Readers of this blog are well aware of the growing debate in the Commonwealth about how to slow our health care spending, sustain health care reform, and relieve a growing burden on employers, consumers, and government. Many of the proposed solutions – improved prevention and management of chronic illness, administrative simplification, and greater transparency of cost and quality information – have great potential. But their potential will be severely limited if they are not built on a payment system that rewards the best, most affordable care. We do not have such a system in Massachusetts today.
Last January, BCBSMA CEO Cleve Killingsworth challenged the company to examine how our method of paying hospitals and physicians could be transformed to better support the high quality care we all know our system is capable of delivering. Currently, Blue Cross and most other health plans base payments principally on the number of services provided, and the complexity of each service. For example, surgical and specialty care is rewarded more than primary care, and hospitals receive higher reimbursement when they perform more tests and procedures. As Karen Davis, president of the Commonwealth Fund, has written, “Fee-for-service payments create incentives to provide more and more services, even when there may be better, lower-cost ways to treat a condition…It’s not realistic to tell hospitals and doctors that they must improve quality if by doing so they are likely to lose money.”
What Cleve asked us to create was a system that would instead base payment on quality, outcomes, safety and efficiency – did the patient get the best result from the most appropriate treatment (eg. based on the best medical evidence) by the right kind of provider (eg. specialist, family doctor, nurse) at the right time (as early in the illness as possible).
A team of physicians, finance experts, and measurement scientists worked for months to develop a model that would give hospitals and physicians meaningful incentives to improve quality and safety of care while conserving health resources. We tested the concept through many conversations with key hospital and physician leaders, policy experts, employers and health care purchasers.
The result: a new, innovative optional contract that combines two forms of payment: a global or fixed payment per patient, per year, adjusted for the health of patients: and substantial performance incentives tied to the latest nationally accepted measures of quality, effectiveness, and patient experience of care.
Can the seemingly arcane payment methods of health plans promote quality and moderate health spending? Growing evidence suggests they can. According to the Centers for Medicare and Medicaid Services (CMS), “quality of care has improved significantly in hospitals participating in the CMS Premier Hospital Quality Incentive demonstration, a groundbreaking Medicare pay-for-performance demonstration project. Improvement in these evidence-based quality measures is expected to provide long term savings, because of their demonstrated relationship to improved patient health, fewer complications and fewer hospital readmissions.”
That’s the goal of this new contract, which combines this kind of performance incentive with flexibility to allow physicians to provide services according to patient needs. The contract will be offered as an option to hospitals and physicians in our network this year.
For hospitals, we believe that payment reform will accelerate initiatives already underway to improve safety and performance. For physicians, our new contract should liberate the whole care team to spend more time with patients, and offer innovative services, such as “e-visits” and group visits for patients with chronic illness. For employers, state agencies, and individuals who pay for care, we believe the new contract could cut in half medical cost trend, which has been rising at rates up to 12% annually, for those who participate.
So, as the state discusses how best to moderate health spending, let’s put the need to pay for quality at the center of the debate.
Andrew Dreyfus is executive vice president for health care services at Blue Cross Blue Shield of Massachusetts and former president of the Blue Cross Blue Shield of Massachusetts Foundation.
Will premiums be set according to health status of the patient? As a 63 yo man who exercises rigorously and regularly; eats healthy; doesn’t smoke and never has; whose cholesterol, psa, triglycerides, etc. are in the desired range and who is in very good health I want to be paying premiums based on health status and life style rather than on age.
I like the idea presented in the above article.
While performance measures may have some part in determining reimbursment, they do not take into account factors that providers have little or no impact on, such as genetics (family history) and patient adherence to treatment recommendations. Are providers going to be responsible for, and thus reimbursed less for patients who don’t take their medications or follow lifestyle recommendations?
Also, BCBS may be concerned about rising health care premiums and costs, but this new plan doesn’t seem to address 2 reasons why health costs are rising so much. 1. administrative costs that eat up to 15-20% of out health care dollar and 2. prescription drug costs. These are two areas that need to be adressed. A single payer system that eliminates much of the insurance reimbursement headaches would seem to be the most logical solution to #1. As for durg costs, this may be more difficult as the baby boomers get older and recieve more prescriptions to treat their chronic health conditions.
Two weeks ago, I participated in an Immersion course on Value Driven Health Care by Michael Porter and Elizabeth Teisberg, which described how health care should be organized to maximize value for the patient.
I think this is a good initial step toward “Value Driven Health Care”. However this plan will require a higher level of coordination between in patient and outpatient care and organization around medical conditions if it is to be effective.
Parts of this plan sound like the payment system of the last decade, known as “caputation”, where several major health insurances paid a fixed fee to providers based on per member, per month. This system was designed to eliminate wasteful utilization of medical services, and encourage efficient medical treatment of known medical problems. The capitation system shifted financial risk from the insurance companies to the health care providers. The result of this older system was that every insurance company that implimented caputation abandonded it and changed over to fee for servive. There are lessons to be learned from the earlier trial of set payment per patient based on age or health risk.
