global payments


Partners Renegotiates Blue Cross Contract, Joins Global Payment Plan For Cost Cutting

Here’s the press release from Partners:

Partners HealthCare today announced that it has reached an agreement with Blue Cross Blue Shield of Massachusetts that will reduce the growth in health care spending by nearly a quarter of a billion dollars over the next three years. The agreement is a renegotiation of an existing contract and achieves three major objectives:

Partners and BCBS are reducing the amount that Partners would have received by $80 million in 2012. Over the life of the three-year contract, this translates into about $240 million in total savings.

Partners is entering into global payments and taking on risk, as recommended by the Special Commission on Payment Reform. By entering into BCBS’ Alternative Quality Contract, Partners will be required to meet or exceed quality measures for its patients and Partners will be required to keep cost growth lower than the network average for the rest of the BCBS provider network.Rate increases during the contract period will be held in line with general inflation. Continue reading

Harvard’s Herzlinger On Powerless Patients And A Cautionary Cost-Cutting Tale

I found myself typing compulsively as I watched this recent video of a cogent talk by Prof. Regina Herzlinger of Harvard Business School on how to make health care more consumer-driven. In case you can’t hear — the volume is a bit low — here are some excerpts courtesy of my fingers on auto-pilot. (And don’t miss the thoughtful responses from a distinguished group of commenters beneath the B School’s post here):

“The only sector of the economy in which the consumer has virtually no voice is health care. And you can tell that because instead of being called the consumer they’re called a patient. The word ‘patient’ means ‘You be patient. My time is valuable. You’re the one who has to be patient.’ This kind of consumer unfriendliness in health care manifests itelf in many ways: in the inconvenience of the health care system, how long very busy people have to wait; in the inconvenience of how health care is packaged.”

“So I coined this phrase, ‘consumer-driven health care’…this idea that consumers should drive the system, rather than be driven by it.”

“I don’t think these people are venal or evil, but like all of us, they’re naturally interested in mantaining the status quo if it works to their advantage, and right now they’ve got all the power. The consumer, who’s the source of all the money, [has] all the money but zero power. If I were part of the indusry that got all the money with the funder having no power, I’d kind of like it that way and wouldn’t be too wild to embrace changes to it.”

What happens if, as an innovator, you say, ‘This is stupid!’

“If you want to make health care better and cheaper, the answer is health care services, because about 80% of our 2.7 trillion dollars — an amount bigger than the GDP of China virtually — that’s how much we spend on health care — 80% of that is spent on services and they’re very inefficient. So why haven’t they been innovated? The reason is the way we pay for health care services. We pay for services on a fee-for-service basis. So a doctor gets paid for every X-ray, every lab test, every visit, every hospital stay. She does not get paid for a bundle of care. So what happens as a result of that?

There’s a disease called congestive heart failure, a dreadful disease. It costs hundreds of billions of dollars; it is the leading cause of unnecessary hospital admissions itn he US, everybody agrees with that. So why does that happen? It’s because the people who manage congestive heart failure each separately get paid for what they do. They don’t integrate with the other people. We don’t have IT platforms that would permit them to do that, and as a result the care is substandard because Dr. A doesn’t know what Dr. B has done, and we incur unnecessarily high costs. Continue reading

Taking Sides On Global Payments

Is there a line in the sand emerging on global payments?

Who would have thought that the wonky issue of global payments could generate such heat?

But indeed, hard-core health policy types are riled up over the question: can such a system of paying hospitals and doctors under a global budget per patient, rather than in a piecemeal fee-for-service manner actually save money while improving care?

There seems to be a line in the sand emerging: on one side, there are those who embrace global payments as a panacea for our current fragmented and pricey system; on the other side, there are folks saying ‘Whoa,’ let’s re-evaluate and look at whether these contracts will really provide enough consumer choice and payment equitability to make them viable.

Leading the global payment skeptics is Attorney General Martha Coakley, who last month issued a bombshell of a report saying global payments so far have generated no real savings. Moreover, the attorney general found that these global contracts, particularly Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contracts, have put different doctor groups on different budgets which means some, like Atrius Health and Mount Auburn Cambridge Independent Practice Association, have been paid far more than others.

On the pro-global payment side, there’s Blue Cross Blue Shield of Massachusetts. The state’s largest insurer was the subject of a financial analysis published last week in The New England Journal of Medicine which reviewed the first year of Blue Cross’s Alternative Quality Contracts. It concluded with a pretty upbeat analysis by Harvard health economist Michael Chernew and others (at least one Blue Cross executive was also listed as a study author) which said that these “alternative” contracts generated “modest” savings as well as improvements in the quality of patient care. Much of the media coverage of the study latched onto the “modest savings” quote in the headline.  That assessment, however, seemed to undercut the attorney general’s findings.

