Early in President Barack Obama’s speech to Congress about health care reform, he mentioned health care costs as one of the causes of the problem of lack of insurance coverage. But most of the speech focused on what to do about health insurance costs, not health care costs. Changing the rules about how insurance companies operate and compete can address the add-on costs of insurance administration as well as eliminate inappropriate denials of coverage, but if the costs of the health care system keep growing as they have been, health insurance will continue to be unaffordable; the burden will simply shift to the taxpayers through the affordability tax credits the president has proposed. There are solutions, but they require a very different approach to health care delivery and payment than exists in most communities today.

Reducing Health Care Costs Without Rationing

It’s probably understandable that the president decided to tread lightly on the issue of how to fix health care costs, because too many people have come to believe that “reducing health care costs” means rationing of health care services — i.e., denying care or delaying people from getting care they think they need. This, in turn, creates tremendous public fear and resistance to reforms designed to tackle this critical issue and tempts partisan opponents to create specters such as “death panels.”

However, there are tremendous opportunities to reduce health care costs without even coming close to rationing of services. For example, many illnesses can be prevented through interventions such as immunizations, weight management, and improved diet, and the severity of other illnesses can be reduced through regular screenings (e.g., for cancer or heart disease) that lead to early diagnosis and prompt treatment. Use of evidence-based treatment guidelines and embedded decision-support systems can enable doctors and patients to avoid unnecessary or even potentially harmful tests, interventions, and medications, and can help doctors and hospitals eliminate harmful and expensive infections and medication errors. Hospital admissions and readmissions for patients with chronic diseases can be reduced dramatically — by 20-40% or more — through fairly simple primary care interventions such as training patients how to use their medications properly and more frequent contacts to identify problems early before they require hospitalization.

No patient is likely to label these programs as “rationing” or demand that doctors admit them to the hospital rather than helping them stay well.

The Urgent Need For Health Care Payment Reform

So if all of these win-win opportunities for cost reduction and quality improvement exist, why haven’t we taken advantage of them? The reason is that our health care payment system is badly broken. The fee-for-service systems used by Medicare and most commercial payers won’t reimburse primary care physicians for providing the patient support that will keep people out of the hospital, but they’ll pay every time a patient is admitted to the hospital because they don’t receive the outpatient care they need. Current payment systems pay providers for delivering more services regardless of their quality, and they pay hospitals more when people get infections or get readmitted than when they don’t. And doctors aren’t paid at all if they succeed in helping their patients stay well.

There are better payment systems that would fix these problems — systems called episode-of-care payment and comprehensive care payment that reward doctors and hospitals for improving outcomes and efficiency. Where they’ve been tried, they’ve worked. You can read more about them in an article in the newly released Sept-Oct issue of Health Affairs — a thematic volume on bending the health care cost curve — and in more detailed reports at the Center for Healthcare Quality and Payment Reform Web site.

The description of the Obama plan at the White House Web site indicates that some of these payment reforms — and the delivery system reforms that must accompany them — may be part of the president’s plan. However, the description there suggests a much less aggressive approach than is needed. The payment system isn’t broken just a little, it’s badly broken, so what’s needed aren’t more tweaks and add-ons, but truly fundamental changes. Instead of just “incentives for hospitals to prevent avoidable readmissions,” we need episode payments with warranties, such as what the Geisinger Health System is already using and what PROMETHEUS Payment has begun implementing in several regions. We need comprehensive care payments to help avoid hospitalizations in the first place, like the payment systems that are being used in Massachusetts, Minnesota, and other areas.

Supporting Regional Reforms, Rather Than One-Size-Fits-All Solutions

These kinds of dramatic changes in health care delivery systems can save a lot of money, but the Congressional Budget Office is having trouble “scoring” the savings in federal legislation. That’s not surprising, because the payment changes are just a means to an end — the goal is changing the way health care is delivered, and those changes can’t be directed by Washington. They have to come from the doctors and hospitals and other health care providers in each individual community, and every community is organized differently. There is no one-size-fits-all national solution that will work, and trying to define something that will work everywhere will just lead to lowest-common-denominator approaches that will not move us forward nearly fast enough.

So how can the federal government best accelerate payment and delivery system reform in each community? An important and underutilized approach is to support the work of Regional Health Improvement Collaboratives. There are more than 50 such collaboratives around the country today. They bring all of the key stakeholders together — providers, payers, consumers, and purchasers — to build consensus on the best ways to improve health care in their own communities, and the collaboratives then help the doctors, hospitals, consumers, and payers work together to achieve those goals.

Most Regional Health Improvement Collaboratives have already established the foundation for a system of holding providers accountable for outcomes by collecting multipayer data on the quality and/or cost of health care delivered by individual providers and using those measures to encourage providers to improve their performance and to encourage consumers to choose higher-value providers. Many collaboratives are working with providers, either individually or in groups, to help them better organize and deliver health care in order to improve quality and efficiency. And a growing number of collaboratives are working to build consensus on multipayer payment reforms and to implement those reforms in their communities. (You can find a full list of collaboratives and examples of their work at the Network for Regional Health Improvement (NRHI) Web site.)

Supporting Regional Health Improvement Collaboratives

How can federal health reform legislation support the work of regional collaboratives to reshape health care delivery? Several ways:

• By enabling Medicare to participate in payment and delivery reform initiatives organized by Regional Health Improvement Collaboratives. For example, through its DIAMOND Initiative, the Institute for Clinical Systems Improvement (ICSI), a Regional Health Improvement Collaborative in Minnesota, has dramatically changed the way primary care doctors are paid so that they can deliver better care to patients with depression, and it’s successfully improving outcomes. However, although all of the commercial payers are participating, Medicare is still paying the old, counterproductive way, which makes it harder for the doctors to implement and sustain the changes. The Pittsburgh Regional Health Initiative (PRHI) is working with hospitals and primary care practices to reduce hospital readmissions, but Medicare won’t pay for the nurse care managers that are helping keep patients out of the hospital.
• Provide Medicare data to Regional Health Improvement Collaboratives’ quality measurement and reporting programs so they can measure and improve the quality of care for Medicare patients as well as for commercially insured and Medicaid patients.
• Use Regional Health Improvement Collaboratives as a means of helping health care providers use federal electronic health record (EHR) funds successfully, helping consumers and providers use federal comparative effectiveness research results successfully, and so on.
• Provide federal funding support to the collaboratives to enable them to pursue payment and delivery system reforms even more aggressively than they can today.

A New Paradigm

If we’re going to succeed in health care reform, we need an entirely new paradigm. We need payment for value, rather than volume. We need to have doctors, hospitals, health insurance plans, consumers, and purchasers working together collaboratively to improve quality and reduce costs. We need regional multistakeholder collaboratives setting ambitious goals for their communities and working to ensure that they’re implemented. And we need adequate and appropriate federal support for this new paradigm if national health reform is going to succeed.