Current State of Medical Service Supply Chain

Michael Thompson: So the next area I think we should talk about is really the medical services supply chain. Employers obviously spend a lot of activity providing designs and programs for their employees, but they’re also a big influence on the supply chain as well, especially when they work together. And frankly, this is an area that seems to be going in the wrong direction in some instances, right? We’ve been living with fee-for-service medicine for a long time, but it’s not clear that this is getting better. Any thoughts on some of the factors that are contributing to that?

Andrew Crighton, MD: I think when you look in the medical system, it’s still driven by RVUs, relative value units. So the doctor is being rewarded on how serious the condition is and how many times they see this. So the more conditions they see, the more patients they see—it’s driven by volume, which is that same methodology for fee-for-service. So even if it’s not a fee-for-service, the basics of the physician reward are still in the health system itself.

Patricia Haines: Do you think the increased number of salaried physicians with in-house systems changes any of that?

Andrew Crighton, MD: It depends on how the salary is based. I think you look at some of these larger, well-known clinics, where it is really salary based. You get a lot more collaboration, a lot more thinking, a lot more time with the patient, and better outcomes. So salary and reward is a big thing. I think customer satisfaction, that’s a hard one too. When I see the patient, and then they walk out and they’re giving me a customer satisfaction form, I’d better give them what they want too. So that may be driving some of this too.

Michael Thompson: Has provider consolidation helped?

Bruce Sherman, MD: My sense is, no, it has not. And if anything, it’s making the situation worse because there are fewer competitors from which individuals can choose or from which employers can select networks or, for that matter, health plans. But getting back to the original point, I think salary providers—when the income stream is assured based on a fee-for-service model, what impetus do individuals have to accept any risk from the supply side to change the way that they contract, because that could result in lower earnings.

They don’t really have a compelling motivation to transition from fee-for-service necessarily to a risk-based model. My sense is when entities within those individual marketplaces start to move in that direction, they will cause a shift in the rest of the service or the service providers to move more in that direction. And I think that’s where—Mike, to your point—employers have a powerful role to play.

Michael Thompson: To what degree have the employers, in many instances, insisted on broad networks contributing to the problem? Do you see that as part of the issue?

Andrew Crighton, MD: You have less influence, I guess. In the narrower networks, you have better contract negotiations, or the price for service is already negotiated. They still may practice the same, so you’re probably getting a better discount with that provider. That is what you’re dealing with when you have a narrow network. But then on the flip side, you have to watch: if you have a narrow network and everybody else does too, well, then you’re overloading these providers, and it may be hard to get into them too.

Bruce Sherman, MD: I think this is a great opportunity for employers to come together as coalitions to be able to work together to identify who those higher-quality providers are and use evidence to support the development of more high-value networks rather than call them narrow semantics, probably lean toward high value.

Michael Thompson: Well, maybe it isn’t all about narrow networks. It’s about value differentiation within our programs. Right? And we need information to help better understand who the higher-value providers are, and we need people have a better incentive to go in that direction.

Patricia Haines: I was sitting here thinking, “I’d put in front of any narrow network high performing,” and qualify it that way. We’re hugely dispersed, and so we don’t really have the leverage, I think, in any given market to do that. But I have really appreciated the work of the Greater Philadelphia Business Coalition on Health because, just by its existence and the creation of certain standards, there are more hospitals now feeling pressured to participate in leapfrog than before. So there is strength in numbers. If you coalesce around values and issues of quality, someone is going to sit up and pay attention.

Michael Thompson: I want to shift gears a little bit in terms of payment reform. We know that there are experiments with payment reforms through the various carriers, and we know Medicare is now doing a lot of experimentation in Medicare in payment reform as well, particularly around bundled payments. And 1 observation I would make is that we really need people to do the same thing, right? Providers don’t react well when everybody is doing something different. They don’t know how to react to those various incentives or whatnot.

Is there an opportunity here to start to move in the same direction, particularly around bundled payments? And is there a value proposition to move in that direction? And what are some of the concerns in going there? Anybody?

Andrew Crighton, MD: I think it is an opportunity, and we probably should go there because, again, you get the interest of the hospital and the provider to do the best care possible in the most cost-effective way. They know it’s going to be this type of payment, and I think you start aligning everyone’s goals. I think that’s what we’ve been talking about: there are misaligned goals in the system right now. With this one, there are few procedures that this makes sense for, but if you can align those goals, you’re going to get better outcomes at a better price.

Bruce Sherman, MD: Certainly at the Coalition, we’ve been involved with bundled pricing and implementation. We have a number of coalitions that are at various stages of implementation. I think 1 of the biggest challenges has been coming up with a standard set of definitions in terms of how when we look at quality, we see the same thing. Health plans use different measures. HEDIS measures notwithstanding, there still seems to be a tremendous amount of variation. But the potential— particularly for those services that lend themselves to bundled pricing and more equitable balance of risk between the service provider and the purchaser, the employer, or the coalition—certainly makes sense.

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