But hold on, says Jeff Levin-Scherz on his blog Managing Healthcare Costs. In a post published last week called “Dueling Estimates of Cost Saving From New Massachusetts Blue Cross Global Payment Contract” he argues that if you actually read past the headlines, “the authors of the NEJM article are very clear that the AQC did not save money in the first year, which is consistent with last month’s report from the Massachusetts Attorney General. In fact, the authors state: Total BCBS payments to AQC groups, including bonuses for quality, are likely to have exceeded the estimated savings in year 1.” Continue reading

Coakley Speaks On Market Dysfunction

Attorney General Martha Coakley took the stage today at the Bunker Hill Community College auditorium to tell the audience that, according to the findings in her recent report, the health care marketplace is still dysfunctional and global payments alone will not bring medical costs down.

Speaking at the state hearings on health care cost trends, she reiterated that if the market “distortion” (in which some providers are paid far more for services without necessarily offering better quality) isn’t resolved, “temporary statutory restrictions,” should be imposed. After being asked several times and in several ways, what, exactly, might be involved in these government restrictions, she refused to offer any details. “We have to consider some action,” she said, but “we’re not going farther than that today.”

She was also asked if it was fair to condemn elements of global payments (which she does in her report, saying they’re not saving money, and that there are vast disparities in global payment deals between insurers and certain physician groups compared to other groups) since they are in their infancy. She offered a bit of myth-busting:

We’ve heard that [global payments] are in their infancy, but several of them have been in operation for five years [or more]. You did not see savings you might expect given expectations for global payments. Global payments in and of themselve don’t solve the problem, they are clearly part of the solution but they don’t solve the problem of market distortion.”

After Coakley’s panel was over, I tried to ask, once again, what should be done about the spending inequities and price disparities detailed in the report she issued last week. Here’s what she said:

Cornucopia Of Reactions To AG’s Report On Health Care Costs

Attorney General Martha Coakley

Attorney General Martha Coakley’s new report on Massachusetts health care costs is not exactly water-cooler fodder, but we all do our best. The Boston Herald tweeted today, “Do you support Coakley’s efforts to drive down the cost of health care?”

It’s hard to imagine anybody saying, “No! I want health care costs to keep going up!” But the Herald story did reap the usual bounty of choleric comments like this one:

Sure, put me on a budget for health care….hmmmm install a stent? nope not this year, guess I’ll have to save up and not get sick for a couple of years… or DIE first!

Asked about the report today, Gov. Deval Patrick emphasized the common ground it occupies with his own plans for health care reform. He too, he said, has been concerned that the next phase of reform not set into stone the price differences among different health care providers.

Blue Cross Blue Shield of Massachusetts issued a statement both commending the attorney general and defending its global payment plan, which the report found had failed to save money.

In its findings, the report states that a “shift of payment methodology by itself is not the panacea to controlling costs.” We agree. Also important are the adoption of new value-based benefit plans noted above along with a greater focus on wellness and the chronically ill.

However, we are enthusiastic about our new payment model, the Alternative Quality Contract (AQC) which now includes more than a third of our provider network and slightly less than half of our in-state HMO membership. The early results show the AQC is achieving our twin goals to both improve the quality of patient care and reduce the historical rate of increase in health care costs. Continue reading

The Great Divide: Policy Vs. Practice In Medicine

9 days, 22 hours, 51 minutes.

It’s not the countdown to a major holiday, royal wedding or important presidential speech. Rather, it’s the time remaining until the state Division of Health Care Finance and Policy holds its hearings on the costs of medical care and how to contain them. A wonky affair, for sure, but with particular resonance now because the cost of health care — and the fact that health care spending in Massachusetts is actually outpacing the nation — is a central theme this year, both in local and national politics and for the overall economy, with truly far-reaching implications.

As the state tries to rein in costs by replacing its long-standing fee-for-service payment system with global payments, whereby insurers put groups of doctors “on a budget,” it’s important to remember that we really aren’t sure if this new system will actually save money and provide top-notch care.

As MIT economist Jon Gruber said to WBUR’s Martha Bebinger: global budgets make a lot of sense in theory, “but in practice, what does it mean? What is the global budget? Who sets the global budget and for which payers? How much uprooting do you want to do, based on the limited evidence we have, that this will solve our theoretical problems? I think it’s great we’re having this conversation. I just think it’s premature to say it’s a solution.”