There are parts of this plan that sound excellent and may help to shift the focus of medicine; moving closer to prevention/ fixing the root cause and further away from chasing the symptoms. The first thought that came to my mind this morning was Dietitians. I think many health problems could be managed more efficiently and cost effectively with increased use of a dietitian’s services. A dietitian’s main goal is prevention and disease management and the services come at a much lower cost than visting an overwhelming number of specialists and polypharmacy. Just a thought.
Will performance incentives cause hospitals and doctors to concentrate on low-risk, healthy, individuals?
It seems like the rational economic choice would be to focus on patients that would likely have the best health outcomes regardless of treatment. Will this make medical professionals too risk averse when it comes to quality of life issues?
Umm, did somebody say “capitation”?
Check it out, straight from the Boston Globe:Blue Cross and Blue Shield of Massachusetts wants to stop paying doctors and hospitals for each patient visit or treatment, a common arrangement that most experts agree has led to unnecessary, inefficient, and
Thanks for all the great comments – this is an important, complicated topic, and it’s great to see people thinking about all the different implications.
On the questions about variations in health status and how people care for their own health, the alternative contract we are proposing addresses this in several ways. To answer Jonathan and Ryan’s questions about members with different health conditions, the global payments will be adjusted for health status, to minimize any risk that doctors would focus only on healthy patients. For members like Richard, who work to maintain good health, we are designing health insurance products that include incentives for diet, exercise, taking medicine as directed and having recommended preventive screenings. These programs may be available directly through an individual insurance plan, or through your employer.
To respond to Jonathan’s second point about drivers of health care cost, we believe that improving quality has been shown to moderate cost increases by eliminating unnecessary care and ensuring prevention and early diagnoses. We also hope that this alternative contract will alleviate some of the administrative burden from physicians and hospitals, because the global payment should simplify payment and potentially eliminate the need for referrals. And, of course, even in a single payer system, reimbursement to physicians and hospitals would still have to be calibrated to encourage early identification and treatment of disease (which is why Medicare is making changes to its own payments).
Evan: you’re right that this proposed payment system will only work with closer coordination among different caregivers and institutions, which should reduce the fragmentation so many patients experience today. This will require some new ways of doing things, but the contract is designed to support that innovation.
Laurie, thanks for the great example of dieticians. They can offer very effective treatment (in terms of both health and cost), and can absolutely be integrated into the care system under this alternative payment model.
Finally, on the question of capitation, we were very conscious in developing this contract to learn from early experiences with fixed payments. Capitation asked hospitals and physicians to focus only on costs, while this alternative contract asks clinicians to focus on costs and quality. By combining the flexibility of a global payment with significant quality incentives, we hope to support safe, effective, efficient care.
[...] safety measures putting that institution in the highest 2% ranking in the country, or Blue Cross announcing its willingness to stop paying fee-for-service claims to any providers who are willing to… (along with the chance of earning a hefty performance bonus), it sounds as though someone out there [...]
Interesting discussion but it does seem to ignore the elephant in the parlor of cost control…
When will our state leaders allow the creation of a publicly administered insurance pool that cuts out the waste of the private insurance middleman? The public insurer could utilize a capitated payment system to reduce unnecessary care, as well as put into place many quality improvement standards. Every time this model starts getting serious consideration in the State House, certain “stakeholder groups” come along and crush it.
When will those of us who are being crushed by the high cost of health insurance and healthcare be “allowed” to take advantage of a truly nonprofit social insurance model to achieve maximum cost-savings? This policy approach is used with great success in many other places; we are we not allowed to give it a try here in Massachusetts?
This is a sensible choice that citizens and residents deserve to have made available to us. Individuals, families, and employers should have a right to a public insurance option along with the “option” of purchasing private insurance. At least teh state should make it available on a trail basis and see how it goes.
To learn more visit http://www.masscare.org/about
This week, officials at Blue Cross Blue Shield of Massachusetts, made quite a splash when they announced plans to introduce a new payment system that would get away from the traditional fee-for-service model dominant in today’s market and would instead base payments on things like patient outcomes, safety and efficiency.
Is this the future of health care in Massachusetts? Or does this proposal represent a trip back to the future and a return to the days of capitation that simply did not work in the mid-90’s?
Quite frankly, it is too soon to tell. But BCBS’ proposal is an important — and welcome — jumping off point as we start to craft the future of health care. It has become clear that the traditional fee-for-service model is not the long-term answer to controlling health care costs. As a hospital community, we have long held the belief that a focus on quality is, in fact, the best way to reduce health care costs over the long term. But as we collaborate with the health plans to develop this new approach, there are a few key points to consider;
- Whatever we do, we cannot afford to disrupt our success. Massachusetts currently enjoys unprecedented achievement when it comes to delivering health care. What does this mean? According to a recent Commonwealth Fund analysis, no other state offers what we offer our citizens in terms of health care quality and health care access. Simply put, Massachusetts has among the highest scores on quality measures in the U.S. and rates second in the nation in assuring residents access to needed care. There is tremendous value in the system we have put together.
