Oh, wait, you want to know how he might be a model? Well, he definitely has my vote when it comes to practicing “Lifestyle Medicine,” tackling his patients’ unhealthy lifestyles and getting them to exercise more. (Check out that story from earlier this year here.) But now The Los Angeles Times features Dr. Folch in “A shift in how care is paid for.” It’s an excellent explanatory piece about the shift away from “fee for service” medicine — paying doctors for each bit of care — and toward “global payments” that pay doctors for a patient’s overall care — and rewards them for keeping the patient healthier and costs lower. That shift is happening more systematically here in Massachusetts than anywhere else, the piece says.

It begins:

CHELMSFORD, Mass. — It’s hard work being one of Dr. Damian Folch’s diabetic patients.

If a lab test shows high cholesterol, Folch is quick to call or email. No patient can leave the office without scheduling an annual eye exam, a key preventive test. A missed exam or an appointment leads to another call.

“We are a real pain in their necks,” joked Folch, a primary care physician in suburban Boston. “We track them down.”

That kind of attention has always been good medicine. For Folch, 59, it’s now good business. He is among thousands of physicians in Massachusetts whose pay depends on how their patients fare, not just on how many times they see them. If patients stay healthy and avoid costly medical care, he gets more money.

This simple shift in how healthcare is paid for — long seen as key to taming costs — has been occurring in pockets of the country. But nowhere is it happening more systematically than in Massachusetts, the state that blazed a trail in 2006 by guaranteeing its residents health insurance. Now Massachusetts, a model for President Obama’s 2010 national healthcare law, may offer another template for national leaders looking to control health spending.

“There have been few greater periods of change in American medical history … and this is the epicenter,” said Dr. Kevin Tabb, a former chief medical officer at Stanford Hospital and Clinics in Northern California who now heads Beth Israel Deaconess Medical Center, one of Boston’s leading hospitals. “It is striking how different Massachusetts is from the rest of the nation.”

Read the full story, then let us know how you voted….

In April, we introduced you to one of America’s most expensive patients. Stoughton’s Sue Beder is 66 and has had multiple sclerosis since she was 18. She sees half a dozen doctors, takes 21 prescribed medications, and is typically in and out of the hospital twice a year. You can listen to her story here.

Beder is one of the 5 percent of patients we often hear about who account for half of all health care dollars in the United States. As one of the most expensive patients, Beder is at the epicenter of Massachusetts’ efforts to save money while improving her care.

Late last year, Beder signed up with an agency, Senior Whole Health, that receives the money Medicare and Medicaid expect to spend on Beder and pools that into one budget. It’s an approach the state plans to expand to 110,000 disabled patients across Massachusetts. Senior Whole Health pledges to spend less than the government would spend and, in exchange, the agency gets to decide how best to spend the money to keep Beder healthy.

Beder couldn’t have been happier with the move. The agency put handrails in her bathroom and started buying all her vitamins and lotions. It supplied adult diapers so that she wouldn’t get out of bed at night and risk a fall. The agency is doing all this to help Beder stay home. That’s where she wants to be, and it’s cheaper than moving her into a nursing home.

So is this idea working? Is spending more money up-front on this home-based care helping Beder avoid costly medical care?

Here’s a hint: We begin the second part of our series at Epoch Senior Living, a nursing home in Sharon. The goal is to get Beder back to her cozy bungalow in Stoughton. If she can recover and return there, it will likely be her last chance to try living at home.

A Two-Month Medical Journey

Beder rocks forward, trying to make the transition from wheelchair to walker.

“It’s hard again today,” Beder says, her voice cracking with tension.

“So, push it [the wheelchair lock] forward until you hear the click, then you know it’s locked,” coaches Sharon Lerner, an occupational therapist at Epoch.

“Forward,” Beder mutters. “Oh, OK, forward.”

Beder’s been in and out of this nursing home and several hospitals for two months.

It all started with this: Beder wasn’t getting enough to drink and became severely dehydrated. An aide found her slumped in a chair. “I couldn’t hear that well,” Beder recalls, “and I couldn’t swallow much and um, I’m trying to think what happened this time, but I knew I had to go to the hospital.”

Now, after three separate hospital stays, repeated recoveries and $56,171 in bills, Beder is cleared to go home. But only if she agrees to some difficult changes.

