Armchair Finance

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Incremental Change Won’t ‘Save’ Healthcare

I felt out of place attending February’s International Pay for Performance Summit at the Beverly Hilton Hotel. You could feel the ghosts of the Rat Pack roaming the halls—perhaps because their photos were plastered all over the hotel. In the International Ballroom, where the Golden Globe awards are held, the conference featured its own share of glitz; California Gov. Arnold Schwarzenegger gave the keynote address as part of a press tour to tout his new universal health plan for the state.

It was both surprising and refreshing that the speakers at the conference, sponsored by California’s Integrated Healthcare Association, refused to tout P4P as a healthcare inflation panacea. In fact, they seemed to chasten anyone who sees any singular solution, P4P included, that will “fix” healthcare’s double-digit inflation/unsustainability problem. Instead, they advocated a multitude of fixes to help improve cost and quality while lamenting the fact that payment reform—the fix that holds the most promise—has yet to materialize from healthcare’s biggest mover and shaker, Medicare.

Robert Galvin, MD, director of Global Healthcare for General Electric Co., says P4P is a good first step, but that determining the cost and quality equation is paramount. That’s music to a finance writer’s ears because it seems that few people want to talk dollars in healthcare. Other than bleating about how painful further reimbursement cuts will be, many won’t talk on the record about a system that rewards healthcare providers for expensive interventions, not for keeping patients healthy. That shouldn’t be, because as Galvin said that day to many nodding heads, “even if we had everyone insured, if we can’t figure out the cost and quality equation, the system will still collapse.”


Many health plans have had success restraining healthcare cost increases with P4P. Others have been overly blunt and variable in their approaches, frustrating providers trying to comply with multiple incentives that can’t carry their own bureaucratic weight. Providers have a point when they complain that they can’t keep up with so many incentive programs designed to reward or punish them. So if P4P holds such promise, why doesn’t the one payer that controls 50 percent of the market, and has the market share to force real changes, step up? CMS has made halting steps toward incentive programs that reward (though minimally) high-quality providers, but they’re too incremental to achieve significant cost and quality improvements. This approach only postpones the reckoning for a system that is fatally flawed, Galvin says—overweighted for expensive interventions and not geared toward prevention. P4P is only part of payment reform.

Until Medicare implements a system that truly rewards providers for getting and keeping patients healthy, we’ll continue to have a system that perversely encourages expensive episodic interventions—and those minimal P4P rewards will continue to yield minimal results.

—Philip Betbeze




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