The adage that “One person’s cost is another’s Revenue or Income” comes to the fore, when we are discussing changing payment models for health care over the next decade.
As the 21st Century has begun, and health care costs in the US are escalating, Dr. Donald Berwick coined the concept of the “Triple Aim” in Healthcare: Better Care for Patients; Better Health for Communities and Lower Costs. These are laudable goals, but can they be achieved?
Currently, the majority of health care payments are based on “Fee for Service”. Everything that any provider does is paid for on a piecemeal basis. The incentive, even if not intended, then is for Hospitals, Physicians, Home Health Agencies, Drug Manufacturers, Device Manufacturers and others to do as much as possible. Payers, on the other hand, want to have less done (Medical Loss Ratio considerations may blunt this incentive, however). It has been variously estimated that there has been between $210 Billion ($210,000,000,000) and $750 Billion wasted on delivery of unnecessary or harmful care in the US annually.
There are initiatives in various legislative packages (PP-ACA – PL 111-148; MACRA – PL 114-10) to try to change financial incentives to improve the quality while reducing the cost of health care. One potential stumbling block in these initiatives is that if we spend less on health care, somebody is going to have their current incomes reduced. We then must question how will reduction in income change incentives? How will we “share” the savings in health care expenditure that could be realized from decreasing readmissions, shortening inpatient care stays, and doing less “routine” testing as suggested by the “Choosing Wisely” initiative that was begun in April 2012.
In the early 1900’s the Ford automobile company, when it was able to cut costs of production of the Model-T, actually cut the cost to the consumer by a significant amount. Ford and his employees still enjoyed a reasonable income and life style. It is difficult to imagine that a modern hospital manager, after improving processes and potentially cutting down on staff that might decrease costs of delivering care, would subsequently decrease billings. Physicians, who might stop doing some procedures, might see their fee for service payments decrease, decreasing their income. Would either the hospital employer or insurance payer that they are dependent on reward them with enough of a proportion of the savings to the health care system to keep up their lifestyle, even though they might not have to work as many hours a week? If the costs of care decrease, will an insurance company cut staff (they would certainly lose in the process) and pass the savings to the purchasers of the insurance product, rather than “pocket” the savings and continue with business as usual? Providers of drugs and devices are expected by investors to have their companies grow, to satisfy demands for return on investment to stockholders and other stakeholders.
In none of these brief examples is there any real incentive to continue to work to decrease the costs of providing medical care or treatments. The challenge to policy makers, health care systems, and physician groups will be to work together in order to ensure that none of the stakeholders in the healthcare system will feel unduly put upon. Can we do this?