A thoughtful piece by Dr. Pauline Chen in The New York Times offers an important reminder that well-meaning policy doesn’t always align with the practice of medicine. She relates the story of a colleague, a pediatrician who “recently bemoaned the fact that several insurers in his state no longer reimburse him for each medical service he performs. Instead, the insurers give his practice a budget for each patient, and he can earn more by meeting certain quality goals.”

“I’m all for quality,” he said, sighing. “I just don’t think this is quality.”

One of his insurer’s quality requirements, he recounted, is testing all sexually active girls for chlamydia, a sexually transmitted disease. But because the insurers cannot read every single patient’s medical chart, they determine whether a girl is sexually active by other means: They check whether she takes birth control pills.

The problem is that many of my colleague’s patients are taking those pills not for contraception, but for acne and menstrual pain.

“So do I skip the testing for chlamydia and fail my quality standards?” he asked. “Or do I order a test that the patient doesn’t need and that will probably not be covered by her insurance?”

Chen’s point, I think, is that before huge systemic changes are put into place, we should be pretty sure they’ve been tested and measured so we can evaluate the consequences, both intended and unintended.

Let’s see what the policymakers have to say about it all at the hearings on cost trends and how to contain them, now 9 days, 22 hours and 30 minutes away.

Getting A Grasp On Global Payments: Prix Fixe Vs. ‘I’ll Have The Lobster’

As the Patrick administration pushes Massachusetts forward toward the cost-cutting phase of health reform, one of its guiding concepts is to shift the state from “fee for service” to “global payments.” That is, instead of being paid for each bit of care they give, health care providers will be put on an overarching “global” budget for each patient.

But how do we know that global payments work? And do they really save money? WBUR’s Martha Bebinger asks those important questions today in her report here, and takes a look at the early experience of some local global-payment hotspots: Commonwealth Care Alliance, Harvard Vanguard and Blue Cross Blue Shield. Already, she reports:

There’s a lot going on behind the scenes. Physicians are joining large practices so they’ll have help managing budgets. Clinics, rehab centers and hospitals are forming new alliances that put all our care under one umbrella group. And health insurers are negotiating contracts that send nurses to patients’ homes to avoid a hospital stay, but hold providers financially responsible if they don’t stick to a budget. In theory, these connections are supposed to lead to better care and lower costs.

“That makes a lot of sense in theory, but in practice, what does it mean?” asks MIT economics professor Jon Gruber. “What is the global budget?

“Who sets the global budget and for which payers? How much uprooting do you want to do, based on the limited evidence we have, that this will solve our theoretical problems?” Gruber continues. “I think it’s great we’re having this conversation. I just think it’s premature to say it’s a solution.”

Yet another early adopter of global payments, Lowell General Physicians Hospital Organization, is featured in a piece by Pippin Ross in the latest issue of the magazine CommonWealth, here.

Read both pieces and you come away with the impression that there are some positive initial experiences, but the jury is still very much out on whether global payments are a major solution for ever-rising health costs. And then, as Paul Levy hammers home on his Not Running A Hospital blog here, there’s the transparency problem: It’s awfully hard to tell how well even initial global payment experiments are working when so many of the financial figures involved are not publicly available.

Well, at least I picked up a couple of wonderful new analogies: In Pippin’s piece, Dana Safran of Blue Cross says that the current fee-for-service system creates a mentality of “If you’re paying, I’ll have the lobster.” In contrast, the story’s headline describes a global payment system as “prix fixe.”

Therese Murray: Senate Will Be First On Health Care Reform — In ‘Near Future’

State Senate President Therese Murray vowed this morning that the senate would move promptly on Gov. Patrick’s proposed health care reforms — more promptly than the slower-moving House.

Speaking to the Greater Boston Chamber of Commerce this morning, she was answering a question from Jim Roosevelt, chief of Tufts Health Plan. Gov. Patrick, he said, sounds like he’s on a 90-day timetable for getting his payment reform bill passed, but the legislature has to act before the governor can see actual change, and the House speaker “seems to be on a very different timetable.” (In fact, word from the House is that it’s likely to dig in to health care reform this fall, but is not expected to pass anything this calendar year.) What, Jim Roosevelt asked, are the prospects in the Senate?

President Murray responded: “You know the senate’s always first. The senate has been working on this for quite some time, and to give the governor his due, it has to be done. We can’t sustain the model we have now because it’s too costly.”

