection sets in on the weekend the dermatologist’s answering machine says to go to the emergency room ($300 co-pay).
She describes a situation where a woman had a facial skin cancer removed at a cost of $26,014. The astounding cost was the result of a dermatologist removing a lesion and then being unable or unwilling to close the wound — but still billing for the procedure. And, the patient also received bills from the doctors that actually fixed the problem (perhaps they should have billed the dermatologist). Sadly, a bad system is more profitable than a good system.
It is easy to see why the patient and Ms. Rosenthal believe there is a problem with US healthcare. Because, THERE IS A PROBLEM!
Rather than complain about the problem, what is the solution? It is not rocket science. The dermatologist, surgeon, operating room personnel and anesthesologist all need to be employed by an accountable care organization (ACO)– that way there is just one predetermined fee for taking care of the whole patient for a year. If the system does the work correctly they make some money, if they goof-it-up (as in this case) they lose money. The incentive should be to do good and efficient work. Not to make money by making mistakes.
This solution is extremely easy yet extremely unpopular with hospitals, surgeons, anesthesiologists, pathologists, radiologists, ophthalmologists and dermatologists. The reasons are obvious — they make less money and must follow quality guidelines. Given the low quality and extreme high cost of US healthcare is that really a problem? A few more articles by Ms. Rosenthal and a few thousand letters to congress might help. Sadly, one industry lobbyist equals one journalist in this battle.
By the way, the lesion at the top is a benign seborrheic keratosis — harmless, but gladly removed by dermatologists ($250).
How much extra are you willing to pay to continue to see your current primary care provider? $100 per visit? $20 per visit, or $2 per visit? That’s an individual decision. But, insurance industry studies show an average person in a health plan would change primary care providers if they had to pay more than $2 extra.
This is one of those dichotomies where people rate choice of providers very highly but in practice are not willing to pay more than about $2 to pick one provider over another. Doctors uniformly place a much higher value on the doctor-patient relationship than patients themselves.
However, to paint the picture with a large brush leaves out details. Patients who have primary care providers that manage chronic illness like diabetes, asthma or migraine headaches are much more willing to pay higher co-pays to maintain that relationship. Sometimes the relationship with a specialist is worth more to patients, but not always, because of a prevailing notion specialists are more alike than primary care providers.
The $2 statistic also includes the huge number of people who do not see a health care provider regularly — they just go to a clinic when a problem arises. In fact, they just want to be seen quickly, the name of the provider is not important.
Over the past 10 years employers have changed insurance carriers on average every 3 years. A change in insurance often forces people to change providers in order to stay “in-panel” and avoid high out of pocket costs. Anna Wilde Mathews’ article “Health Plans Limit Choice of Doctors” appeared in the Wall Street Journal today (8/15/13). She suggests the Affordable Care Act causes patients to change health care providers, an assertion that has no relevance, since that’s how our current system works! Not to say this is good — in fact, forcing patients with chronic illnesses to change providers borders on unethical business behavior.
Conclusion: rather than whine about the Affordable Care Act we need reasonable legislation to improve US healthcare, NOT legislation to return to something worse. Businesses should not have to change health plans so frequently. We need more large high functioning health plans (like Kaiser Permanente and a few others) so businesses don’t feel the need to change insurance carriers so patients can keep the health care providers they like.
According to Louise Radnofsky of the Wall Street Journal 7/1/13 “Insurance Costs Set for a Jolt“. Should this really come as a surprise?
No surprise indeed, because very little has been done to reduce health care costs. The ACA has 2 important financial provisions:
- Everyone must purchase insurance
- Insurance companies can’t cherry pick healthy people and dump the rest on public institutions.
The rise in total cost of US health care will continue but those who pay for it will change. The bizarre system the US now has which forces hospitals to care for the uninsured by cost-shifting to private insurance will stop. The cessation of cost-shifting will make costs more transparent but not smaller.
The problem is in the transition from one method of finance to another. As the transition proceeds hospitals get a windfall profit, insurance companies raise rates due to uncertainty but score a profit with so many new policies, premiums rise for many, and taxes go up for some. Eventually, the system finds a new equilibrium.
Sadly, Congress has been paralyzed by partisan issues so no improvements to the ACA have been made and no actions taken to make health care more efficient. Other countries with health systems seem to steer the ship of healthcare but the US can’t seem to disengage the autopilot.
It seems likely that each State and even some large cities will need to act without help from the federal government. We need ACOs to reduce cost and States could help that system grow.
That’s my view, what’s yours?
Payment of health care providers by volume of service (fee-for service) rather than quality of service is blamed by many as the cause of high cost and low quality in the US health care system.
A possible solution was proposed in 2006 as the Accountable Care Organization (ACO). The concept is modeled after other advanced countries which have lower cost and higher quality health care than the US. The idea is to pay a large organization (the ACO) to provide all the care needed for a large group of people. In other words, a per capita system, with payments not related to volume of services.
Medicare and the Affordable Care Act are betting on ACOs. The private sector is moving that way as well. The following graph shows the number of ACOs in the United States (CMS data)
The following graph shows the increase in the number of ACOs starting in 2009 and ending the first quarter of 2012.
The insurance industry is so entrenched it is hard to think outside of terms like deductible, out of pocket cost, and premiums. And, current ACOs indeed use those terms. But, under the hood, the ACO is run with a budget based on the cost to take care of a person for a year.
So, perhaps sometime in the near future you will just purchase health care by the year — something based on your age and ranging between $100 and $400 per person per month. Undoubtedly, there will still be some co-payments in order to avoid over use of services by some people.
A well formed ACO has a strong focus on a medical home and should include pharmacy service (not Walmart,Target or Walgreens etc.), hospital service (not every hospital), doctors, nurses, physician assistants, x-ray services, medical equipment, and devices. Not every hospital in the ACO would duplicate services — some would have specialty expertise, like brain surgery or heart surgery.
The materials to run the ACO would be purchased in bulk. The providers would be predominantly on salary and the hospitals under a strict budget with mandatory quality levels for all.
The rise of ACOs is encouraging but the actual number of covered patients is not large and the internal payment for ACO providers is still rooted in volume of services. But, with time and pressure (mostly from the business community) ACOs should begin to lower costs to levels enjoyed by other countries.
Congress could speed the process to be ready for the aging baby-boomers. But, action in Washington seems nearly impossible. It seems hard to argue against lower cost and higher quality, but they will.