Going Global | Health care costs are skyrocketing. Has one local hospital already discovered the solution?
When Patrick Muldoon, president and CEO of HealthAlliance Hospital in Leominster and Fitchburg, sees an empty hospital bed, it’s a good thing.
Empty hospital beds don’t mean a lack of patients; it just means no one is sick.
And healthy patients are less expensive to care for. They’re less expensive for the hospital to treat and less expensive for insurers to pay for.
But for most hospitals around the country, fewer patients mean less revenue. That’s because they operate on a fee-for-service model. In other words, they get paid at varying rates depending on the procedure.
HealthAlliance, however, gets paid for a portion of its patients on a global payment model, which means the hospital gets a flat amount from insurance companies each year.
Next Generation Reform
The first wave of national health care reform may have been signed into law, but many in the health industry say there’s more work to be done. Specifically, they point to the way doctors and hospitals are paid for their work and say it should change to help control costs. And global payment systems could be part of the solution, according to Muldoon.
“If we’re going to have real health care reform, something has to be done on the financing side,” he said. “Instead of being paid for every test taken or procedure given, we’re paid once for the whole year. That creates incentives to keep people healthy.”
This North Central Massachusetts hospital and a partnering group of physicians could be an example for how a global payment system could work on a larger scale.
In 2008, the Massachusetts legislature commissioned a study on how to contain health care costs. The recommendation from the Special Commission on Health Care Payment System was clear: Transition to a global payment system over a five-year period.
The idea is that if hospitals have a set amount of money to spend on patient care for a year, doctors will have an incentive to keep the patients healthy and not overspend on unnecessary care.
The study did find that there is a risk that with a global system care could be compromised or diminished in an effort by the provider to not overspend. The report found that if costs are adequately predicted for the year, however, that is unlikely to happen.
Marc Spooner, vice president of provider contracting for Tufts Health Plan, is not worried about care being rationed to stay on a budget. Tufts has two global payment contracts with HealthAlliance. The hospital also has similar agreements with Harvard Pilgrim Health Care and HMO Blue.
“We put in protections to monitor the quality and we’ve found that quality performances in the global payment models are very similar to the fee-for-service, if not better,” he said.
In fact, if the system works correctly, the patient shouldn’t even know the difference.
So, could global coverage be health care of the future?
Hospitals around the country may not be ready and willing to make the switch just yet.
Practical Implications
Dennis Irish, vice president of marketing for Vanguard Health Systems, which operates St. Vincent Hospital in Worcester and the MetroWest Medical Center in Framingham and Natick, said going to a global payment system is the “next logical step” and an “evolution” that most hospitals likely will get to in the coming years.
But neither St. Vincent nor MetroWest have any global-payment agreements with insurers yet. The infrastructure to do so just isn’t in place, according to Irish.
To operate in a global model, hospitals usually partner with a physician organization. HealthAlliance has had a 200-member partnering physician group since the 1990s, for example. The physicians handle the regular checkups of patients while hospitals provide the specialty care.
Irish said Vanguard is in discussions within the organization about establishing partnerships with physician organizations to move into global payment systems.
The logistical and managerial changes needed mean it’s unrealistic to expect that hospitals will switch to this model quickly, said Harold Miller, executive director of the Pittsburgh-based Network for Regional Health Care Improvement. He’s been studying health care payment systems for years and said there needs to be a gradual transition to global payment models.
Global payment systems, he said, need to have adjustments for patients that get extraordinarily sick and cost the hospitals more money than they were expecting.
“You need to be able to adjust based on conditions,” he said. “It’s the only way hospitals would be willing to take on the risk that insurers in a traditional model are covering.”
In a global payment model with adjustments, a hospital would get a certain amount of money for caring for a patient for a given year. If the patient develops a rare form of cancer that costs millions of dollars to treat, the hospital would not have to assume all of those costs.
Forecasting
Another major hesitation by hospitals is that they don’t know how to predict what it will cost to provide a year’s worth of care to patients. Miller said there is no good data showing total costs of patient care. Determining the cost of providing care for a given year is all about analyzing data on how much it has cost to provide care for patients in the past, said Eric Hall, vice president of network development and management for Fallon Community Health Plan in Worcester.
Insurance companies look at multiple sets to determine the cost, including the number of days someone spends in a hospital, the number of times they are readmitted, the number of lab tests and X-Rays that are done.
Hall said about 35 percent of the insurer’s commercial business uses a global payment model. Most of that is through the insurer’s partnership with the doctor’s group Fallon Clinic. The insurance company comes up with a proposed budget for the hospital and the rate is negotiated and agreed to by the provider.
Not everyone seems to be convinced that going global will truly reduce health care costs.
Attorney General Martha Coakley issued a study this year showing that some hospitals can charge nearly double the rates that other hospitals do for the same procedure. She did not list specific hospitals.
The report took a skeptical tone toward global payment systems, however.
“A shift to global payments may not control costs and may result in unintended consequences if it fails to address the dynamics and distortions of the current marketplace,” the report stated.
In an interview, however, Coakley backed off the statements and said she supports moving toward global payment systems.
“We believe that reform and moving toward a global payment is a good idea,” Coakley said. “That in itself, however, will not be enough to adjust for these dysfunctions in the market related to leverage.”
WBJ Web Partners
Most Recent
Most Recent
0 Comments