‘It Wasn’t Working Out Before’

Three nurses, a social worker and Beder sit around a small conference table at the nursing home. They’ve gathered for a required discharge planning meeting. Before Beder can go home, her main nurse at Senior Whole Health, Judy Tremblay, wants to make sure the seemingly small problems that triggered Beder’s long, expensive medical journey won’t happen again.

All eyes turn to Tremblay, who sits up straight in her chair. “I want to talk, Sue, about two phone calls I got,” Tremblay says. “One phone call was from your mom.”

Beder’s 93-year-old mother told Tremblay why Beder wasn’t getting enough to drink. Beder was letting her personal care attendants, or PCAs, work hours that were convenient for them, but not for her. Beder, her mother told Tremblay, usually wakes up around 6 a.m., but her PCA wasn’t arriving until 10 a.m.

“And between the hours of 6 and 10 you really have no one to take care of you, to help you get to the bathroom, to help you get something to eat or drink,” Tremblay says, her voice rising with urgency. “[And your mom says] that you had falls during the 6 to 10 period.”

Beder jumps in to defend Jen, her main PCA. “She always says to me, if I need her, I have her phone number, to call her,” Beder says.

Tremblay gives Beder one of those looks. Beder is crestfallen. She thinks of Jen as family and depends on her for emotional support.

“She happens to be a very wonderful person in my life, it’s just that she has a daughter,” Beder says, hoping Tremblay will relent. She doesn’t. Beder’s voice becomes plaintive. “I can talk to Jen and tell her I need her. Does that…?”

Beder glances up and sees Tremblay is still giving her that tough-love look. It turns out that another PCA, the one who comes on weekends, wasn’t arriving at Beder’s home until 4 p.m.

“Sue, this is all about you,” Tremblay says firmly. “This is about what you need. So it’s just not been working out.”

“Right, no, it hasn’t been working out,” Beder agrees.

Beder looks defeated as Tremblay says she may have to hire a new team of aides and put them on a different schedule. Jennifer Cooperman, a social worker at Epoch, steps in to reassure Beder.

“You need to know you’re not trapped,” Cooperman says. “If something upsets you tonight or whatever, we still work towards the goal of getting you home and keeping you home safely. Does that make sense?”

“Yes,” Beder says, “that’s good.”

Beder’s discharge plan requires a visit to her primary care doctor. He’s a key part of Beder’s team and will be part of the decision about whether she can remain at home.

Dr. Joseph Kagan has been treating Beder for more than 10 years and her mother for almost as long. “You been doing OK?” Kagan asks, bursting into the room with a big smile. “I know you were in rehab for a while.”

“Oh my God, two months,” Beder tells Kagan, “and I did some silly things.”

“Well, the issue was you were not really well at the time,” says Kagan, who spoke to some of the nurses and doctors who treated Beder, “and you were making decisions you normally would not have, so I understand all of that.” Kagan moves through a routine exam.

“The main thing is,” he continues, is that “a lot of it’s behind us. Right now, your mind is as clear as a bell. We’re going to start winding down some of these medicines. We’re going to see how you do.”

Kagan reviews Beder’s 21 prescriptions. He cuts her dose of sleeping pills so she’ll be less groggy and less likely to fall if she gets up in the night. But he agrees to increase the strength of Beder’s anti-depressants after hearing about the upheaval with her PCAs and a cat who was gone when Beder got home.

Two Months Of Sue Beder’s Care:

Feb. 11 – Arrives at Norwood Hospital – At home, Beder is having trouble talking and hearing. A personal care aide drives her to the hospital, where she is admitted for IV re-hydration.
Feb. 15 – Discharged to Epoch – Beder moves into a shared bedroom at Epoch, a nursing home in Sharon. She is weak and needs help standing, dressing and taking care of other daily activities.
March 3 – Goes back to Norwood – Beder tries to call 411, but dials 911 by mistake. She’s flustered and disoriented as she talks to the police. She’s admitted to Norwood for a mental health evaluation.
March 6 – Returns to Epoch – Beder continues rehab. She is moved by the kindness of the staff and she loves the food, but she is anxious to get back to her own home and her cat in Stoughton.
March 21 – Admitted to Good Samaritan Medical Center – Beder develops a urinary tract infection. She has another period of agitation, which her doctor attributes to too much change: of place and meds.
March 26 – Makes a brief return to Epoch – Beder checks in again at Epoch. She develops cellulitis in one hand. The infection spreads up her arm.
March 28 – Admitted to Norwood Hospital – Beder is admitted for treatment of cellulistis in her hand. She is overwhelmed again, her anxiety flares, and she’s transferred to the mental health unit.
April 6 – Spends one last week at Epoch – Beder’s care managers have doubts about whether she can live independently, with some help. Beder wants to go home. They work out a discharge plan.
April 12 – Returns home – Beder arrives home to a new hospital bed, new caregivers, a schedule designed to help her avoid falls, and a charge to drink!

