Healthcare reform focused on our primary care providers is doomed to fail because most US healthcare spending is driven by specialists.

Quick-take:

1. US healthcare spending is excessive, wasteful and unsustainable, given the aging of the US population.
2. Specialists drive the bulk of US healthcare spending.
3. To rein in US healthcare spending, specialists must be committed, aligned and engaged.
4. Specialists will not be committed, aligned and engaged unless their interests are protected or enhanced.
5. Accountable Specialist Care (ASC) is a feasible proposal to fundamentally transform specialist reimbursement, eliminate waste and can be embraced by specialists.
6. Savings come not from cutting specialists’ income, but by eliminating unnecessary procedures, and recouping the much higher, “technical component charges,” from eliminated procedures.

“Our core belief is that about 40% of what doctors and hospitals do is wasteful. If you can extract that percentage of crap, you can redistribute it into savings and profits but also into procedures that actually help patients,”says Dr. Glenn Steele, Geisinger’s former president. 

Reducing healthcare waste requires that those who control the bulk of healthcare costs (specialists) must be incented to become true partners, directionally aligned and absolutely committed to waste elimination. If not, the United States will continue our unsustainable trajectory to ever higher healthcare costs, worsening federal budget deficits, flat or declining real incomes (as increasing healthcare costs vacuum up all of the money otherwise available for raises) and declining competitiveness in the world market.

With 10,000 baby boomers entering Medicare every day, Medicare’s trustees note that the US Medicare Hospital Insurance trust fund will become insolvent in 2026, in 8 years. We have three choices to prevent Medicare insolvency:

1. Relentless fee cutting, which I posit cannot be sustained by most hospitals and physician groups,
2. Rationing, which may be politically and socially untenable, or
3. Eliminating wasteful and potentially harmful practices, through aligning incentives of providers, patients and society.

Problem Statement

Most experts agree that 30% to 40% of the “healthcare” we deliver is unnecessary. “Our core belief is that about 40% of what doctors and hospitals do is wasteful. If you can extract that percentage of crap, you can redistribute it into savings and profits but also into procedures that actually help patients,”  says Dr. Glenn Steele, Geisinger’s former president. The Dartmouth Atlas studies have demonstrated that high cost Medicare care can be associated with a lower quality of care.

There is an old saying, to a man with a hammer, everything looks like a nail.

Background:

There are huge “gray zones” in medicine where no established best practice is clear. For example, when I fractured my own shoulder (which is demonstrated on the CT images below) I was offered a choice of a $7000.00 to $10,000 surgery to immediately bolt the broken bone back together, with the potential of surgical complications such as infected hardware… or I could choose to place my arm in a $50 dollar cloth sling until the broken bone healed.

Different surgeons I spoke with had differing opinions on which option was best, but most suggested surgery. After my last surgeon consulted several of his mentors, he recommended, and I chose, the $50 dollar sling.  I fully recovered, avoided the unnecessary expense and risk of surgery and I now enjoy full shoulder strength and a completely normal range of motion.

There is an old saying, to a man with a hammer, everything looks like a nail.  In the current fee for service (FFS) world, a surgeon is paid much more for operating on someone than for recommending conservative therapy. This contributes to an unconscious bias towards surgery in such gray zone cases.

ASC, savings do not come from reducing specialist payment, but rather from specialists eliminating unnecessary and costly tests and procedures.

Accountable Specialist Care (ASC) is a feasible proposal to fundamentally transform specialist reimbursement. ASC totally removes this unconscious bias by eliminating specialist fees for doing stuff to patients and aligns specialist payment with performance, population health, value and outcomes. ASC, savings do not come from reducing specialist payment, but rather from specialists eliminating unnecessary and costly tests and procedures.

Unlike ASC, in today’s alternative payment models such as the Medicare Shared Savings Accountable Care Organizations (ACOs), the more patients a surgeon operates on, the more he gets paid. This drives waste.

Most of the expense for such unnecessary tests, procedures or surgeries actually go to pay for the “technical component” of the test or surgery. This “technical component” payment pays for the operating room, the MRI scanner, the surgical implant, etc.  Under ASC, specialists are fully paid, regardless of how many procedures or surgeries they perform, as long as the patients’ outcomes and experiences are good. Unlike ASC, in today’s alternative payment models such as the Medicare Shared Savings Accountable Care Organizations (ACOs), the more patients a surgeon operates on, the more he gets paid. This drives waste.

In the ASC model, specialists are rewarded for creating value for their stakeholders, not for doing more “things” to patients. The creation of this value will require the specialists to perform additional real work: research, stakeholder meetings, discussions with patients and referring physicians and administrative work for implementation. The value created will far outweigh the costs of this additional work. But unless the incentives are realigned, and specialists are protected from harm, specialists will remain reluctant participants in healthcare reform, rather than innovative leaders of disruptive value creation.

In exchange for a salary guarantee, and ASC specialist must identify unnecessary, low value and potentially harmful care they were previously delivering and eliminate it.  

What is ASC?  A key component is specialist group subcapitation, that is each specialist group (such as orthopedic surgery, cardiology, radiology) receives a fixed fee per patient per month regardless of how many procedures the patient receives. Also included in ASC are identification of best practices, implementation of best practices and benchmarks for patient satisfaction, population health and referring physician satisfaction.

Specialists salaries: One way to look at how specialists are paid is to look at the current Rube Goldberg fee schedule, the contractual discounts offered to over 500 different insurance plans, the alternative payment models specialists may be engaged in and the supplemental payments for hitting quality targets, budget targets, etc.

