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June 26, 2006

This Is What We Should Drown In A Tub?

In politics, the battle lines over health care are drawn atop access. The quality of our care is granted, the only question is how more folk can reap its wonders. In academia, however, the question is as often care. Our surgeons may be on the cutting edge (thanks folks, I'll be here all week), but stepping back a bit from the frontier, the vast majority of care is either inefficiently delivered, or simply forgotten. Studies show that we receive only about 55 percent of the recommended treatments for most serious complaints -- and we're not talking CAT scans here, but easy lifesavers, like aspirin and beta blockers after a heart attack. America offers the world's best care for its most exotic and complicated problems, but if you're unlucky enough to suffer something more mundane, you're better off in a host of other hamlets.

The policy response here is something called pay For Performance medicine, or P4P. At base, the incentives in our system are to offer treatments, particularly intensive ones. It's called fee-for-service, and it offers no incentives for quality care or low intensity (aspirin) treatments. P4P, by contrast, pays based on outcomes, on percentage of suggested care delivered (for a fuller explanation, see this review I wrote). It pays based on how good, not how expensive, the treatment is. And one of its first major tests just ended. Utilizing more than 200 hospitals and 38 states, Medicare instituted P4P systems, paying based on treatment quality and comprehensivity and offering bonuses for outcome improvement. The results? Not only did care get better, but it got cheaper. "2004 hospital costs for pneumonia patients were $10,298 for patients who received a low number of the care measures and $8,412 for those who received a high amount. Hospital costs for heart bypass surgery patients also varied widely, with those receiving a low number of measures costing $41,539 while those who had the highest amount cost $30,061."

The mechanism here is that better care means fewer days in the hospital, fewer relapses, less catastrophic measures deployed. Those things are expensive and, contrary to popular opinion, much lifesaving care is cheap. At least if you deploy it early. It's worth noting here that it took Medicare, a single-payer government system, to finally force a wide test of P4P theories. Private insurers are too fractured, and lack the proper incentives, to trigger a reevaluation of hospital care procedures. But Medicare, using their weight and public mission, forced a study that may pave the way towards more efficient, cost-effective, and worthwhile care.

Ooh, scary government, huh?

Crossposted at Tapped

June 26, 2006 | Permalink


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Well, I don't see how P4P is going to result in either increased profits for insurance companies and for-profit hospital systems or dividends for their shareholders.

Posted by: Stephen | Jun 26, 2006 2:54:38 PM

Well, it's cheaper for the insurance companies to pay for this kind of care. Granted, it's even cheaper for them to pay for no care...

Posted by: Kylroy | Jun 26, 2006 3:01:46 PM

The problem with P4P is that it will introduce patient shopping.

If I'm a doc, I ask every prospective patient to fill out a detailed questionnaire. If they have any chronic diseases liek diabetes or asthma, I autmoatically eliminate them as patients. That way, I could take only healthy people.

P4P pays doctors who have "healthy" patients. Thats a great moneymaking tool for docs, because it means they can enlist 10,000 very healthy patients, cast off all the patients with chronic disease. They could jsut sit in their office all day and do nothing, while they get paid for their "healthy" patients.

Posted by: joe blow | Jun 26, 2006 3:21:43 PM

...except with Medicare, you HAVE to provide treatment to everyone with the coverage (i.e. nearly everyone in America over 65) or you lose your Medicare licensing.

Not to say that cherry-picking doesn't occur, but the doc will have to work harder than simply turning them away. Referrals and the like would have to be employed, and they are easier to track.

Posted by: Kylroy | Jun 26, 2006 3:26:27 PM

If I'm a doc, I ask every prospective patient to fill out a detailed questionnaire. If they have any chronic diseases liek diabetes or asthma, I autmoatically eliminate them as patients. That way, I could take only healthy people.

And the current system, which encourages insurance companies to do exactly that, is good because...

Single payer -- it's really the only way you get out of this hole.

Posted by: paperwight | Jun 26, 2006 3:47:12 PM

Joe -- That happens now. As it is, fixing such selection problems is the point of P4P. You get paid based on improvements in care, variable rates for different diseases. Basic point: you bring incentives into line with societal needs; it's actually a tonic for just the problem you identify.

Posted by: Ezra | Jun 26, 2006 3:52:35 PM

Hi Ezra,

I dont know if you saw this at the time. It seems the 2003 Medicare drug bill also created a bipartisan Congressional commission to look into healthcare needs. Their conclusion? Americans want universal healthcare - probably paid for by a payroll deduction!


In other words, Americans want a National Health Service very akin to that which exists in the UK. I've previously pointed out that it could be had for less than the present U.S. system costs the populace and probably deliver better results than the currently underfunded British version.


I'm tempted to paraphrase a great Churchill quotation about democracy - "A National Health Service is imperfect, it is just less imperfect than any other system."

Regards, Cernig @ Newshog

Posted by: Cernig | Jun 26, 2006 4:00:40 PM

One potential problem with pay-for-performance is that doctors and medical societies might see it as the government's (or insurers') forcing doctors to meet unreasonable demands and taking their professional autonomy away. I don't think this is an insurmountable difficulty, but it will definitely need to be dealt with if p4p is going to be implemented on a large scale.

Posted by: Andy | Jun 26, 2006 4:45:21 PM

Out here on the Left Coast, P4P has been around for a while. It's an accounting problem that results in yet more staff being hired to paw through charts and find out who needs a Pap smear and such. Generally, it is given as a bonus incentive on reaching pre-determined percentages of compliance with various tests and procedures. Different HMOs have different lists of items that they have negotiated with the medical groups. I am currently rewarded (or at least my employer is) based on my performance in Paps, mammograms, chlamydia screening for under 25s, tetanus vaccines, PSAs (I think), Hemoglobin A1Cs under 8%, and diabetic lipids. Others have been proposed and pediatricians have a different set. I'm pretty good with my goals except I keep forgetting the damn tetanus shots.

Cherry picking isn't such an issue because Medicare reimbursement (and HMO reimbursement in step) is higher for patients with more complex chronic medical problems...if you code the damn insurance billing sheets right. In order to learn how to code correctly, you go to seminars given by coding experts, no two of whom agree.

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