“Oh, I feel so bad” about the cat, Beder says. “I’m very depressed.”

“Yes, but you just pick up the pieces and move on, and you’ve always in the end been very courageous,” he tells Beder, holding her hand. He tell her to come see him again in a month.

Returning Home To Many Changes

Beder makes it back home. Tremblay, her nurse, is there to reinforce the rules. Beder must drink regularly, avoid falls, and keep her PCAs on the agreed schedule.

“Sue knows that if this fails, the next step is long-term care,” Tremblay says.

Beder has a new PCA, Ernestina Depina, who is just arriving with an armload of groceries, including Beder’s new favorite drink, diet cranberry juice.

“Oh hello,” Beder tells Depina. “Look how pretty she is, just like Sophia Loren, but she doesn’t even know Sophia Loren.”

Depina does know the Heimlich maneuver. She performed it on Beder in her first week on the job.

“I just have a habit of putting so many things in my mouth. And I’ll try to start to talk and, oh, it was just awful,” Beder recalls. “Before I knew I was choking, she [Depina] said, ‘Sue, do you want to go to the hospital?’ And she got me frightened.”

Beder refused Depina’s plea that she go to the hospital because Beder was worried she’d end up in another spiral of hospital admissions and readmissions. If that happens again, Beder may be back in the nursing home for good. There are no programs that pay for 24-hour care at home, Tremblay tells her. If a patient needs that, they go to a nursing home, unless they can afford to pay for round-the-clock care on their own.

Beder, Tremblay and others involved in Beder’s care discussed whether she should have left the nursing home this time.

Says Tremblay: “The question was, how feasible was it for her to come home? Sue is competent. Legally she can make her own decisions. Whether they be decisions other people would make, it’s not up to us to judge that. She wanted to be home.”

As in our first story, Beder is still falling regularly. She calls the Stoughton Fire Department about six times a month to come pick her up off the floor and place her in a chair or back in bed. Tremblay and Beder keep trying to come up with solutions.

“You have to have an open relationship, because I have to be able at any time to come in and say, ‘Sue, this isn’t working,’ ” Tremblay says. “You’ve had this many times, rescues come here. Next time it could be a fractured hip.” We have to have that relationship, she continues, so that Beder will trust her one day when she says, “this is no longer going to be possible.”

“I do trust you,” Beder says.

There’s no sign yet that caring for Beder under a global payment is saving money:

$56,170.97 – Sue’s hospital and nursing home-related expenses
$15,709.00 – What Senior Whole Health received for her care over the period
$40,461.97 – What Senior Whole Health lost for this period

But if Senior Whole Health weren’t trying, Beder would probably already be in a more expensive nursing home full-time. The agency says it often takes a few years to get to know a patient and figure out what will work to keep them healthy at home.

Still, Beder is a sign that controlling costs without sacrificing care for the country’s most expensive patients can be really hard.

This fall, we’ll take a final look at whether putting Beder on a budget can save money while improving her care. We had help with this story from WBUR intern Katie Broida.

So when I saw this line in a Health Affairs analysis of the Blue Cross Alternative Quality Contract (AQC) after two years, my doctor’s words echoed in my head.

“We cannot distinguish between a true increase in risk and more aggressive coding resulting from incentives.”

OK, this might take a little explaining. The study says each year, there are more, sicker patients in the Blue Cross AQC contracts. Why might that be, you ask?  Are doctors who shift to a global budget attracting sicker patients? Are they detecting more medical problems? Or could doctors be claiming to have more, sicker patients, so that they can demand a larger global budget from Blue Cross?

