Thursday, August 14, 2008

Fixing healthcare with pay for performance

Even if our national government somehow gets its fiscal act together and pays the funded national debt down, or at least slows its rate of increase below that of real economic growth, the American people will still face two other daunting financial problems, Social Security and healthcare entitlements. I'll tackle S.S. in a future post and concentrate on healthcare in today's installment.

The debate over healthcare tends to revolve around insurance. I think that emphasis is misplaced. Insurance is an issue only because healthcare has become so expensive. In the 19th and early 20th centuries, people wanted reimbursement for lost wages due to illness, not for healthcare costs. That changed as the cost of doctor visits, surgery, hospitalization, and medication soared faster than inflation year after year in the last three quarters of the 20th century.

But the real problem is not simply the cost of healthcare, it is the value proposition. People would happily pay high prices for medical treatment if they actually worked to alleviate suffering, stop further damage, and so forth. Modern medicine does some things very well and the doctors, nurses, and other specialists who provide those services ought to be well compensated for them.

Unfortunately, however, modern medicine is far from flawless. Many diseases and disorders continue to flummox it. My parents, brother, and wife, as well as several colleagues, suffer from chronic medical problems that doctors can't, or won't, fix. Here is where the value proposition comes in. Why do we pay doctors (etc.) even when they don't make us better? Would we pay an auto mechanic who looked at our car, maybe changed out a part, but didn't fix the rattle? Would an accountant expect payment for just looking at your taxes? Why should we pay our doctors just for seeing us?

I recently suffered from a viral infection in my throat that led to acute pharyngitis. I couldn't even swallow my own spit. The ER staff got the swelling down but sent me home without trying to ascertain the cause. Unsurprisingly, I ended up going back to the ER two days later. This time the docs did not even alleviate my pain, sending me home with a concoction I suspect was a placebo. Whatever it was, it didn't work. A week later, I recovered thanks to my own immune system but the ENT insisted that I pay him an office visit anyway. He actually had the nerve to request that I come back 2 weeks later, even though he admitted he could do nothing to help me or to prevent another bout of this nasty ailment. All told, I shelled out almost $200 in co-pays for this "treatment." Lord knows how much my insurer will pay, and all for nothing.

If the government said patients only had to pay when doctors actually helped them our national healthcare bill would be slashed, perhaps by as much as half. That would go a long way toward alleviating the entitlement burden and decreasing health insurance premiums. Some smart egg would have to create a system that would minimize abuse (doctors claiming to do more than they did; patients claiming that they were not helped when in fact they were); entry into the healthcare professions would have to be opened to more people (which in and of itself would be ameliorative); our tort/medmal system would need to be revamped (it needs it anyway).

Imagine, though, how differently doctors would behave if they only got paid based on proven results. Unnecessary office visits and long waits would vanish, doctors would specialize around symptoms/diseases rather than body systems, and referrals to doctors better equipped to handle particular problems would come more rapidly. As long as the rewards matched the risks, doctors could be found who would take on any medical problem, including gunshot wounds and advanced cancer. Overall, doctors would have to work harder and smarter.

Healthcare professionals will therefore come up with all sorts of reasons why this proposal is dumb. As they mumble and bumble, just ask yourself if you would believe the same sort of story from any other professional services provider.


Scott Hodson said...

Beginning October 1, Medicare will no longer pay hospitals for care provided to resolve hospital acquired conditions. This has the potential to significantly reduce medicare expenditures and hosptial revenues.

For example, vascular catheter associated infection represents a major area of impact. A significant number of patients rely on vascular access devices, like PICC lines, to deliver needed medication. The line has to be placed and maintained in a specific manner, or it has a potential to cause a catheter-related bloodstream infection (CRBSI.) CRBSI, along with ventilator-associated pneumonia (which CMS is considering adding to the “selected conditions” list for FY 2009), are the two most costly infections to treat.
Analysis in one Midwestern hospital identified that the average cost to treat a CRBSI was $91,000, whereas the average reimbursement was about $67,000 – an operational loss of $24,000. As of Oct. 1, 2008, reimbursement will be zero. The CDC estimates 250,000 central line-associated infections occur in the United States annually, with an attributable mortality rate of 12 to 25 percent.

This change in reimbursement methodology will create a significant incentive for hospitals and physicians to work together to improve quality management.

Robert E. Wright said...

This is great info., Scott! Thanks so much for your input. I hadn't even thought about secondary conditions CAUSED by hospitals. I'd be interested to know, if Scott or other readers know offhand, how this particular reform came to pass.