She emphasized the need for better management of chronic diseases such as diabetes and heart disease, but also called for caution in moving to a new payment system, given the need to keep the state’s huge health care sector robust.

“I agree with the governor that something has to be done soon,” she said. “We’ve been working on it for three years, trying to figure out how we get there.

It won’t be easy, she said, “But we’re not sitting, wringing our hands, worrying, ‘Oh, we can’t do this.’ We are going to do this. The senate always goes first, so once it passes the Senate it will go to the House.”

In the one-minute video above, I ask her whether it will be days, weeks or months until the Senate puts forth its plan, and she says she cannot give an exact date, because there are “a lot of moving pieces,” but it will be “in the near future.”

Our ‘Reform 2011’ Forum Wants You! Presenting Guest Post #1: ‘HMO Deja-Vu’

Commenter Dennis Byron expects a back-room deal on health care reform right around the time the fireworks go off above the Hatch Shell.

Thanks to WBUR’s Martha Bebinger and an all-star team of guest posters, CommonHealth served a unique role documenting the debate that culminated in the passage of the landmark Massachusetts health overhaul of 2006. (The full archives are here.)

Now, Gov. Deval Patrick has just officially launched Health Reform II, and all the signs are pointing to 2011 as the year for the second great wave of health care reform here. Once again, CommonHealth aims to serve as a forum for the exchange of interesting and important thoughts on what should be done. To offer a submission or sound us out, please just hit the “Get in touch” button below. Warning: We must be merciless about keeping guest posts readable and user-friendly. The piece below is an example of how punchy writing and strong opinions can bring a potentially soporific subject to life.

Our guest poster: Dennis Byron is a researcher in enterprise software market statistics who has just started his own blog on Massachusetts health care statistics here. He’s an active commenter on CommonHealth who casts a gimlet eye on the results of health care reform so far, and I’m always grateful when he writes in because he has a spot-on detector that picks up when I’ve glossed over something or failed to ask the right skeptical questions. He describes himself as semi-retired and “clearly with too much time on his hands;” I hope that remains true enough for him to keep commenting.

Patrick’s Proposal: Too Soon To Tell But…

By Dennis Byron

The details of the latest of many Massachusetts health care reform efforts are still dribbling out. But the message is unclear. It’s either the beginnings of socialized medicine in the Bay State or it’s a moderate attempt to slightly tweak a world-class healthcare delivery system to make it better. In reality, it’s too soon to tell. It’s not just that you probably still have not read the actual 50-pages-plus of proposed legislation but, more important, the legislature is going to change it anyway just as it has changed a half-dozen or more “health care reform” efforts dating back to the 1970s. Last year alone the Great and General Court changed the “2006 reform” twice.

Commenter Dennis Byron (on a trip to Helsinki)

But if history is any indicator, get your two cents’ worth in now because the changes are going to be made in a back room on Beacon Hill and signed into law at 11:30 pm July 3rd.

My personal take is that both the current proposal and the 2006 effort are/were solutions looking for problems. The combination of the two is not going to change anything and might make things worse.

I admit that when I see propaganda, I assume I am getting a snow job. For example: Continue reading

Inside Scoop: Patrick Expected To Give Major Speech On Controlling Health Costs Thursday

Gov. Deval Patrick is expected to speak Thursday on health care

WBUR’s Martha Bebinger reports:

Here’s the most solid fact on which this post is based: Governor Deval Patrick is scheduled to speak at a Greater Boston Chamber of Commerce breakfast Thursday morning.

Now here’s the buzz: Word in the halls of the State House is that he will make the speech an urgent call to halt rising health care costs.

We know Gov. Patrick has been promising legislation that would map a path to global payments in Massachusetts within five years.  I’m not hearing from anyone who expects to see the details of that legislation on Thursday. 

They do expect to hear the governor explain how he’ll pressure more doctors and hospitals to move towards global payments and limit rising rates in the private insurance market as well as in the Medicaid budget and at the Group Insurance Commission.

We talked last month about one idea in the works that seems to be taking hold: the governor is telling some hospitals he wants the authority to set the rates they can charge if, after three years, hospitals are still asking for increases of more than 2%.  Blue Cross CEO Andrew Dreyfus says he hopes the governor does not set a cap because it will suggest that annual increases are okay while the goal should be level or decreasing rates.

Speaking of Mr. Dreyfus, there is a coalition of insurers, hospitals and business groups meeting about the plans the Governor is expected to outline on Thursday.  This coalition is in touch with Governor Patrick and members of his cabinet.  The most interesting political dynamic here may be whether the Governor and this coalition find a way to work together.