Just found your blog on Technorati & Digg upcomming news feeds and read a few of your other posts.
ISeems good contents,Keep up the good work. Look forward to reading more from you in the future.

Thanks,
Michael

Sorry for slow reply—I’ve been on vacation.

With all due respect, I think you may have missed the point.

To me, it’s hard to refute that the financial performance of hospitals is related to the illogic of current payment methods. First, different types of services have different levels of profitability. Hospitals that don’t provide lots of the highly compensated services generally don’t do as well as hospitals that do. For example, if a hospital provides lots of primary care and behavioral health, and not as many high-end specialty and inventionist procedures (e.g., cardiac surgery, orthopedics), it generally doesn’t do as well. Just ask Cambridge Health Alliance if you don’t believe this… Second, hospitals that have more market power—through geographic location and/or “brand monopoly”– do better financially. This is hard to dispute.

Although I’m not involved in the payment reform commission, my understanding is that it is very much focused on moving the state to more rational payment methodologies, ones that will reduce unwarranted payment inequities both among services and across providers. I hope global payment will be among its strong recommendations. My following of the commission is that it’s been quite clear that insurance risk belongs with insurance companies, and I agree. But I think there’s good evidence—from the US and other countries—that global payment systems hold enormous potential for moderating costs and improving quality, if designed carefully.

I hope we will also think about innovative benefit design and coverage policies as ways to contain costs and improve value. Limited networks might have some promise in this regard, although in many parts of the state there may not be enough providers to make limited network products very feasible. But I hope we won’t limit our thinking to networks alone. We need to get much more creative about finding every way possible to eliminate services of little or marginal value. If we do that, we might well have the resources to increase rates of payment for public programs. And, even more important, we’d free up public dollars to invest in education, housing, income support, public health, and, near and dear to your heart, I know, public infrastructure. All these investments would, of course, improve the health of all of us much more than more medical care.

Nancy

I fail to see what this has to do with reform of provider payment, at least based on what I have seen as the principles coming out of the reform commission. Those mainly seem to be based on movement from fee for service to capitated or bundled payments. How would that affect the relative financial performance of hospitals?

I didn’t see the commission saying anything about reducing the effect of market power, but maybe I missed that.

I also see the commission totally avoiding two key issues — the transfer of actuarial risk to providers and the design of insurance products based on more limited networks. The former could actually enhance the market power of those providers with larger balance sheets, in that they could absorb more risk than smaller places. Likewise, the latter could reward the hospitals systems that have bigger networks.

It seems to me that you are misdiagnosing the problem in the conclusion you draw. Perhaps we could start improving financial performance by having the Comonwealth pay for Medicaid at compensatory rates. And yes, it would be really great if the state used its existing authority to openly publish real-time patient quality and safety figures, and payment rates to the various hospitals.