The AQC contracts are based, in part, on whether a physician’s group includes, for example, 300 or 3,000 diabetics. If the group has a large ratio of expensive patients, the group can demand a larger AQC budget. Doctors may be “upcoding” – using more complex and expensive codes when billing for patients – to make it look like the doctor has more expensive patients and needs a larger budget.

A 2009 report from the Medicare Payment Advisory Commission (MedPAC) raised concerns about “upcoding.”  Health Affairs study lead author, Dr. Michael Chernew, says he looked for upcoding in the Blue Cross AQC contract, but found little evidence that doctors in Massachusetts are claiming to have sicker patients so that they can justify a higher global budget.

Of the 9.9% savings that groups new to global budgets achieved in 2010, Chernew says only 5% of that total can be attributed to doctors who exaggerated the sickness of patients. “The vast majority of the 9.9% is real savings, as opposed to simply coding changes,” says Chernew. “Nevertheless, I do think it’s an important issue to keep an eye on.”

The bottom line – so far – there’s little evidence that doctors are gaming global budgets in Massachusetts. I’m sure my primary care doc won’t believe me.

WBUR’s Martha Bebinger offers her thoughts:

A Health Affairs report out last week concludes that a relatively new global budget contract in use by Blue Cross Blue Shield of Massachusetts has “improved care.” Hold on. If this is the threshold for success, then the move to global budgets is going to disappoint a lot of regular, non-medical people, like me.

Take a closer look at the evidence of “improved care” in the report. There are two charts (and summaries, both are below). The first includes scores for 21 ways to measure whether patients received recommended preventive or maintenance care. The second looks at whether patients with diabetes, hypertension and cardiovascular disease are more likely to have their ailments under control with care through a global budget than through fee for service. Yes, there is some evidence that patients are receiving better preventive care.

But to me, “improved care” should mean more: Are patients in a global budget healthier, happier and more productive than those who receive are through traditional fee for service? I understand that measuring “health” is really hard. One quality guru told me that the U.S. has not expanded ways to measure health care quality since we started using HEDIS in, was it the early ’90s? OK, but if you can’t tell me I will be healthier under a global payment, then don’t make the claim.

Here are some examples of things I want to know when comparing patients in and outside a global budget:

1) Do your kids with asthma miss fewer days of school?

2) Do adults diagnosed with depression miss less work?

3) Are patients readmitted to the hospital for the same or a similar ailment less frequently?

4) Do patients develop fewer hospital acquired infections?

5) Do moms suffer fewer complications after a normal vaginal delivery?

I don’t want to minimize the importance of helping diabetics keep their blood sugar under control. This is important. But I need more clear, understandable proof of “improved care.” Is it out there?

Here’s the chart on the 21 preventive and maintenance measures:

On the chart that looks at chronic disease management control, here’s what the report says:

Formal evaluation of outcome quality measures could not be conducted because of the lack of pre-intervention enrollee-level outcome data. However, an unadjusted analysis of weighted averages for five outcome metrics across provider organizations suggests that intervention groups achieved better or comparable outcomes in 2009–10 relative to recent Blue Cross Blue Shield of Massachusetts network averages.

And here’s the chart:

One in five patients in Massachusetts is now under some kind of global payment. That means that hospitals and physician groups negotiate a budget for all the patients in their practice. Doctors are paid based on the number of patients in their care, not based on how many patients they see in a day or the number of tests they order. This change is sweeping across Massachusetts and being tested in pockets around the country. Blue Cross Blue Shield launched this experiment in Massachusetts in 2009. Michael Chernew, and a team of researchers at Harvard Medical School, looked at what happened in the first two years.

“We find in our study that the underlying medical spending fell and quality improved,” says Chernew, “and ultimately I think that’s what the system is striving towards.”

The 11 physician groups and hospitals that joined in 2009 and 2010 did a better job than physicians in traditional medical contracts of making sure that patients received standard check-ups, cancer screening tests and other preventive care.

Overall, they trimmed spending by just under three percent. Chernew says these providers are delivering quality care for less money, but, “the real question is going to become, as the global budget gets tighter, can the groups continue this level of savings. I don’t think we can tell the answer to that question after two years of analysis.”

The main way doctors saved money was by sending patients to lower cost hospitals. This wasn’t easy; many resisted the change. Doctors say the next stage, which is trying to eliminate care patients don’t need, is even more difficult.

