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Aug 2016

Will Changing the Reimbursement Practice for Hospitals and Physicians Produce Better Outcomes?

As a young boy, I remember reading about a different payment system for doctors in China. My book of strange facts said that, historically, a Chinese physician was paid a fee to keep his patients healthy. If a patient became sick, the doctor would not be paid by the patient until the patient’s health returned. Furthermore, if a physician in China resorted to surgery, he or she was considered an inferior doctor. The logic behind this payment practice was: if a physician did his or her job correctly and helped patients stay healthy, there would be no need to perform surgery.

The United States has always paid hospitals and physicians on a service basis. Just like when your car needs an oil change, new tires, or a complete tune-up, we pay as we go. And like our car, we pay whether the outcome is good or bad, unless we feel the poor outcome warrants a trip to Judge Judy.

But for the past four years, according to a Los Angeles Times article, the federal government has been pushing to change the way healthcare is reimbursed. The concern is that the push to insure the entire U.S. population will put a severe drain on federal and commercial insurance bottom lines. Hospitals and physicians still live in an age of malpractice fear that often leads to multiple patient tests to eliminate any potential errors. Naturally,  this practice leads to higher and higher costs. Of course, there are always the bad apples, who also take advantage of the system to pad medical bills to payors, whether it is Uncle Sam or a commercial health plan.

The current administration is attempting to build a new system that would reimburse physicians, hospitals, and other healthcare companies based on how their patients recover and how much their healthcare costs. To turn the healthcare ocean liner in this direction, there is a need for acceptable metrics for all parties.

For Medicare, the federal government’s goal is to make 50 percent of its payments to providers based on the quality of care they provide, rather than quantity, by the end of 2018. If this lofty goal is actually achieved, it would mark a historic change for the federally administered program that provides insurance for Americans age 65 and older or those with end-stage renal disease.

Efforts to overhaul the current healthcare reimbursement system still face resistance from skeptics who question how the federal government would measure quality outcomes. Challenges would include having providers and physicians collaborate and change their practice patterns, making the transition to a new payment system in a reasonable amount of time, and establishing quality metrics that are acceptable to the providers. These are not easy feats to accomplish.

At this time, there are little data to support the health rewards for such a major change. Paying physicians and hospitals for improving the quality of care has shown mixed results. According to a 2012 health-policy brief in the journal Health Affairs, one study showed that improvements to the patient’s overall health were short lived.

A large reason for the metric measure concern is that the physician and provider are just half of the equation. The patient, with unique hereditary traits, as well as habits beyond a doctor’s control, remains the significant wild card. Imagine if the responsibility to keep my car running well was completely on my auto mechanic. In tough financial times, I may use low-grade gas, push the oil change to every 10,000 miles (if at all), and let the tires ease into bald status. Should my car mechanic face financial fallout from my actions, or lack thereof?

There is no question financial changes are coming to reimbursement. However, perhaps we are looking at the wrong end of the money chain. Perhaps our nation’s healthcare costs and use might be fundamentally changed for the better if the patient, rather than the doctor and hospital, had a financial incentive.

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