Monday, November 11, 2013


For some years now I have been wrestling with a dilemma.  On the one hand, I have been suspicious of commercial approaches to health care, believing that the interests of patients should rank higher than those of investors.  On the other hand I have increasingly become convinced that economic incentive is the only thing that will cause anyone to get serious about addressing the cost of health care. 

Then I read an article in the New York Times Magazine of Sunday, November 3 about Tom Scully and his new company Navicare.  During the 1990’s, Scully was head of the Federation of American Hospitals – the trade association of investor-owned hospitals – and from that position became head of the federal Centers for Medicare and Medicaid Services under President George W. Bush.

Navicare was formed to manage the care patients receive after hospitalization, known as post-acute care.  The prevailing routine has been that when post-acute care is needed, the doctor discharging a patient from hospitalization prescribes nursing home, rehab, or home health care and then has nothing further to do with it.  Providers of those services are paid on a fee-for-service basis and so the more service they provide, the more revenue they generate.  Navicare undertakes to reduce cost by managing the process and makes money by contracting with health insurance companies to share the savings.

The prospects look bright.  One can imagine opportunities for commercial abuse, but they seem rather unlikely to present problems. 

Maybe we are beginning to discover workable and acceptable ways to use economic incentives to get cost under control.

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