Scrutinizing Medical Value

By Lindsey Getz

What does the restructuring of the payment system mean for medicine?

With the government and employer groups continuing to push for lowered costs and improved outcomes, a restructuring of the healthcare system appears imminent. One insurance carrier leading the pack is UnitedHealth Group, Inc, the largest US health insurer, which has become the latest to revamp its payment structure for medical providers. Transitioning away from the fee-for-service model, UnitedHealthcare has shifted its focus to value-based contracting. It’s expected that other insurers will follow suit.

While the traditional model pays hospitals and healthcare providers for each service provided regardless of the outcome, under a value-based contracting plan, a portion of the provider’s compensation could be tied to goals such as avoiding hospital readmissions and ensuring patients get recommended screenings. Some providers say a system that offers rewards based on the qualityof care rather than the amountof care is ideal, but not everyone is ready to jump on board so quickly.

Benefits of Restructuring
UnitedHealth believes value-based contracting models will help create quality and cost outcomes, foster greater accountability, and take advantage of innovations in medical technology. Its push to restructure comes from increasing pressure to fulfill these standards. “The shift toward increased collaboration, outcome-based payment, and new benefit design is driving innovation in how we pay for healthcare and how healthcare is delivered,” says Sam Ho, chief clinical officer at UnitedHealthcare. “The drive toward lowering healthcare costs and improving quality is the basis for moving to performance-based contracts.”

Certainly the idea of linking compensation and value has merit. In a recent issue of The Journal of the American Medical Association, Laurence F. McMahon, Jr, MD, MPH, and Vineet Chopra, MD, FACP, FHM, both of the University of Michigan Health System, argued for a healthcare model in which physicians and hospitals are paid more for delivering better care. In their commentary, they argue that payment for tests and procedures should be directly linked to clinical value.

The current US healthcare system that pays physicians and hospitals the same regardless of whether the services delivered are of high or low clinical value is a flawed model, says McMahon. “Since medicine has struggled to eliminate care that provides little clinical value, a valuable step would be to at least pay less for marginal care,” he adds.

Henry Tripp, MD, a provider of house-call services in North Carolina, says he can certainly see the potential for flaws in a pay-for-service system of healthcare. “Since most physicians are compensated in a fee-for-service system, there are a lot of services being done,” says Tripp. “But we have to ask whether we’re getting quality of care. We want to make sure that healthcare is more quality oriented and not just about the volume of medicine being delivered.”

Changes Ahead
UnitedHealthcare experts believe that, overall, most physicians will be on board with a movement toward value-based contracting. “While the new performance-based contracts will be voluntary, we expect most providers to enter into the new contracts,” says Ho. “Discussions around incentive/performance-based payments have been ongoing for a number of years. Health plans, employers, and providers see this as a new wave of the future and a driver to improve quality and lower cost.”

Though it would seem a given that patients would also be on board with a system that rewards doctors not for the number of services but for the value behind them, Tripp says it may not be so cut and dry. He points to a recent study performed by University of California (UC), Davis researchers that found the most satisfied patients are not necessarily the healthiest but rather the ones receiving the most services and attention. In what seems like a twist of reason, satisfied patients are more likely to be hospitalized, have higher healthcare costs, and more likely to die than less satisfied patients.

Tripp surmises this could be an indication that some patients who are used to the pay-per-service structure feel they’re receiving the best possible healthcare when they’re getting a lot of tests and procedures done. “This is likely a small minority but it has interesting implications,” says Tripp. “We need to make sure we’re not just indulging patients by performing unnecessary tests.”

The UC Davis researchers argue that the findings suggest a disconnect between value and physician compensation. In fact, because many physicians receive payment based on patient satisfaction, they may be reluctant to discuss negative aspects of treatment or tests. “We need policy changes to potentially open the door for doctors to spend more time with patients and change incentives,” says the study’s lead author, Joshua Fenton, MD, MPH, an assistant professor in the UC Davis department of family and community medicine. “The ideal patient-doctor relationship is one where the patient and doctor collaborate to identify the best care for a patient’s unique healthcare needs.”

Although value-based contracting appears to be an overall solution, there will certainly be an adjustment period. And with any change, it can’t be expected that everyone will initially be on board. “I think all doctors should appreciate a drive toward quality but I’m not sure they do,” Tripp says. “If physicians are no longer getting paid for the quantity of procedures they’re performing, that can have some impact on the structure of medicine. Traditionally, specialists have made higher salaries and charged the higher fees. But some of that is going to be redistributed. Specialists may not be compensated as highly as they’re used to. On the flipside, the primary care physicians [PCPs] may get a little more as we begin to focus more on preventive medicine. Patients can start to expect to get better care through their PCP and have a more appropriate utilization of specialists and procedures.”

And while many certainly already agree with the idea, others say it’s important to remember that the future is not clear on how this restructuring will play out. It’s a big change and may have several implications regarding the way physicians practice medicine.

“There are so many moving parts to this, so who knows exactly what is going to happen?” says Tarek Elsawy, MD, chief medical officer of the Cleveland Clinic Quality Alliance and the clinic’s physician provider organization. “It’s such a dramatic change in modeling that even some of the most brilliant actuaries are wondering exactly how it will work. But one thing that is undeniable is the fact that the model will change, and it will greatly favor institutions that are really looking hard at value.”

— Lindsey Getz is a freelance writer based in Royersford, Pennsylvania.