Thursday, November 20, 2008

I Can't Believe the News Today

Today, I completely intended to charge ahead through the IBM Global Business Services Healthcare 2015 report, diving into the fascinating conversation about new ways to promote health and deliver care, but there are two news stories today that are very distracting/attention getting.

On Sunday, the Boston Globe featured a story on payment differences between Boston-area hospitals. Broken down simply, Partners Healthcare, specifically Mass General and The Brigham, are, gasp, getting paid more by insurers to do procedures, run tests, per admission than non-Partners hospitals. In the end it’s a matter of negotiating clout and the value consumers place on access to those brands.

Today’s Globe contains a follow-up to Sunday’s story, that opens with what I hope is a bit of literary license, specifically; “Leaders of some large academic medical centers and community hospitals called for Governor Deval Patrick to examine how Massachusetts General Hospital, Brigham and Women's Hospital, Children's Hospital, and a few other institutions are able to obtain higher prices from health insurers even though there is, especially for the most common procedures, often no demonstrated difference in the quality of the care delivered by those hospitals.”

When I say I hope there is some license involved, I personally would be disturbed if AMC CEO’s in Boston were actually clamoring for the State (the Commonwealth more accurately) to investigate something. That just smells. Call the State dogs out to sick your competitor when they’ve done nothing more wrong then build their brand and leverage their market position? What’s next? Flying chartered jets to DC in pursuit of a piece of the bailout pie?

Don’t get me wrong. The sentiment of value-based competition on results is something I strongly favor. If Mass General and the Brigham (I believe Boston Children’s is a totally different matter) deliver better value, they should be rewarded in rates and volume. But urging the State to dig around into a private business matter between health plans who freely negotiate with the hospitals on behalf of their members is just wrong. The health plans need to find a better way to play hard ball and Partners’ competitors need to figure out how to close the perception gap with their rivals and figure out how to negotiate the best deals they can. Period.

Then, today’s New York Times leads with the eye-popper, “Health Insurers Offer to Accept All Applicants, on Condition.” In a huge step toward monumental change in the US health system, “The health insurance industry said Wednesday that it would support a health care overhaul requiring insurers to accept all customers, regardless of illness or disability. But in return, the industry said, Congress should require all Americans to have coverage.”

In separate proposals the Blue Cross Blue Shield Association and America’s Health Insurance Plans (no shrinking violets, either of them) announced guaranteed coverage of all pre-existing conditions as long as there is an “enforceable mandate for individual coverage.” This is a dizzying 180-degree spin from the fiasco that was the Clinton Health Reform effort in 1994. Clearly they are saying they want guaranteed risk pool growth in return for accommodating all comers, which makes total sense, and is the only way universal coverage can work anyway. And it places private insurance at the heart of the new system. Quite frankly a smart strategic plan and wise fiscal play in comparison to Senator Kennedy’s loopy “Medicare for all” ideas.

Now the $64,000 question is elucidated in the article, “While insurers would be required to sell insurance to any applicant, nothing would guarantee that consumers could afford it. Rate regulation promises to be a highly contentious issue, since it pits the financial interests of insurers against those of consumers.”

Here’s where some of the 1994 thinking is valuable. To make this all work, it seems like massive regional risk pools and group rating are absolutely essential. It could be done without everyone buying insurance from the feds. State insurance commissions could create and administer the pools. Then it could permit the Government to stay out of the business of collecting premiums but rather use existing structures/bureaucracies to provide subsidies and vouchers to the pool on behalf of lower income Americans. And you could fiddle with the tax code too, if tax credits are needed as the carrot to encourage participation.

It’s all workable. Having the industry inside the tent significantly ups the likelihood something will get done early in the Obama presidency.

Taken together, these two stories present and interesting strategic reality for hospitals. Expanded coverage and increased interest in value-based competition could be a boon for providers. But, the devil is in the details and, once the coverage issue is solved, then we’ll have to get serious about population health and re-engineering the delivery system. Which, in some sense, is refreshing.

And a great segue way to a continued discussion about new ways to promote health and deliver care…

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