Gene Lindsey runs Atrius Health, which includes Harvard Vanguard doctors. He says doctors have many longstanding habits and practices, and talks about “getting them (doctors) to the place where they’re actually able to see, ‘Wow, it’s wasteful to order a test that measures 10 things when I only needed to measure one.’”

Lindsey says he hopes doctors will realize that there is a cost for getting this information they don’t need but, “that’s relearning an approach to your craft.”

The Blue Cross contract uses financial incentives to encourage doctors to make these changes. There are quality bonuses and extra payments so they can hire patient case managers and add more preventive services. But these additional payments are eating up all the savings so far. In fact the report says these global budget contracts are likely costing Blue Cross more right now than standard medical contracts.

Blue Cross Senior Vice President Dana Safran says the insurer did not expect to save money right away. “We understood that we would be buying something very different, that we would be buying these higher levels of quality and better outcomes that the study reports,” says Safran, and “that we would be buying a system that is in the process of transforming itself to hold down the rate of growth in medical spending.”

Safran says these doctors and hospitals in the study are on track to save consumers money towards the end of their five year contracts. Even though consumers are not seeing any savings yet, health care experts say the fact that doctors are saving money internally is significant.

“This is really the first time that people have shown you can save money even right away,” says Harvard University economist David Cutler. “You then start to see some of the fundamental transformations that will save money down the road.”

“One way or another health care spending growth will have to slow,” says the report’s author, Michael Chernew. If changing the way we pay for health care doesn’t lead to better care and lower costs, then consumers will face much higher costs or doctors and hospitals can expect much lower fees. “We simply, as a state and a country, can’t afford the levels of health care spending growth that we have historically experienced,” says Chernew.

At the State House, lawmakers are negotiating the final elements of a bill that will encourage more doctors and hospitals to move to global payment contracts. The House chairman of the Joint Committee on Healthcare Financing, Steve Walsh, says he’s encouraged by the report because it “confirms that there’s a huge amount of savings to be achieved if you move away from fee for service.”

Walsh says the legislature recognizes there are a number of alternative payments that can be used to build a better and cheaper health care system in the long run.

The House and Senate are expected to build on movements that are already under way: global payments, electronic health records and the increased focus on primary care. The House point person on health care, Steven Walsh, has outlined his proposals in meetings with dozens of groups.

Legislators are considering some controversial moves.

The Senate has talked about taxing insurance company profits. One House leader has a proposal to close the gap in payments to rich and poor hospitals. There’s a vigorous debate about how aggressive the state should be in trying to hold down health care costs.

Health care is 18 percent of the Massachusetts economy. Trying to reorganize and reduce health care spending without hurting the health care industry is a high-stakes gamble. And, as Cutler pointed out, the nation is watching.

“A few years ago, Massachusetts was the first state in country to decide that we can and we will cover everybody,” Cutler said. “And then the rest of the country followed. Now is our opportunity to show that we can make the health care system work for everybody. And if we do that then the rest of the nation will follow as well.”

So it’s slightly unnerving that a survey conducted by the Harvard School of Public Health for the Massachusetts Medical Society found that only 29 percent of doctors said they were ready to enter into such payment arrangements, and less than half believe that global payments will reduce medical spending.

The latest MMS survey, which we covered earlier here (the survey has just now been finalized) included “572 physicians, 290 who work in solo or small single-specialty practices, and 282 who work in larger, multi-specialty groups or groups connected to hospitals.”

Her are some more key findings:

–While 67 percent of respondents reported having access to computer systems for managing some types of clinical information, only 7 percent said they had computer-based systems that permit clinical information exchange, communication, and management both inside their group and with physicians and hospitals outside of their group.

–Only 29 percent reported that their group is ready to enter global payments contracts, and only 21 percent said their group is both ready to enter such contracts and large enough to provide comprehensive care, negotiate with health plans and attract skilled managers to oversee these processes. Those practicing in large groups with experience with financial performance incentives were more likely to say they were ready for global payments.

–Physicians also questioned the presumed benefits of global payments: Only 44 percent believe that medical spending will decrease with global payments, only 19 percent think quality will improve, and 76 percent think that a global payment system will reduce the number of physicians willing to work in Massachusetts.

