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Healthcare Industry Reforms Require Broad, Bold Strokes

Rita E. Numerof, PhD, is the president of Numerof & Associates, a firm that helps businesses across the healthcare sector define and implement strategies for winning in dynamic markets. For more than 25 years, she has helped executives understand the implications of an evolving healthcare market. Working with leaders in the healthcare space, she has consulted with everyone from top academic and community hospital systems, payers, and Fortune 500 pharmaceutical, device, and diagnostics companies. She is the coauthor of several books, most recently, "Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model" (2016).
Under the current administration, CMS has made several good-faith attempts to revitalize the current healthcare system. These efforts demonstrate CMS’ commitment to move our industry closer to value-based payment and consumer-centered delivery models. The recent changes, which include revamping accountable care organizations (ACOs) to hasten uptake of double-sided risk and efforts to expand bundled payment programs, are clearly well-intentioned. However, each of these reforms exhibits 2 concerning characteristics.

The first regards the nature of the reforms themselves: rather than being innovative or value-based, the paradigm that underscores these new models is painfully familiar. The second regards the industry’s response to these models: while stakeholders have been swift to applaud the parts of these initiatives that preserve the status quo, they have done their utmost to block any of the components that promise real reform.

True reform requires a wholesale rethinking of our current reimbursement model. For more than 30 years, the government has made incremental, piecework attempts to inch toward healthcare innovation—unsuccessfully, and to the detriment of all within the industry. Today, with major changes in technology and new outsiders willing and able to deliver care differently, we can finally initiate a fresh approach.

For CMS, this approach means enforcing faster uptake of higher levels of risk through strictly double-sided risk models, implementing site-neutral payment policies, and reimbursing care episodes in a way that allows providers and the government to measure and focus on overall outcomes.

To begin with, we might examine CMS’ recently proposed changes to 3 specific areas of healthcare delivery. The new policies now reimburse providers for care planning, well-visits, and provider coordination. While the additions of coordination and treatment planning are critically important components of care delivery, the methods with which CMS is going about doing so are fundamentally flawed.

The framework CMS is using to “revolutionize” its ACO approach amounts to an extension of the pay-for-volume approach that has plagued the industry for decades. These methods reimburse providers for delivering a set “menu” of services, the costs of which are typically subsidized at the outset of care planning. (Although retroactive, outcomes-based reimbursements are used in some shared savings models, the industry’s preferred approach involves upfront payments based on the treatment promised and not the outcome delivered.)

By forcing clinicians to undertake piecework approaches all oriented toward ensuring they are appropriately paid, rather than their patients are appropriately treated, CMS unwittingly detracts providers from fulfilling these models’ original intent: delivering the right care in the right setting for the right patient at the right time. Yet CMS continues to reward providers for putting government reimbursements ahead of consumers’ needs, reinforcing the same Skinnerian delivery paradigm that has driven healthcare spending up, and healthcare outcomes down, for years.

In the mid-20th century, psychologist B.F. Skinner demonstrated that rewarding individuals for performing a certain task would result in the individual continuing to perform the task. Unfortunately, CMS’ past and present programs amount to little more than a classic Skinnerian behavior experiment. But where Skinner was experimenting with rats and pigeons, CMS has reproduced his results using healthcare providers.

This paradigm encourages providers to deliver more of the same treatment, regardless of whether it’s needed. CMS’ new shared savings program’s piecework-oriented approach is, therefore, merely a replica of older models and continues to overemphasize the minutiae without focusing on outcome, which should be the ultimate objective of care and payment.

This leads to the second disturbing component of the CMS’ recent reforms: the industry’s response.

By and large, stakeholders have applauded the toxic aspects of the new programs described above, even as they’ve decried the more beneficial policies discussed below. Clinical societies have commended upfront payments (which usually mean more money for them), and advocated a "slow and steady" transition to double-sided risk models and therefore greater accountability, which they’ve couched in concerns for safety.

Yet, privately, executives frequently remark that they are simply committed to maximizing revenue for as long as possible under the current model—while publicly pointing fingers at other segments that they believe need to change. Most recently we witnessed this as troubling allegations surfaced around hospital drug price-gouging. Hospitals have used these as a convenient opportunity to heap new blame upon brand-name pharmaceutical manufacturers by touting their own generic drug partnership.

Industry leaders reacted to CMS’ transition to double-sided risk ACOs with a similarly alarming degree of petulance, as they did to the CMS’ efforts toward site-neutral payment policies. Site-neutral payment, which allows physicians to determine where the optimal place is to treat a given patient who needs a given therapy, is a critically needed component of patient-centered care. Yet the responses of many healthcare insiders reveal that the true locus of their concerns lies not in their patients, but in their pocketbooks.

The government’s job isn’t to support training wheels; it’s to make costs lower and care quality higher. That means that reimbursement should no longer drive care planning, and that rules, penalties, or incentives shouldn’t drive treatment decisions—including site of care. Rules dictating inpatient days and site of care are, of course, aimed at controlling costs, which is an entirely legitimate undertaking. But controlling costs for providers and consumers cannot and will not come through dictating care patterns from Washington, DC. We can control cost through transparency in cost and quality, ensuring accountability across the continuum, and connecting payment to outcomes that matter to consumers.

 
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