News flash: Higher Quality Care May Actually Cost More Money

There was a Dutch study published last week showing that providing better quality care, in this case to smokers and obese patients, raises the cost of health care because it prolongs the lives of patients (here's the Boston Globe article and here's the actual study). Prolonging lives means they need care for longer periods of time and they die of diseases that are more expensive to treat -- unlike lung cancer, for example, for which there is no treatment, which makes it a relatively cost-effective way to die; better still, using this calculus, would be getting hit by a Mack truck. But I digress....

Anyway, the study has been actively blogged on the WSJ health blog already, but one angle I haven't seen discussed is the impact of this on health insurance dynamics. A not uncommon refrain among commercial health insurers is that their investments in quality improvement are reaped mostly by Medicare, because the benefits of healthier enrollees don't really pay off until those enrollees are older and mostly off commercial insurance. The Dutch study suggests that for certain conditions the opposite is true -- higher quality care may increase costs to Medicare (and Social Security) by increasing the fraction of people who live to draw on Medicare (and Social Security) benefits.

States like Pennsylvania and Vermont have adopted the chronic care model as state policy, not only to promote better quality lives for their citizens, but also on the assumption that there are cost savings down the road. The National Quality Measures Clearinghouse has literally thousands of quality measures, and the drumbeat of quality improvement is beating louder and louder every day. Yet, the Dutch study and work by the Partnership for Prevention suggest that the economics for universally applied quality improvement just aren't there.

A real moral dilemma for our society could come with the realization that the Dutch findings may be more generally true -- it may actually cost more to get higher quality care. David Cutler has argued that we should spend more on health care because the marginal returns are so high, and measured in lives saved and pain avoided, that is certainly true. But we live in a reimbursement system where costs are vigorously monetized but benefits aren't, and literally no one has an incentive to put in more money for anything. Funding longer lives and less pain for all will be much easier said than done.

P4P may finally be growing up

I've heard anecdotally that health plans are retrenching on so-called pay-for-performance (P4P) reiumbursement programs because they're not getting the return that they hoped to get. There seems to be some evidence of this in the data as well -- projections from 18 months ago suggested gushing growth (see The state of P4P programs), but the trend more recently seems to be on refinement rather than expansion (see It's everywhere but measuring effectiveness of P4P is challenging). There seems to be a trend out there away from pure P4P and toward mixed reimbursement models that blend in capitation with performance-based payment, exemplified by two new approaches.

First is the so-called "medical home" idea, which has been articulated and promoted by a variety of medical specialty socieities (for example, see Medical home could rescusitate primary care and Joint Principles of a Patient-Centered Medical Home Released by Organizations Representing More Than 300,000 Physicians). While a lot of the focus of the medical professionals has been on bolstering primary care, the business community has recently jumped on the bandwagon because of the financial benefits of the approach. Bridges to Excellence estimates that the medical home approach yields savings of $250-$300 per patient per year by reducing unnecessary specialist and emergency room visits and preventing acute medical episodes that result from poor preventative care (see Group Offers Doctors Bonuses for Better Care). Since the average primary care physician cares for roughly 2000 patients, this can add up to real money real fast.

The second approach is in the creation of alternative payment models such as that announced by Blue Cross Blue Shield of Massachusetts earlier this year (see A New and Different Way to Pay for Care). This approach has had some early bumps, but it's still early (see Blue Cross faces uphill climb over flat-sum payments).

The best description I've seen of the benefits of moving back toward some type of capitation model is in Benjamin Brewer's column in yesterday's Wall Street Journal (Finding a Medical Home May Be Just What the Doctor Ordered). Dr. Brewer gives an excellent ground-level view of what it means to pay physicians to manage patients instead of acute episodes, and why such an approach might really offer benefits to patients and physicians alike.

Congratulations to our local health plans!

The votes are in and once again Massachusetts health plans are the best in the nation, capturing three of the top four slots in the national "America's Best Health Plans" rankings (see Harvard Pilgrim ranked top health plan in nation). Harvard Pilgrim, Tufts Health Plan, and Blue Cross Blue Shield of Massachusetts were rated top performers in clinical performance and customer satisfaction by the National Committee for Quality Assurance (NCQA).

We often hear about how blessed we are to live in a state with such world-class medical institutions -- and it's true, we are. What gets less attention, however, is that we in the Commonwealth have such terrific health plans -- non-profit, well-managed, focused on our state, and community-minded.

Health insurers get a lot of criticism -- and not all of it undeserved (my parents are physicians -- believe me, I've heard it all). Yet, in our overly complicated "non-system" that we call a health care system, health insurers are for many patients -- and especially the sickest ones -- the glue that holds the whole thing together. So, let's give some credit where credit's due and praise our local health plans who have shown themselves to be world-class in their own right.

Okay, I'm finished with today's blog and now it's time to get back to running the business.....Next year's premiums are going up by how much?!