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Mass. may opt to pay flat doctors' fees

Doctor with money in pocket

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TESS VIGELAND: This week Senate President Harry Reid said there are no guarantees that any health care reform will pass Congress this year. So as we all continue to wait on the national level, states are moving ahead with their own ideas. Massachusetts is considering a surgical repair of its own health care system. Right now -- as in most places -- it's got a so-called fee-for-service model. Doctors and hospitals are paid for each service they perform.

Joel Rose reports on the debate over something called a global payment system.


Joel Rose: Don't worry, I'm not going to launch into a discussion of international finance. The global payment I'm talking about refers to the practice of paying doctors a flat fee in advance to cover all of a patient's medical needs.

Richard Lopez: That encompasses all the costs. For their ambulatory care, for their in-patient care, for their medications.

Richard Lopez is chief physician executive for Atrius Health. It's a nonprofit alliance of more than 800 doctors in eastern Massachusetts.

Jeanne Fitzpatrick: Yes, hi Florence? This is Jeanne Fitzpatrick from Dr. Zamalu's office.

Atrius Health has been using global payment for 20 years. Here's how it works: Say my doctor is part of Atrius. The insurance company pays Atrius at the beginning of the year. The amount depends on my health, which is pretty good, and my age. There's no financial incentive to do extra tests or procedures.

On the contrary, says Lopez, my doctor would like to see me as little as necessary.

Lopez: One of the incentives in global payment is really to keep patients healthy, so that it does control costs.

Massachusetts seems to agree. Over the summer, the state's payment reform commission recommended that Massachusetts switch to the global payment model.

JudyAnn Bigby is the state's Health and Human Services Secretary.

JudyAnn Bigby: Right now we have a lot of waste in the system, because 20 to 30 percent of the services that people get may not be necessary.

The hope is that global payment will reduce unnecessary tests and procedures. But some doctors are worried about the unintended consequences.

Mario Motta: That was tried last time, and everyone rebelled. Not just physicians -- payers, patients. And that's a failed model.

This is Mario Motta, president of the Massachusetts Medical Society. And the failed model he's talking about is known as "capitation." It was a flat-fee system that was common back in the 1980s and 90s. Motta says many doctors in private practice hated the system

Motta: Basically, they were given one lump sum of money to manage all their patients. Well, what if you have a few patients who have extraordinarily high expenses? That would bankrupt that practice.

And Motta says patients didn't like the system either, because they felt they were denied expensive tests and treatments. Health care providers say they've learned some important lessons from the past.

Lynn Nicholas: Things have changed since the last round of managed care. There are ways to monitor and see that care is not being withheld for simply financial reasons.

Lynn Nicholas runs the Massachusetts Hospital Association. She says electronic records will make it easier to measure medical outcomes and to coordinate patient care. But she says it's also crucial that doctors and hospitals don't wind up shouldering too much of the financial risk, as they did back in the 90s.

Nicholas: The margins are so thin that if they mess this up through poor management or poor design, they'd go under. There's no other alternative.

To spread the risk, the Massachusetts plan would pull doctors and hospitals together into large groups. This may all sound reminiscent of the dreaded HMOs of the 1990s. But the state's HHS secretary JudyAnn Bigby says patients don't need to worry.

Bigby: For people who use a lot of medical care, hopefully they will find that their care is more coordinated, that providers are talking to each other, that they're working together to deliver the best care to people.

Lawmakers still have to decide how and when Massachusetts will switch to global payment. No state has tried this before. But if it works, Massachusetts probably won't be the last.

I'm Joel Rose for Marketplace Money.

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