Landon writes:

Conceptually, global payment represents an important opportunity for changing the perverse incentives inherent in our current fee-for-service system. To be successful, however, ACOs must pass these incentives along to their member physicians, who continue to be responsible for most utilization decisions. Although organizations can implement various managerial strategies to influence physicians’ decision making (e.g., radiology decision support and prior authorization), ACOs are unlikely to reduce the rate of increase in health care spending without some essential changes in the behavior of member physicians — and therein lies the rub. [My bold]

The fundamental questions become how ACOs will choose to divide their global budgets and how their physicians and other service providers will be reimbursed. Thus, this system for determining who has earned what portion of payments — keeping score — is likely to be crucially important to the success of these new models of care.

Under ACOs and many commercial global payment products, providers will continue to receive traditional fee-for-service payments, and hospitals will receive their usual contracted payments, through either the diagnosis-related-group (DRG) system or per diem payments. All spending for each patient that is attributed to the ACO will then be tracked and compared with the calculated budget retrospectively at the end of the performance year in order to calculate savings or losses. Thus, standard fee-for-service payments remain the de facto method for keeping score, which works against the very design of the program. The inequities of the fee-for-service system, which reward proceduralists and specialists at the expense of cognitive specialties and primary care, remain embedded in the payment system. Although organizations can receive surplus payments, additional revenue from any surpluses will not flow into organizations until at least 18 months after the program begins.

As global payment systems are currently designed, primary care physicians stand to be among the big winners. However, to earn rewards, they will also have to shoulder the largest burden of the work needed to succeed under risk-sharing arrangements.3 In a well-functioning health care system, primary care physicians are the point of access, are responsible for care coordination and management, have perspective on the whole patient, and have the ability to manage the care of a patient population. Moreover, most quality incentives being incorporated into the payment systems for ACOs and other new global payment contracts also fall under the purview of primary care. To accomplish the care-management and quality goals, however, primary care physicians will need substantially more resources — for hiring care managers and other personnel to pursue population health management, for coordinating and managing care, and for implementing processes to ensure adherence with quality measures.

Children’s President and COO Sandra Fenwick says the savings, as compared to previous increases, will be $83 million.  That amount, Fenwick says is in addition to money Children’s shaved off contracts in 2009 and 2010 for a the total of $155 million.  Is that enough over five years? Weigh in below.

Beyond the savings, Fenwick says this contract is a milestone because it moves Children’s into the Blue Cross Blue Shield global payment plan (the Alternative Quality Contract/AQC).  “We’re going to be taking risk for managing the care of our patients,” says Fenwick, “we’re going to be held accountable for the quality, and it really is in line with policy changes that the whole country is going to be watching.”

Blue Cross CEO Andrew Dreyfus also calls this contract a milestone, but for a different reason.  Dreyfus recalls sitting in meetings several years ago about moving to global payments and hearing “a lot of skepticism about whether global payments could work in a specialty hospital like Children’s. I think we’re answering the question that it can work in a way that both improves quality and lowers cost.”

For more on how Fenwick sees the deal, here’s a condensed version of our interview:

Fenwick: The savings in these contracts are in addition to an aggressive and comprehensive approach that we took at Children’s starting in 2009 to try and reduce both the cost of health care as well as to improve quality. I can give you some examples of that if that would be helpful.

We built some care delivery innovations like something called home ventilation for kids who are on ventilators, where we actually send a physician into the home to keep kids from coming to the emergency room or to the ICU.

We’ve moved some of our chemotherapy children to a home hydration program preventing inpatient stays for those kids. We have tried something called “Try Without Sedation,” so that very small children can avoid anesthesia going through an MRI. All of these are ways of both trying to improve the quality and the experience of care while clearly reducing the cost of care for those incidents.

And we have been really working hard to move care to the lowest cost setting, trying to keep kids out of the hospital where we can through our asthma program and moving children from inpatient to outpatient to satellites and to our community hospitals. So all of those are both related to the unit price of care as well as to the comprehensive cost of where the care is delivered and how much is delivered and how much it costs.

Bebinger: Are you still a high cost hospital in the tiered insurance plans?

Fenwick: We are a high cost hospital. Pediatrics is more costly than adult care. And a specialty hospital that really takes care the sickest children will always be more costly than either a community hospital or a hospital that takes care of principally adults.

