Commonwealth Fund Paper on Global Payment

The Commonwealth Fund just published a paper on the potential for transition to global payment.  The paper is by by Ann Robinow (one of the founders of Patient Choice Healthcare, which administered BHCAG in Minnesota) Disclosure – I was one of her interviewees, based on my past experience at Harvard Vanguard.

This is important work – and Ann’s 16 interviewees were overall enthusiastic that global payment – otherwise known as next-generation capitation – can improve quality and lower cost by as much as 20-30% (!). Her paper notes that risk adjustment has improved, clinical systems are better, and some of the provider consolidation will make global payment transitions easier.  She notes that our cultural belief that “more is better” will need to be challenged, and notes that a move to global capitation will substantially change the roles of hospitals (a filled bed becomes bad instead of good) and health plans (which will be sending some of the risk to providers). 

 My take

  1. I’m not convinced that the risk selection issue is totally settled. (Risk adjustment works best close to the mean – and works more poorly out at the extremes).
  2. We’ll also have to watch carefully to be sure that groups under global payment don’t skimp on care.  The best care is NOT always the least expensive! 
  3. The culture at the groups that have delivered real value with capitation were not created overnight (good opinion piece by David Mechanic in JAMA– and that’s why the transition should not happen rapidly
  4. Patients also still really demand choice, and are often unwilling to obtain all their care in a single system.  Porter, Herzlinger and others have made arguments that are hard to dismiss that people should “shop” for the best care for the illness they are currently facing, rather than stay in a single integrated network (that might be the best for a transplant, but isn’t optimal for their gallbladder removal).   
  5. Capitation has worked best when patients felt that they entered it voluntarily – so widespread global payment with no patient alternative might create a lot of friction
  6. I believe that fee for service is the best method of payment for services which are high value but underutilized, such as childhood vaccinations, colonoscopies and mammograms). 
  7. I think the 20-30% figure for cost savings is probably too high. Many of the great capitated cost-effective provider organizations are in areas that have low underlying medical costs. It is clear that Mayo Clinic offers high value health care in Rochester MN; I’ve heard that its costs are similar to market in Jacksonville, FL and Scottsdale AZ (although I can’t find a source for this statement – so I’ll resort to crowdsourcing.  If you know where I can find this information – please leave a comment on this post).  

I’m hopeful that payment reform (aka capitation) can increase the interest in decrementally cost effective services (like the $100 MRI in Japan)

I think this paper is an important contribution to the discussion. Our current fee for service method of payment doesn’t work– and we need the push to try out credible alternatives.