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Global Payments Sounds Like Deja Vu All Over Again

Cost cutting seems to have replaced “quality measures” as the mantra for all health care discussions. Not that “quality ” measures have gone away, but the focus is on trimming the cost of health care in the United States since it is about 15 percent of the GDP ( as measured in 2004) more than any other country, without commensurate superiority in outcomes measures.
So the current solution seems to be global payments! No more pay per visit/procedure/hospitalization/operation. Rather with global payments the physician receives a fixed payment per month based on the complexity of the patient i.e. how many chronic diseases the patient has. Thus, the doctor is no longer incented to visit-churn or do unnecessary referrals to specialists; hospitals no longer hang onto patients, and alternatives to emergency rooms are provided during off hours.
Sounds like a plan. The only problem is that this has been tried before with very mixed results. It was called capitation then. Those physicians and hospitals that did well under the old capitation system knew how to game the system in their favor. Certainly there were some good practices put in place under capitation that saved costs without sacrificing quality.
While health care providers and systems are not primarily driven by money, they are just as susceptible to responding to dollar incentives as the rest of the human ecosystem. As a warrior from the days of capitation, let me offer some lessons learned from the bad old days when our medical group had several large capitated contracts.
In 1996 as the new medical director for our multispecialty group, I inherited several large capitated contracts from major insurers in the New England area. It was my job, along with other administrators, to understand these contracts and educate our providers, to stop the financial bleeding from these contracts, and to serve as an intermediary for the numerous patient complaints. We were also losing patients steadily from one large insurer, and the insurer demanded to know why.
There were quite a few challenges to providing cost efficient capitated care, particularly in an urban setting with a challenging socio-economic patient mix. Populations that used large academic hospitals that balanced clinical care with teaching responsibilities and research were harder to manage in such a complex, and often inefficient setting. The medical groups that made money under capitation in general had efficient information systems with computerized records, a relatively healthy, younger, and homogenous population, and used a local community hospital that was close by for specialty care and hospitalizations.
The thinking behind global payments is to encourage alternative approaches to health care. Instead of having a patient come to see the doctor for each ailment, care may be provided by a phone call, a Skype visit, e mail, or nurse practitioner visit. Group visits with a doctor or nurse for chronic conditions such as diabetes encourage sharing of information. Since ER visits cost the provider under global payments, groups are incented to offer after hour’s access in the primary care setting. Some capitated plans stationed a nurse in the emergency room to head off inappropriate visits to the ER and redirect the patient to a more appropriate setting. Specialty referrals were given sparingly since the cost of those visits came out of the provider’s health care budget.

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