Health system woes, or whose benefit should we be focusing on anyway?

It’s not easy to be a big healthcare system these days, what with all the new rules and incentives for spending less money and providing less unnecessary care. Medicare is leading this charge, with a variety of efforts, mostly recently contained in the 2015 Medicare Access and CHIP Reauthorization Act, fondly known as MACRA. This law extends previous efforts by Medicare to encourage consolidation and “shared savings” (spend less and you get to keep some) through the creation of “alternative payment models” (APMs), most of which emphasize increasing prospective payment (paying in advance for a basket of services to be delivered to a population) rather than fee-for-service (paying for each service provided).

In some ways, and particularly in some places, such large health systems are well-positioned for these changes; because they are big and provide the whole range of healthcare services (or most of it), and because many of them employ physicians, they should be able to take advantage of the efficiencies of scale, as well as understand their comprehensive costs. Many of them are; Kaiser, especially on the West Coast, and other early-adopters of this comprehensive model. Other payers are following Medicare’s lead, such as Blue Cross/Blue Shield of Massachusetts.

Still, it’s hard to change your business model. When your health system has been designed for decades to maximize income from fee-for-service by hiring lots of specialists who provide services (often procedures) that bring in a lot of money and supplying them with the expensive facilities and equipment to do them, it is scary to think that this entire investment could move from being a profit center to a cost center, where each of these procedures just chips off money already received in capitation rather than generating new revenue. Plus APMs create incentives to spend less overall, and you have spent decades gearing up to spend more – with the expectation and assumption that reimbursement would more than cover this investment.

And if you are not on a coast, but in the part of the country where such changes are happening more slowly, and in fact are mostly still in the future and you’re still making money the old way, it is a very scary and risky proposition to change your business model completely. The analogy of when it is time to put your second foot in a canoe is an apt one. The dock is a stable place to be, comfortable and familiar, but the canoe can take you off to new, and maybe wonderful, places. But there is only a limited amount of time that you can keep one foot on the dock and one in the canoe before the canoe moves off and you end up falling in the lake.

One of the big concerns confronting such health systems is the degree to which they should invest in expanding primary care capacity. The argument for doing so, put forward by most consultants and experts, is that it ensures a patient base loyal to their system and referring in to their hospital(s) and specialists and providing a more comprehensive ability to manage the spectrum of care. The other option is to “double down” and be providers of only high-end, high-cost (and hopefully high-profit) care, with the assumption that the community’s primary and secondary care providers will see you as a beacon for their complex problems and refer their patients to you. This latter position is especially popular among academic medical centers, hospitals tied to a medical school and a faculty practice group, and is much closer to the advice given by the University Health Consortium, the organization of such hospitals.

Along with this is the question of how income might be distributed. Most of the incentives in MACRA and prospective payment are for primary care; in addition to direct reimbursements for primary care providers, the shared savings come from a higher percent of conditions being managed by primary care and not subspecialists, fewer hospitalizations resulting from greater continuity of care, and fewer referrals for imaging (x-rays and the like) of questionable necessity but easy availability (because the capacity for doing them has been overbuilt). Kocher and Chigurupati discuss these issues in their July 14 piece in the New England Journal of Medicine, “The Coming Battle over Shared Savings — Primary Care: Physicians versus Specialists”.[1] The main point of the piece is how specialty physicians will respond to their incomes decreasing – they suggest the options are defensive (fight it and keep doing what they are doing) or offensive (sell themselves as more able to contain costs especially for certain disease conditions). Of course, what works for some specialists may harm others; if, say, a pulmonologist caring for chronic obstructive lung disease is very efficient and their patients need less imaging and fewer admissions, it can hurt others.

The average American is not going to have great sympathy for loss of income for such specialists. The authors cite the mean income for primary care doctors as $195,000, about 4 times the average US household income, and average for specialists $284,000, significantly more but deceptive in that many specialist make 2, 3, or more times that. Thus a $35,000 reduction in income, which is what the authors use in their example, is likely to mostly concern these doctors. The authors also note that primary care physicians “…account directly for a small percentage of health care costs. Yet they substantially influence the total cost of care through referrals and directing of their patients’ subsequent care.” They are, or could be, cost effective, provided that there is not pressure from the system to increase referrals – something that has usually been the norm, and even touted by primary care physician groups who talk about “downstream revenue” generated.

Of course, nowhere in these discussions is the question of what is best for the health of the American people. Implicitly, MACRA and the ACA before it (with its creation of accountable care organizations or ACOs), are intended to increase both access to care and its quality (two legs of the “triple aim”), but arguably have been put forward by both the federal government (Medicare) and adopted by other insurers to achieve the third leg – lower cost. And for insurers, including Medicare, the concern is lower cost to them. The issues addressed heretofore in this piece and by Kocher and Chigurupati and by consultants such as the Advisory Board and organizations like UHS, are how healthcare providers (healthcare systems, academic and otherwise, physicians and other individual providers) can most effectively respond to keep from losing money, from having the cost savings for insurers come at a big cost to them.

The health of the people should be the measure. And it needs to be the health of all the people, the poorest and sickest and most vulnerable and most easily left off, not just the high-yield, high-profit generally healthy, well-insured person who needs a single procedure and has no complicating conditions. Indirect incentives that seek to modify behavior by not demanding that all necessary health needs be provided to all people and no unnecessary care be provided to anyone are all bound to fail. Societies are, or should be judged, not by how they care for their most privileged but by how they care for their most needy (see the FDR epigram at the top right of this page).

And nowhere is this more true than when it comes to the people’s health.

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[1] Kocher R, Chigurupati A, The Coming Battle over Shared Savings — Primary Care Physicians versus Specialists, NEJM 375(2):104-106, July 14, 2016