I ended the last blog talking about how the regional differences in spending seem inexplicable as the more you spend, the lower the quality. Huh? It's true. This excellent article talks more about this: http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?currentPage=1

There's controversy as to how to turn the high-spending areas into low-spending areas. Everyone agrees the problem is with incentives. I'd like to take it a step further - there are no incentives towards cooperation. While there are excellent organizations like the Mayo clinic that work that way, as I said in my previous blog, it takes a long time and a lot of resources to set up one Mayo clinic (10 years to be fully functional and efficient).

The above article points out that many physicians in an effort to compete have become businessmen, and have learned what to do to maximize compensation. There is little if any cooperation between primary care and specialists; it is a disconnected system where physicians and administrators have no concept of their costs (relative to others) and their quality.

If you don't create a zillion mini-mayos, how to you realign the payment structure so that it naturally allows higher quality, more cooperative care?

Here's my plan:
  • Assume that Doctors in "high supply-high cost" areas have incentives that get them this way, i.e. cardiology clinic work is not valued monetarily in remimbursement as a cardiac catheterization and stenting.
  • Also, primary care visits in general, monetarily, are not valued as highly as procedural work - despite concrete proof that primary care coordination of care increases quality and lowers costs. For hospitals, ORs and Procedure centers are the only money-makers. Caring for patients in the Emergency Department and on the floors and ICUs are money-losers.
  • And you assume that: Physician's most valuable asset is their skill set and their time with which to use that. Currently physicians with 20 years experience are not valued more under Medicare than a new graduate.
  • Then also: Through the administrative hassels of Medicare (and other insurance), much time is wasted.
  • You can conclude: paying physicians for their time and complexity of patient care, plus their experience, and coordination of care, would align physicians with what they actually do, and at the same time reduce the need for supplementation with higher cost care of questionable benefit.
Thus, I have a new, simpler physician payment system that will drastically reduce administrative costs, and realign incentives that would pay physicians for their skills and time.
  1. There will be a base hourly rate that will be paid to all physicians for their time spent with the patient. Physicians with longer training, board certification, longer years of experience, proper CME [and conceivably incentives for EMR use] will receive a higher hourly rate from the base.
  2. Added to the base also will be for Docs that participate in a cooperative group (also called Accountable Care Organizations), that I liken to the spokes of a wheel, with primary care docs (PMD) in the center, and specialists they work with forming the spokes. Peer review time they spend working with each other to track and optimize quality will be paid.
  3. The hourly is then multiplied by a complexity factor that is determined by age of patient (very old and very young are higher complexity), and number of medical problems (including social issues like smoking, drug usage, and alcoholism which complicate medical diagnosis and treatment).
  • How will this work? A primary care doc treating a hypertensive patient who is 70, with 8 medical problems, will get a higher rate (and consequently require more time spent) than for a hypertensive patient who is 20 and no other medical problems. A surgeon's complex followup on a diabetic food that won't heal will get paid based on time, not based on whether they went to surgery. No longer will one diagnosis be valued higher than another.
  • It is assumed that a doctor can treat a diagnosis in their field. More complex diagnoses take more time to treat and thus will pay more. Diagnoses will only be used for statistical tracking. If a physician spends time on the phone dealing with their patient concerns (easily verifiable by answering service and phone records), they should be paid for that service. Because studies show that time spent with the patient equals better patient care, and cheaper patient care.
  • I know what you are thinking. Doctors are going to be like lawyers and start billing 25 hours in a day. Or will say they are spending all this extra time with their patients to get more hours. I've got a simple solution for that: To prevent physician abuse, each patient submitted for payment will have a complexity code that is determined not by the physician but by a simple billing computer algorithm based on age and medical problems. An average time spent per diagnosis and complexity level will be computed on a national basis. Any physician with more than 20% of their charts 2 standard deviations above the mean will have a one year probationary period where they will only be paid for the mean time for a given diagnosis complexity. If they can bring their average back, they can receive normal billing. If not, they will have a 3 year period where they will only be able to bill for the mean time spent per complexity level.
  • In a special situation, hospitalists, and emergency physicians, will be paid an additional complexity assessment for numbers of patients seen in a shift that exceeds the "maximum" recommended number of their respective boards (in EM that is 2.5/hour) since those specialties can not control the flow of patients that come to them. Those specialties, primary care specialties, as well as on-call physicians who are called or called in, will get a complexity boost for patients seen on weekends, holidays, and between the hours of 5pm and 8am.
Why have I created this reimbursement system? For one, it is simpler - one that a computer algorithm could do the necessary calculations. Plus, it allows physicians to take more time with complex patients with chronic problems, which saves costs and improves care.
  • There will be no need to have "medicare police" to incarcerate physicians for Medicare fraud. Especially since physicians are not the drivers of fraud (from OIG Testimony on Medicare Fraud - July 25, 2000, which said of all the examples of types of fraudulent and abusive activities mentioned in the report, NONE of them were individual physicians.) Typically, they are fraudulent companies finding creative ways to game the system. Largest example of fraud: Rick Scott's Columbia/HCA paid a fine of 1.7 Billion dollars
This blog is longer than I thought, so I will end it here and address the hospital payment system changes in my next (and I think last) blog on Medicare Reform.