The ASC way to look at specialist salaries: Look at the total number of patients a specialist group was responsible for last year, look at their total income for last year and divide the payments by the number of patients.  This yields a per patient per year figure. This is in fact what the specialist group was paid. If this figure is divided by 12, it yields a per patient per month fee.

Key to ASC payment methodology is to continue paying the specialist group the same per patient per month fee, in exchange for certain deliverables.  In exchange for this salary guarantee, the specialist must identify unnecessary, low value and potentially harmful care they were previously delivering and eliminate it.  This generates huge savings as the technical component fees are eliminated. This enhances patient well being and paradoxically will enhance the specialists’ well being. Going forward with wasteful procedures eliminated, the specialist will receive the same income and more time off.

Example specialty, Radiology: Nationwide, the volume and cost of medical imaging has skyrocketed during my 32 year tenure as a radiologist. Some of this has accrued to our patients’ benefit.  With modern cross sectional imaging, highly accurate and specific treatable diagnoses are generated by the radiologist, so that the patient can be triaged to the most appropriate care plan.

This has been a mixed blessing however.  On the one hand, the cause of a myriad of symptoms from every body part can be non-invasively and quickly diagnosed with medical imaging. On the other hand, given our litigious society, failure to image a patient with a significant condition can result in some of the highest medical malpractice awards. Understandably, if a doctor believes there is even a remote chance medical imaging will benefit the patient, a scan is requested, often unnecessarily. This results in wasteful, low value care. Making matters more challenging, the very same symptom which can and should lead to advanced medical imaging, can in its less severe forms, be a common and ubiquitous condition.  How then are the ordering clinicians to determine when imaging is appropriate? With help from an ASC radiologist.

ASC radiologists will be held accountable for:

• Improving patient satisfaction.
• Improving population health, for example ensuring patients receive screening mammography.
• Improving physician satisfaction.
• Improving report turnaround time.
• Periodically reviewing the world’s literature to ensure only indicated studies are performed.
• Calling critical exams and reports to referring physicians.
• Standardizing the imaging follow up of incidental, probably benign findings, utilizing evidence based best practices.
• Reducing over-utilized, high-cost, high-volume examinations, such as CT pulmonary angiography.
• Implementing computer assisted Clinical Decision Support (CDS).
• Ensuring that all suggested follow-up studies made by a radiologist in a subspecialty that they don’t not have fellowship level training in (or its equivalent in experience) be double read by a subspecialist radiologist to ensure the follow-up imaging is appropriate.

For any proposal to have a significant effect in the real world, it must be designed in such a way that the specialists making the decisions which drive healthcare costs can enthusiastically embrace this change.

Currently, radiologists’ financial incentives under the current fee for service (FFS) model encourage increased provision of services and punish any process which thoughtfully reduces scan (procedure) volume. This is inherently inflationary, and is a contributing factor to the unsustainability of our current healthcare system, and it is generalizable to other specialties.

In the past, many plans to decrease utilization have been developed, without the input or true buy-in of practicing radiologists, none of which have had substantial success in reining in the costs of unnecessary and wasteful radiology imaging. Historical utilization management techniques have included command and control mechanisms by the regulatory authorities, such as Certificate Of Need programs, pressure put on radiology groups by Physician Hospital Organizations and ACOs and prior-authorization requirements instituted directly by insurers.

I would argue the reason these prior processes have largely failed is that they did not involve the radiologists, a key stakeholder, in their development and they ignored the financial ramifications on, and incentives of, this key stakeholder group.

ASC incents radiologists to become enthusiastic supporters of the transition to pay for value, rather than reluctant foot draggers. As an example of the foot dragging mindset, the chair of one of the most prestigious radiology departments in the US noted in his presentation about the recently enacted Affordable Care Act (ACA)  in 2010, “Alternative payment systems will take years to implement -thank goodness… they have the potential to hurt radiologists if current attitudes toward the specialty are maintained.” (Emphasis added by me.)

For any proposal to have a significant effect in the real world, it must be designed in such a way that the specialists making the decisions which drive healthcare costs can enthusiastically embrace this change. Only with such buy-in can we fundamentally transform specialty reimbursement, focus our resources on care that matters and align incentives toward improving patient care.

Within today’s ACA enabled ACOs, all other things being equal, the specialist will gain more revenue if he provides more services, as specialists are still reimbursed by FFS with today’s Medicare ACOs. Specialists might hope the other specialists decrease their utilization appropriately, so that there would be shared savings. But they have little financial incentive to cut their own utilization. Cutting specialist utilization directly and disproportionately cuts that specialists’ income. This results in the perverse incentive to deliver more services, rather than healthy outcomes, and is an example of the tragedy of the commons. This perverse incentive is completely mitigated in the ASC model, as specialists’ salaries are not dependent on the volume of services they provide, but rather on waste elimination among other quality metrics. Without the ASC model, this tragedy of the commons is a sizable barrier to fully realize the potential of the ACO model.

Brandeis Professor Stuart Altman coined  Altman’s law; “While a majority of people desire healthcare reform in the abstract, their second choice, if they personally have to make a sacrifice to accomplish the reform, it to maintain the status quo.” The ASC model respects Altman’s law by aligning specialist, patient and societal incentives. It improves patient care and drives specialist commitment toward dramatic elimination of wasteful healthcare spending.