Sunday, June 26, 2011

It's the Incentives, Stupid

The Atlantic has a wonderful article on HHS open-data guy Todd Park, who is being set up to try to do with health care data what NOAA did with weather data and the government did with GPS data—release the data it’s gathered into the innovation wilds and see if useful, productive services can be extracted. Coming as it does after the closure of Google Health, it’s good to hear more will be done with health information, which does seem to have some promise.

But the note to recall comes from the middle of the article, which includes this cautionary note:
Park first got a taste for the massive blockades hindering payment reform when he and his partner launched Athenahealth. Before it became a software company, Athenahealth was focused on maternity care. The team wanted to scale a model where instead of assigning a doctor to a pregnant mother, you also assign her a midwife, a nutritionist and a case manager. Though the upfront costs are slightly higher, studies found that this type of care radically reduces the chances of costly complications with the mother, which drives down costs overall by as much as 20 percent. So representatives of Athenahealth approached the major health insurance companies and proposed a new payment model: Instead of paying for professional services, the insurers would pay a global fee for all care -- hospital care, physician care, lab care -- so that if Athenahealth could keep the mother healthy, lower the rate of complications and therefore lower costs, it would be able to more than cover the cost of the additional upfront preventive care, benefit financially and in the process drive down the total amount of money the insurers had to pay out. A win-win for all. "The insurers said, 'Look, we completely agree with your math,'" Park said. "'We agree with the five-year study that shows this model will work, but we can't rewire our systems to pay you differently from everyone else. We have to keep paying you on a per-service basis, even though we completely believe that this lowers cost for higher value.' And that was my first fundamental lesson regarding the principles of how you pay for health care dictates how health care gets delivered. Because this model can't scale, can't become widespread, if it's not supported by the payment system."

Basically, Park wanted to do ACOs for maternity care, and don’t doubt it’d be a highly wonderful model for just about everyone involved. But it couldn’t work because of the structural issues—i.e. the incentives. All of the cool innovation stuff and new inventions sound great and might be successful, but the odds of it mattering are low unless the incentives are worked out and are sufficiently widespread across the health care system.

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