Evaluating the ACP’s Vision for Our Healthcare System, Part 2 of 3: Healthcare Delivery and Payment Systems

Read the intro to the series here and Part 1 here.

These posts should start to be more reliably out on Tuesday mornings again soon, but for now I’m excited to get this one out at all.

And in other news, this week marks the blog’s 10th anniversary! It started over at studenthealthpolicy.wordpress.com and then I changed the URL to clearthinkingonhealthcare.com a couple years ago (not something I recommend–it killed my traffic!). My first post was one paragraph long, and I hope I haven’t strayed too far from that original goal to be understandable to the masses as my knowledge has increased. I do know I make more and more assumptions of my readers’ knowledge, which is necessary so I’m not re-explaining everything a million times, but to compensate I try to refer back to the posts that explain those things. I’m interested to see where this blog is and where my knowledge is in another 10 years!

Ok, on to the next ACP paper! I hope you read last week’s post. It’s prerequisite material for everything in this post. Another prerequisite post (linked to in last week’s post as well) explains the spectrum that has fee for service at one end and full capitation at the other end. With the information from those two posts fresh in your mind, everything below will make much more sense.

The overall approach the ACP is taking here is to say that value-based purchasing (VBP) efforts can be great, but the ones we’ve tried to date have not been very effective because they have been fragmented (we’ve been trying lots of different and overlapping ones, all with their own flaws) and because they have been built on a FFS foundation that is often “at odds with goals to reward quality and efficiency.”

So what do they propose instead? They outline 6 “policy positions and recommendations.” I will not talk about each one because, frankly, I don’t know what I would say about some of them. For example, take the first one: “The American College of Physicians recommends that value must always be defined with patients and families at the center, fully empowered to be active partners in all aspects of their care.” That sounds like a great idea that is just ambiguous enough that no one could argue with it! But, to their credit, they do list some ideas in the following paragraphs of how to make that happen.

Their second recommendation is so good that I’m going to put it in the special quotation format:

The American College of Physicians recommends that all patients, families, and caregivers and their clinical care teams be provided with transparent, understandable, actionable, and evidence-based quality, cost, and price information to meaningfully compare medical services, facilities, and products.

Envisioning a Better U.S. Health Care System for All: Health Care Delivery and Payment System Reforms

Yes. This is super important. I love that they included it because the only effective way to financially reward higher-value providers and insurers is to get more patients to choose them. I think I do this almost every week, but I’ll link again to my Healthcare Incentives Framework series that explains this in detail.

Their third recommendation is all about what they would propose to replace the VBP efforts our healthcare system has made to date, and it’s the meat of what I am interested in. They envision teams of caregivers (led by physicians) treating patients, and they want those teams to determine for themselves which VBP strategy to employ from a menu of VBP options. The teams get to choose the VBP option that best fits their specialty and patients’ needs.

The three items on their recommended VBP menu are capitation, patient-centered medical homes, and direct primary care.

They specifically call out accountable care organizations (ACOs) as being less desirable because getting the shared savings bonuses is a moving target from year to year, so already-successful providers have a hard time improving sufficiently to continue getting them. They must take issue with Medicare’s specific implementation of ACOs, because then immediately after saying all that they describe the first menu item–capitation–as a shared-savings approach that should also have quality bonuses (ahem, that’s what an ACO is).

I’ve written less about direct primary care, but it’s simply a narrower form of capitation. The “capitated fee” (fixed monthly fee) patients pay covers all their primary care needs and nothing else. This eliminates all issues with insurer billing! Patients just go to or call the doctor when an issue comes up, and the doctor deals with it in whatever way makes the most sense without having to worry about charging for an office visit or phone call or anything.

So here we have three options on the ACP’s menu that they feel will be the new shiny way of doing VBP that gets rid of fee for service. One is actually still primarily relying on fee for service but pays providers bonuses for reorganizing in ways that decrease spending (patient-centered medical homes), and the other two are actually going away from fee for service and instead relying on some degree of capitation. I’ve talked about how important it is to make sure patients are buying the right breadth of services for each situation, and I don’t think the writers were aware of that principle, but they’re on the right track anyway.

Let’s frame the evaluation of these second and third recommendations by remembering that total healthcare expenditures is determined by (1) the number of care episodes and (2) the cost per care episode.

The ACP has done an admirable job addressing the number of care episodes (primarily by recommending shifting risk to providers, which is an appropriate way for an insurer to pass along the incentive to reduce care costs) AND the cost per care episode (by recommending increased transparency to help patients choose higher-value providers). These two recommendations are not perfect. For example, the ACP still seems to overvalue the benefits of quality bonuses. And they say nothing of many other significant details such as the insurance plan design changes that would also be necessary to get patients to choose higher-value providers. But I am still impressed. If you look back at my Healthcare Incentives Framework, you will see that they have essentially followed the main points of it.

The other recommendations talk about increasing pay for complex cognitive care relative to procedures, decreasing administrative burden (such as billing complexity, which is a huge problem that I have written about recently here and here and here), improving quality metrics (which they unfortunately seem to focus on using for quality bonuses rather than for helping patients determine the highest-value options), and health IT improvements (to facilitate all the other changes recommended in the paper). All these recommendations are interesting and I generally agree with them, but they are peripheral to the issues discussed in the second and third recommendations, so I won’t go into them.

There you have it. The ACP did a good job. Hats off to them. In Part 3, we’ll see if their recommendations to improve coverage and cost of care would interfere with what we talked about here.

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