Ronnie’s Corner

We recently discussed the impact of all of the changes going on with payment models on the providers. We discussed that the evolution to payment models that reimburse for quality and outcomes rather than volume of visits and procedures will have significant impact on the providers. This is no trivial change! Physicians have practiced the same way for thousands of years. Patients with medical issues come to them and receive care. Now, they have to take on a whole new set of activities. They need to make sure that the patients take their medications so they can achieve their treatment goals. They need to make sure patients follow lifestyle instructions so their chronic diseases don’t deteriorate, resulting in bad outcomes. How could they possibly take this on and continue to see patients? if anything, with all of the new insured people, physicians will need to see more patients.

The answer is that in order for physicians to achieve these goals, they need to go to new models of care. This means that they will need to start leveraging a team supporting them far more effectively. They need to use technology to get more done with the same resources. Their practice patterns need to shift to incorporate new tools to get to better results.

Early experience suggests that although there is some movement in this direction by the providers, it’s slow going. Many of the physicians are close to retirement and are not interested in turning their practices upside down. Younger physicians are worried about the impact on their bottom lines during the transition and are proceeding cautiously. What is clear is that the solo and smaller practices will have a much tougher time with this. That’s because they have more limited resources to embark on this journey. That’s why more and more of them are open to selling their practices or forming partnerships with institutions.

We have discussed the historic changes going on with Medicare and the entire healthcare system. The pressure of increasing costs of healthcare on governments is forcing them to take radical steps to contain costs. These include cutting payments to providers, paying only for the most essential medical services, and linking payments to outcomes. So, if you’re a provider, what are you supposed to do? You’re getting paid less for the same services and now you have to do a lot more than just treating your patients. You need to start tracking and reporting their outcomes and if the outcomes don’t meet the requirements set for payers, you will be penalized, even if it has nothing to do with the quality of care you provided. What are you supposed to do if a patient doesn’t take their medications or if someone wants to try other treatments that you did not even recommend? Why should you be penalized for their action? Well, these arguments sound very logical but the payers, especially the governments, are tired of escalating costs and they’re putting it on the providers to fix this.

This has resulted in some pretty significant changes in the healthcare system. For one, to start managing patients in an ongoing basis so you can improve their outcomes, you need to have the resources to not only do your daily job of seeing patients in your clinics and hospitals but also keep an eye on them when they’re out of the clinical setting. Also, you need to start addressing the types of things that you never had to worry about: can this patient afford their drugs?, what is their level of health literacy?, what if they go home from the hospital and don’t follow the instructions and come right back in? Medicare now penalizes hospitals if their patients get readmitted within 30 days of discharge. How does a medical clinic take this on? Well, it doesn’t. Increasingly, physicians groups are joining hospital systems and forming health systems, or medical centers, or integrated delivery networks (IDN.) These organizations are trying to organize their resources so that they can now go to a Team Care model. This means that it will no longer be a physician and a patient. The physician now will have a team supporting him. This team will not only manage patient’s clinical issues but will support the patient’s lifestyle and attend to all of their non-clinical problems that may affect their health. The hope is that we will see much better patient outcomes at lower costs. Will it work? Well, we can discuss that next time.

In our last installment of this series, I’d like to review some of the ongoing changes in our healthcare system  and their potential impact on how healthcare is practiced in US.

First, health insurance exchanges are meant to provide everyone an opportunity to have health insurance. On the surface, this might suggest increased costs to the government since many people will receive government subsidies to buy health insurance. How, then, does this help the government save money and stay solvent? Well, many of these people are currently getting care in very expensive settings such as emergency departments or hospitals, and cost the system lots of money. This results in rise of the healthcare costs and everyone ends up paying more, including the government. By insuring everyone, the goal is that people will get preventive care and have access to the system before they need to go into the emergency departments or hospitals. This will result in lowering the overall cost of care. The Congressional Budget Office (CBO) projects that this will result in significant reductions in overall healthcare costs over the next few decades.

Second, payment reform will mean that providers will need to shift from getting paid per episode of care to payment based on the outcome of their actions. This is quite a change from how medicine has been practiced and paid for historically. Providers are used to seeing their patients when those patients feel that they need medical care. After each episode of care, be it in a clinic or in a hospital, patients and their families are responsible for following the medical instructions. Now, with the new payment models, providers need to worry whether their patients will fill their prescriptions or take them. They’ll need to identify their high risk patients, anticipate their complications, and intervene before they reach a critical stage where they may need expensive care in a hospital. How are providers dealing with this? Many are taking very measured steps toward these new care delivery models. Change is not easy but you have to start somewhere.

Let’s next talk about what providers are doing to succeed in this new world.

Well, it looks like big trouble for the governments who committed to providing healthcare to some or all of their population. After all, who could have predicted all of the expensive advances that would be made in diagnostics and therapeutics? How governments began to deal with this depended on how their population were insured. In European social democratic countries, universal coverage meant government was responsible for insuring and paying for everyone’s healthcare. This meant that these governments were the sole buyers of healthcare services and thus able to set prices. Therefore, price controls became the main tool these governments used to control the escalation of healthcare costs. Also, in the last decade, these governments have begun doing comparative analysis research, where they determine if the new treatments are more effective than the existing ones. If the new treatment costs more, it needs to show what justifies this price premium. This means many new treatments that are “me too” could not get premium pricing. That’s how the rise in healthcare costs has been controlled in many of these counties. In United States, these price controls have not been the norm. Most Americans have private insurance. This means that there is not one buyer for new diagnostics and therapeutics. That has made it easier for pharmaceuticals and medical device companies to commercialize their products in the United States at healthy margins. Also, competition in healthcare between providers has resulted in escalation of costs as they try to match each other in having the latest technologies and best treatments. Another factor has been the large number of uninsured Americans who use emergency departments and other expensive healthcare services result in unreimbursed costs to provider institutions. These costs gets passed on to insurance companies and eventually to all of us. All of this means double digit increases in the cost of healthcare in US for the last few decades. This is now reaching a point where it can no longer be ignored as Medicare trust fund only has a few years left.

Next, we will discuss the steps that are now being taken to bring this fast rise in healthcare costs under control.