Paying doctors for value instead of volume

Dan Gorenstein Feb 25, 2014

Paying doctors for value instead of volume

Dan Gorenstein Feb 25, 2014

All of the changes to the nation’s health care system have led to some broader discussions, including changing the way doctors and hospitals get paid.

That is, medical professionals are contemplating what would happen if they got paid for value instead of volume.

There’s even legislation in Congress that would offer doctors an incentive to move away from what’s called fee-for-service payments.

That’s easier said than done.

Just ask Kavita Patel at the Johns Hopkins Community Physicians clinic in Washington: The changed pricing structure shows up as soon as Patel walks out of an exam room. First, she must instruct her co-worker to follow up with the patient in a few days. Then, Patel must make phone calls herself, at the end of a long day. 

This is what non-fee for service care looks like. It’s more coordinated, but it’s more work. It’s work Patel doesn’t do with her fee-for-service patients.

“It’s much easier for me to say, ‘Sorry, can’t help you, you need to make an appointment.’ It’s much harder to do the opposite. It really is,” she says.

Many health policy people believe coordinated care is key to controlling costs. But here’s the problem: Right now, almost all doctors and hospitals have an incentive to charge for everything from a surgery to the aspirin you’re given after a surgery.

Instead, the government and private insurers want health providers to work within a budget. If they go over, they’ll eat some of the costs, and if they come in under, they’ll keep some of the savings. It may sound good, but Dr. James Weinstein, CEO of Dartmouth-Hitchcock health system, says here’s what people have to understand.

“Going away from fee-for-service fundamentally means less money,” Weinstein says.

That helps explain why doctors and hospitals talk about moving away from fee-for-service but aren’t actually doing too much moving.

At Dartmouth, Weinstein says he’s trying to run away from fee-for-service contracts as fast as he can. As he prepares for the not-too-distant future, executives hope to trim expenses by some $400 million over the next several years.

Less money, says Weinstein, means major changes to the business, and to the people who make that business go.

“Families rely on that health care facility for their jobs, for their pensions. The unintended consequences of this change has a human face that people don’t see,” he says.

But even with less money, shifting payment away from fee-for-service contracts requires upfront spending, to hire nurses, health coaches and social workers.

And then you have the tricky issue of what are called quality measures.

To qualify for bonuses, health providers have to meet certain benchmarks like lower readmission rates and patient satisfaction scores.

“I don’t think we’ve invested in meaningful measures,” says Harvard public health professor Ashish Jha.

Jha says right now we’re spending too much time on quality measures just because they can be measured, not because they’re necessarily the right metrics.  

“If you have a patient who comes in with pneumonia, yes, you want to make sure that patient doesn’t die, but one of the most important things is that patient can go back to work, play with their families and lead a meaningful life. Well, how do you measure all of that? That takes work,” he says.

Jha and most other health policy people know moving away from fee-for-service – no matter how much it may make sense –isn’t going to happen fast. But it will happen.

As more health care providers experiment with new payment models, people will have to address a nagging question.

“If this is the best thing to do, and we are only doing [it for part] of the population, what does that say about the care we are providing to everybody else?” says Patel, the physician in Washington.

She says it means that probably everybody ought to get that kind of care. But in the next breath, Patel says it’s just hard to do that.


*CORRECTION: In an earlier version of this story we mispelled the name of Harvard public health professor Ashish Jha. The text has been corrected.

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