Creating a Better Health Care System

With Massachusetts moving toward groundbreaking improvements in health insurance coverage, it is important not to lose sight of other critical issues affecting our health care system, such as recent attempts by insurers to increase efficiency and lower costs through pay-for-performance incentives for providers. Are these incentives really the best way to improve the health of our patients and communities?

Each third-party payer — indemnity insurers, preferred provider organizations (PPOs), health management organizations (HMOs), Medicare, Medicaid, the state’s ‘free care’ pool — compensates providers differently and seeks to achieve specific financial outcomes in response to their respective incentives. Few health care leaders have stepped back to look at the collective message the payment system is telegraphing to providers, or the consequences for the Commonwealth’s care system.

The system has become a hodgepodge of individual facilities and providers seeking to maximize their responses to varying financial incentives.

While Massachusetts care outcomes exceed national averages, other outcomes of the current system are problematic for hospitals and patients: mounting costs, lack of access, competition for patients, and variable quality. These are not exactly ideal objectives. As with all systems, health care is perfectly designed to achieve the results we have. If these aren’t the results we want, we should reconsider our goals and what we need to do to achieve different ends.

Patients arrive at hospitals and doctors’ offices carrying multiple forms of coverage. Providers are paid by a mix of Medicare (subdivided by HMO plans), Medicaid (subdivided by managed care networks), and a range of HMO and PPO contracts. The Mass. Group Insurance Commission, which manages state workers’ health insurance, even requires extra incentives from some plans just for state employees. Free care pool patients and self-pay patients each pay differently. Providers are generally dealing with at least 10 to 15 payers, each with distinct payment systems that feature their own incentives to achieve unique objectives.

While Medicare and one or two large insurers can directly influence hospital actions because of the high market percentage they represent, the cost to achieve the targeted financial objectives of smaller plans often exceeds the potential revenue gain. These insurers and hospitals are working against each other by default. Hospitals seek to negotiate contracts in ways that simplify billing and align incentives among insurers, while insurers attempt to differentiate themselves based on their unique quality and cost measures.

What is getting lost in this myriad of incentives? Our patients.

Are the needs of each insurer’s patients better met through this differentiation, or would collaboration among providers and payers on specific targeted population-based objectives be more likely to improve quality and access, at lower cost, for all members?

Consider disease management, with Type 2 diabetes as an example. Each health care insurance plan has a process for targeting the costs associated with Type 2 diabetes. Does it make sense for hospitals and pediatricians’ offices to tackle this disease in different ways for each patient in order to respond to individual plans and incentives, or does it make better sense to collaborate, at the community level, on one effort for all students in a classroom setting, focusing on prevention, exercise and diet?

At the macro level, the collective incentive divides hospitals into silos that must try to increase patient volume in order to compensate for underpayment by Medicaid, the free care pool and the under- and uninsured. Recent news articles have highlighted the amount of advertising by hospitals designed to attract new patients. Competition, however, extends to physician recruitment, the race to acquire new technology, duplication of services, and other factors that all contribute to increased costs. Dartmouth professors John E. Wennberg and Elliott S. Fisher have highlighted the dramatic differences in health care expenditures across the nation without evidence of any corresponding improvements to community health.

If state policy-makers were to start with objectives to enhance community health, such as providing low-cost high- quality care delivery and assuring access for all, we would not have today’s fractious health care system. Instead, hospitals, other providers, payers, and lawmakers would pull together to identify major community health problems and design a common approach, building programs to meet needs, without the waste of duplication, advertising and other unnecessary costs.

A quick change in this direction might not be possible. But the world-class providers and insurers in the Common-wealth could start by working together to test potential changes in our approaches to high-cost chronic care conditions on a community basis.

It’s unlikely we can easily make dramatic changes to the complex and various structures for insurance and care, but we could publicly identify common health care goals and create consistent insurer incentives. Such efforts could reduce costs, increase quality and improve access within each insurer’s patient base, while reducing the costs of the uninsured. This would help us advance on the progress set in motion by the Commonwealth’s laudable moves to improve coverage.

Craig N. Melin is president and CEO of Cooley Dickinson Hospital in Northampton.