Saturday, March 30, 2013

Consolidation and Bundling in Medicare 

There is a move afoot to consolidate Parts A and B of Medicare and to move away from fee-for-service in favor of what is called bundled payment.  Bundled payment means either a single fee for an episode of care (like a heart attack or an appendectomy) or a single monthly payment along the lines of the traditional HMO.  The March 29 New York Times carries an article reporting that this is one of the few things upon which the Republicans in Congress and the Obama administration agree. 

You probably have to be as much of an old timer in health care as I am to appreciate what a big deal this is.   

Medicare was enacted in 1965 in the face of fierce opposition by the American Medical Association, one of the most powerful lobbying groups of the time.  Following the pattern set earlier by Blue Cross and Blue Shield, payment to doctors (Part B) was kept separate from payment to hospitals (Part A).  Being aware of the old adage that “he who pays the piper calls the tune,” the medical profession insisted on that as a means of assuring its independence from any sort of institutional control. 

That independence reflected the concept that doctors should be accountable only to their patients.  That sounds laudable enough, but precludes meaningful accountability for the cost and quality of care. 

Consolidating Parts A and B of Medicare and moving to bundled payment would change all that.  Somebody has to take the fee and pay all the caregivers, including doctors and hospitals.  With the exception of large group practices like Mayo and Cleveland Clinic, that is not likely to be a physician controlled entity, meaning that in most cases the physicians will be getting paid by a hospital. 

The Times article made no mention of that.  The only issue that it discussed had to do with deductibles.  Part A has a higher annual deductible than Part B so consolidating them into one is likely to affect some beneficiaries unfavorably. 

I’ve long thought that the providers of health care ought to be unified, but never thought I’d live to see it.



Tuesday, March 12, 2013

Facility Charges 

So-called facility charges are back in the news. 

They were the subject of the feature article on the front page of the March 11 issue of The Boston Globe.   

When hospitals allow physicians in private practice to see their outpatients in the hospital they are allowed to charge for the use of their building and furnishings; i.e., make a facilities charge.  This charge is in addition to the physician’s professional fee.    

In recent times many private practice physicians have become hospital employees.  Some of them continue to practice in what had been their private offices.  Hospitals have found that the right to make a facility fee can be extended to remote locations occupied by employed physicians and a number of Boston area hospitals seem to be doing so.  Not surprisingly when self- pay patients or insured patients with large deductibles see one of these doctors and then get a facilities charge of several hundred dollars in addition to the usual bill from the physician, they don’t like it.   

Following publication of the article on this subject, about which I wrote a few weeks ago, a number of people sent letters to The Globe complaining about the practice.  The March 11 article was in response to these letters and reports that various state regulatory agencies are looking into it. 

As a general matter, hospitals that take on private practice physicians as employees find that the fees those physicians generate following employment are not enough to cover the salaries committed to at the time of employment.  It seems likely that some hospitals have seen the facility charge as a way to make up for at least part of the loss. 

There is growing interest in Massachusetts in doing something to restrain hospital costs.  Making facilities charges may be understandable, but the practice is quite clearly a public relations disaster and will weaken the hospitals’ negotiating strength in the cost control negotiations to come.

Tuesday, March 05, 2013

Maximizing Expenditures 

Many years ago I authored an article titled The Economic Behavior of Social Institutions.  By Social Institutions I meant governmental and non-profit organizations. 

My conclusion was that whereas, according to conventional economic thought, commercial companies try to maximize return on invested capital, social institutions try to maximize expenditures.  Actually, they try to maximize achievement, but the economic consequence is the maximization of expenditures. 

I was reminded of that by an editorial in the March 4 issue of The Boston Globe.  It seems that UMass Lowell, a one-time teacher’s college that has evolved into a part of the University of Massachusetts system, has decided to “move all of its sports program to the more competitive Division 1.”  To do that, the University will have to increase its spending on sports from the current level of about $7 million per year to something more like $22 million per year.   The editorial approved, concluding with the statement “If UMass Lowell can move up to Division 1 without driving academics down, the River Hawks [the name of the school’s sports teams] will soar to heights worthy of the school’s growing reputation.”

The Chancellor of UMass Lowell is Marty Meehan.  According to Wikipedia, “Meehan became the chancellor of his alma matter the University of Massachusetts Lowell in 2007. Since becoming chancellor, the university has seen an expansion both in enrollment and in new buildings.”

One might suppose that with the ongoing concern about the high and rising cost of higher education, there would be concern about tripling the sports budget of a state university.  But not so, at least in this case.

Non-profit and governmental health care institutions and the publics they serve typically behave in the same way.  No wonder it is so hard to get them to reduce their costs.  It is contrary to their nature.




Sunday, March 03, 2013


We’re still somewhat short of being serious about reducing the cost of health care.  

The February 25 issue of Modern Healthcare included an article about a program called Choosing Wisely “a multi-specialty initiative created to curb overuse of healthcare.”  Sponsored by the Washington-based ABIM foundation, Choosing Wisely has been requesting various professional medical societies to provide lists of “five commonly ordered but usually unnecessary – and sometimes harmful - tests and procedures, based on available evidence.”   

On February 21 the program issued a list of 90 such items which, when added to a list issued last April, brings the complete list such “potentially unnecessary tests and procedures” identified to date to a total of 135. 

The article pointed out that it is difficult to determine the extent to which the Choosing Wisely effort is affecting what doctors actually do in their daily practice. 

All this is fine, but progress will be slow as long as we depend on national organizations coming up with suggestions and then waiting for them to be adopted by practitioners. 

How much more rapid progress would be if, instead, the hundreds of patient care organizations across the country were all diligently engaged in finding ways to reduce cost while improving care.  We need to be searching for ways to make that happen.

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