- As we embark on new payment structures, let’s be sure to offer providers choice. BCBS, to their credit, tout their initiative as voluntary. This is the right approach. Hospitals, health centers, physician groups and other providers come in all shapes and sizes and will have different capacities to adapt to the new models. Flexibility will be key.
- Technology is a must. It grows increasingly apparent that information technology will be a necessary and important part of quality improvement and cost control efforts. Speeding the transmission of accurate patient information to the point of need is critical for success in quality improvement efforts and efforts to manage chronic disease. Several efforts around the state are underway, which look promising in terms of putting this type of technology in place. But all stakeholders must decide if a commitment is there to bring the technology to every corner of the Commonwealth. This will require a significant investment.
- The doctor-patient relationship is paramount. We must remember that at the end of the day, the relationship between providers and patients is sacred and that no payment structure or proposal can get in the way of delivering the right care at the right time. If we forget this, then we threaten to erode the valuable health care delivery system now in place.
If together, business, hospitals, physicians, health centers, insurers, and others can remain focused on and address these issues, the BCBS model can succeed. It may change form, it may evolve, but it can work. The status quo, fee-for-service model, will likely not work as we move to curb health costs. Regulation is not the answer either. We must rethink, retool and move toward a payment system that rewards performance. The carrot will work much better than the stick when it comes to patient care and cost control efforts.
Blue Cross is to be commended for a bold entry into the areas of quality improvement and cost control, but it will take widespread commitment and collaboration to make it work.
Lynn Nicholas, President and CEO
Massachusetts Hospital Association
I applaud Blue Cross Blue Shield’s willingness to take action. While it might not be politically correct to call what they are proposing capitation, it is, in fact, a reasonable approach if you have all the necessary elements in place to make it work. Tufts Health Plan has more than 10 years of experience in exactly what Blue Cross Blue is exploring. Moreover, we have ample evidence that high-quality care can be delivered in a cost effective manner when providers and health plans collaborate to create systems to manage through a continuum of care for a population that uses significant health care resources.
I’m talking about our Medicare Advantage offering, Tufts Health Plan Medicare Preferred. Working closely with primary care physicians who provide care to nearly 75,000 seniors, we have been ranked third in the nation by the National Commission for Quality Assurance for clinical excellence.
I’m convinced the reason that our members have such a good experience with this product is that the providers with whom we work are committed to this approach.
In addition, there must be balances in the incentives. In this realm, physicians cannot be successful if they aren’t willing to accept the financial risk posed by their patients not doing well. A full-fledged embrace of this kind of practice can absolutely lead to higher quality outcomes, but only if the providers are thinking in a broader way about their patients. They must be committed to examining the patient experience beyond the initial encounter with the doctor. They also must have the technological infrastructure in place to use data in order to improve quality for populations of patients.
There is no question that this kind of an approach requires a desire to work collaboratively with health plans, an investment in practice resources, and a shift in thinking, but the rewards of improved quality of care and overall lower health care costs are real.
Right now, this is not a systemic solution to all of the ills of the health care system. There are too many variables and not all practices want to engage at this level with health plans. However, it is a reasonable approach and one worthy of further exploration.
James Roosevelt, Jr.
President and CEO
Tufts Health Plan
Has any provider organization actually signed this contract? Or is this just lots of buzz about something that isn’t real yet? Lots of good ideas have never come to fruition in the face of the harsh reality of a competitive, or more appropriately, oligopolistic, marketplace.
Thank you for your answer to my initial questions about care for patients with different health status. I had just one follow-up.
In this scheme (perhaps not the word with the best connotation) there seems like there would need to be a lot of disclosure about patient information. Are there concerns about patient privacy, and patient medical information having to pass through too many hands?
Ryan Richardson
[...] two months ago, Blue Cross unveiled plans to offer a new optional quality contract to our providers. The goal of the contract is to base payment on quality, outcomes, safety, and [...]
Why not try this idea as a new and different way to pay for care????? Reallocate a significant percentage of the salary and bonuses of the top executives at the “non profit” BCBSMA and other “non profit” to help fund the cost of care. Who are we kidding —– allowing this type of compensation ($16M plus for an ex CEO)is just wrong on so many levels. Imagine how many people could have received coverage if these dollars paid out by BCBSMA had been allocated to those that truely need the help.
[...] – Atrius is one of 2 provider groups that has decided to switch to a new Blue Cross Blue Shield contract model. The other group is Mount Auburn Cambridge Independent Practice Association in association with Mt. [...]