Will replacing fee for service really reduce costs?

In this enlightened era of evidence-based medicine, you’d think that the progressive academics, viziers, and mandarins who are cluttering the policy making commentariat would pay more attention to what was tried before. That should be doubly true if those lessons come from that health care nirvana called Europe, where enlightened central bureaucracies wisely allocate health care for its caffè sipping, plaza strolling and beret adorned citizenry.

Case in point is “bundled payment,” which has been underway for several years in the Netherlands. Thanks to this timely New England Journal perspective from Jeroen Struijs and Caroline Baan, readers can get some insight about what is and isn’t known about the topic.

By way of background, the Dutch require citizens to buy subsidized private health insurance for “short-term level” services, such as outpatient care and acute hospitalizations; prolonged care and durable medical equipment is covered by public insurance. Their reliance on private insurance has been held up as a role model for the United States.

According to Drs. Struijs and Baan, starting in 2007, private insurers began offering global payments to legally defined physician “care groups” who, in turn, accept the up and downside risk for persons with a chronic condition, such as diabetes, COPD or vascular disease. The single payment is negotiable for a defined bundle of services related to the condition itself. The care groups are typically made up of primary care doctors. They, in turn, provide and arrange for all the necessary care services and, when necessary, contract with other non-hospital providers (for example, labs) or other services. Patients with services falling within the bundle coverage provisions have no out of pocket expenses.

So what happened?

1. Variability persisted. Bundled payments turned out to vary from group to group and cannot be explained by patients’ burden of illness or the intensity of services. Other factors that probably played a role were differences in how the bundled coverage terms were interpreted and, thinks the DMCB, the negotiating leverage of the various care groups.

2. Integration grew. Providers became organized with greater attention to coordination, protocols and consultations. There was a greater emphasis on use of the EHR. In surveys, physicians reported that they believed they are providing better care.

3. Transparency increased. Providers were obligated to document and report performance against established benchmarks.

but …

4. Outcomes, you ask? According to authors, “…it is still too early to draw conclusions about the quality of care or the effects on the overall cost of care.” There has been no observed impact on glucose control (A1c), lipids, patient satisfaction or cost. So far.

5. Market power increased? Some subcontractors reported that they are being squeezed by the care groups’ local market power. What’s more, patients’ freedom of choice in the selection of subcontractors may have been curtailed.

6. Bundle “boundaries?” The Dutch are still working to define just what services are covered by the chronic care bundle. That’s important, because the care groups have an incentive to cost shift.

Most U.S. observers seem to agree that the fee-for-service system is broken. Drs. Struijs and Baan are reminding us that replacing it, despite policy savoir faire of many U.S. europhiles, isn’t necessarily going to reduce costs, increase quality or not introduce its own set of unintended consequences.

Jaan Sidorov is an internal medicine physician who blogs at the Disease Management Care Blog.

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