15 May 2008

Bringer of Fire

There's a new player in the health finance reform game, bearing the ambitious name "Prometheus," so named for the Greek who challenged the omnipotence of Zeus and stole fire for mortal man. The Prometheus group hopes to challenge the dominant model of health care payment and "ignite reform." They are, it would seem, serious players, listing on their board the past president of the Leapfrog Group, the medical director for Toyota America, and the CMO of the Blue Cross Blue Shield Association, among others; they are funded through a Robert Wood Johnson grant.

The concept is not dissimilar to that of DRG (Diagnosis-related group) coding. If it is possible to predict the total cost of care for a given presentation, adjusted for severity, using best practices and as supported by clinical evidence, it makes sense to combine the payment into a single unified case rate. The money would then be divided among all participants in the patient's care as negotiated by the individual players. The idea is to promote coordination of care and close collaboration among the various members of the health care team.

Ostensibly.

Remember, though, that Prometheus' reward for bringing light to mankind was to be chained to a rock and have his liver eaten every day by a vulture.

I see this as an indirect way to further squeeze health care providers into providing services at lower cost. Call me cynical but I rather suspect that the Promethean case rates will fall short of what is currently being paid for care delivery. The idea of a single lump payment has superficial appeal, but its genius is to then let the the doctors, hospitals, medical device manufacturers, and other providers fight it out to see who gets the biggest slice of the pie. Classic "divide and conquer."

What many of these well-intentioned groups fail to realize is that controlling payment does not control costs. Look what has happened to hospitals with regard to orthopedic surgery: based on the DRG payment system, knee and hip replacements used to be major profit centers for hospitals; those profits were used to subsidize medical care which was under-compensated under the DRGs. Now, the rising cost of prosthetics has transformed the total joints into losses for the hospitals. The hospital gets paid less for the procedure than it actually costs to provide.

Does this mean that the hospitals can just stop doing total hips? No. Can they charge more? No. They just need to find other profit centers to cross-subsidize this new loss; spinal surgery seems to be very in vogue these days as the new cash cow.

So what will happen when the case rates under Prometheus start to squeeze? Predictably, the hospitals, being the bigger players, will keep the lion's share and the doctors will get squeezed. Even if the cost is equally shared, the effect will be to put further strain on hospitals' already thin margins and to further depress physician compensation.

Reform like this we don't need.

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