Bebinger: Why are you agreeing to these rate changes and moving into the Blue Cross AQC (the global payment contract).

Fenwick: First of all, we are absolutely committed to working on innovative ways to reduce both the cost of care as well as to be innovative around payment policy and business solutions that will sustainably reduce the cost of health care, at the same time improving quality. So that is a commitment that we have made over the last three to four years.

I think it was important for us to lead with quality, to make the program with Blue Cross one that really adapted better to pediatric care. And so we are the first pediatric only or specialty hospital to join this particular ACQ or alternative contract. And we worked with Blue Cross to make the ACQ work for kids by having more robust pediatric outcome measures that include not just local but national comparators and not just primary care metrics but also specialty and specialty hospital measures.

Bebinger: What would you say to a neighbor who is not immersed in health care about what kind of difference this will make for patients?

Fenwick: I think that it will basically allow for better coordination of care between primary care, specialists and the hospital. And I think that’s probably where having the information about care of children and the cost that’s involved in taking care of kids, will benefit both the quality of the delivery of service and the right amount of care. And I think all of these things will go toward improving both the cost and long term quality of care.

Bebinger: How different will it be for doctors to work under this arrangement?

Fenwick: I think the physicians will be working much more collaboratively, managing patients through what’s called the pediatric medical home, where the primary care doctor will be looking at managing all of the patient’s care locally, which is what they have been doing now for the last couple of years. But in addition to doing that, they will also have more information about where their children are getting care, how much it’s costing them, no matter where they get the care.

That data, I think, will help them make and inform their decisions about the whole cost of delivering care. Then pairing that with all of the incremental data around quality will make sure that, while they’re looking at cost, they are also balancing that against the quality metrics.

Too often health care reform ideas don’t account for pediatrics. This new pediatric focused AQC features a whole range of quality measures from well-child to sub-specialty care. We are going to be compared locally and against national pediatric comparators. We thought that was very important to make sure that the care that was being delivered was appropriate for kids.

The only other thing that I would say is that this demonstrates that we really are trying to not only be innovative leaders in care and research for children and that we are really focused on ensuring that all children have access to Children’s Hospital and its doctors, and will receive the world-class care that we’ve been a leader in pediatrics for over 140 years or so.

Bebinger: How significant is this for Children’s?

Fenwick: I think it’s a pretty significant milestone. I think we are going to be taking risk for managing the care of our patients. We’re going to be held accountable for the quality simultaneously. And I think it really is in line with health care reform efforts and policy changes that I think the whole country is going to be watching.

The Times piece cites experiments with global payments, and quotes Brandeis health economist Stuart Altman saying that Partners HealthCare’s recent announcement to enter into such an arrangement with insurer Blue Cross Blue Shield of Massachusetts is “a big deal because they’re the biggest player in town and it sort of solidifies that this will be one of the major changes in the system and that it’s likely to be around for a while.”

Levy writes:

The reporters give credence to the premise, even though there is not empirical support for the conclusion. Indeed, such support as exists in Massachusetts suggests that the manner in which global payments were introduced resulted in higher, rather than lower, costs. The story also fails to discuss consumer concerns about such plans, which would limit choice.

But then, the reporters retell the big lie, the one that suggest that concerns about the cost trends of the dominant provider group have been alleviated by a recently signed contract. Ready? Here you go:

“Under market and political pressure, Partners also agreed to renegotiate its contract with Blue Cross Blue Shield and accept lower reimbursements, which is expected to save $240 million over three years. … Blue Cross Blue Shield of Massachusetts said payments to Partners would increase at about 2 percent a year rather than the previously anticipated 5 percent to 6 percent.”

Let’s deconstruct this. First of all, the PHS contract had one year to run, not three years. Whatever rate renegotiation they accepted for the last year of the contract, they would have been smoking something to think that they would have received 5 to 6 percent going forward. Also, as previously mentioned here, the base on which they get their “about 2 percent” increase is substantially above the market. Other hospitals that were at or below market rates also received rate increases in the “about 2 percent range” — starting one or two years ago. Indeed, with other, non-dominant hospitals, BCBS started those negotiations by offering negative or zero change in rates. Partners, then, didn’t give up anything going forward. It was permitted to keep its huge bolus of embedded, above-market rates.