Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

Recently I argued that eliminating the private insurance industry would not suddenly make health care affordable. But this is no reason to gratuitously overpay private insurers to provide health care to Medicare patients—while simultaneously planning to slash the fees that Medicare pays physicians.

Begin with the insurers. When Congress created Medicare Advantage, the program that allows private insurers to offer Medicare to seniors, it agreed to pay for-profit insurers about 12 percent more per patient than traditional Medicare would spend if it were covering those patients directly.  Add up those extra payments and they amount to a $16-billion-a-year subsidy for the health insurance industry.

Why the sweetener?  Lobbyists argued that the government would have to pay more to persuade for-profit insurers to join the Advantage program.  Moreover, they promised that the insurers would use the $16 billion to offer patients extra benefits like acupuncture and eye exams that they would not receive under traditional Medicare.  And Congress agreed. Now, think about this for a minute: legislators agreed to use our tax dollars to help for-profit insurers draw customers away from a government program that most people liked—and that cost taxpayers less.  This is not about saving money by transferring Medicare to the supposedly more efficient private sector. This is about the conservative agenda: some politicians are determined to try to outsource government to for-profit corporations.

Predictably, private insurers structured their plans to siphon off the healthiest seniors.  In New York City, for example, Oxford included free memberships to some pretty posh gyms as part of the package. They called it the “Silver Sneakers” program. Unfortunately, a year after seniors signed up they discovered that the number of gyms involved in the program had suddenly shrunk. The options that remained weren’t nearly as tony, and most were no longer located in upper-middle-class residential neighborhoods. Is this “bait-and-switch”? You decide.

What is certain is that the program has proved a boon for
UnitedHealth, the nation’s biggest medical insurer, and Humana, the No.
4 player in the private health insurance market. As the New York Times explained last week,
Humana, which has 1.1 million seniors enrolled, and UnitedHealth, which
has 1.3 million signed up, are relying on Medicare Advantage “to cope
with a sales slump in the private-sector parts of their business.”

Some private insurers are suffering, the Times pointed out, because
“corporate customers are cutting back on the medical coverage they give
employees.”  So insurers need taxpayer dollars to keep their bottom
line strong.  “Humana is transforming itself into a big-time government
contractor.  It will get almost three-fourths of its projected $1.28
billion in pretax profit this year from Medicare, mainly from the
Advantage program,” the Times reported, “while UnitedHealth, the
industry giant, draws about 15 percent of this year’s projected pretax
profit of $7.48 billion from Medicare.”  One in five of the nation’s 43
million Medicare enrollees is now in the Medicare Advantage program and
by 2009 “government spending on Medicare Advantage is projected to
exceed $100 billion annually.”

As of yesterday, Humana’s shares were up roughly 35 percent for the
year while UnitedHealth had climbed about 15 percent.  Meanwhile, the
Times reported, “the Bush administration says Medicare Advantage has
brought more choices and better benefits to the federal health system.”

Is the Bush Administration Right?

A few weeks ago, the Medicare Payment Advisory Commission (MedPAC),
the independent agency that advises Congress on Medicare spending, took
a close look at the quality of care that seniors are receiving under
Medicare Advantage. If you had been in the room, you would have found
the mood gloomy.

MedPAC Commissioner Jack C. Ebeler called the data on quality
“disappointing.” Ebeler, the former head of the Alliance of Community
Health Plans, an association representing older, more tightly managed
HMOs, said: “this is not what we are hoping for.”  Then MedPAC chairman
Glenn Hackbarth weighed in: “I’m struggling to get to ‘disappointed,'”
he said dryly, referring to Ebeler’s comment. “I’m more depressed.”

Consider just one example of how Medicare Advantage is failing
seniors:  When the commission looked at 2006 data showing whether
diabetics had received routine eye exams to assess whether their vision
is declining, they found that only one-quarter of the plans had
provided the exams for more than 60 percent of their diabetic
enrollees. Older plans were far more likely to make sure that patients
had their vision checked. Fee-for service Medicare Advantage plans are
becoming more popular than HMOs—and they are not coordinating and
managing care.“I feel like we’re going backward,” said Hackbarth,
referring to the new plans.

MedPac isn’t the only organization that is complaining. An American Medical Association survey
released in May revealed that more than 50 percent of 2,022 physicians
responding to the poll said they have seen plans deny services
typically covered in the traditional Medicare plan. More than half of
physicians report receiving payments below the traditional Medicare

Of course, the AMA has its own axe to grind. In January, Medicare is
scheduled to slice the fees that it pays physicians by a whopping 10
percent. With an eye on the extra $16 billion that Medicare pays
insurers, the AMA has been quick to point out that if Medicare cut back
on the insurance industry subsidy, it wouldn’t have to slash
physician’s salaries. As Merrill Goozner explained last week on Gooz News:
“It turns out that Congress needs about $6 billion a year or $60
billion over ten years to rescind the 10 percent pay cut for
physicians…Simply by cutting the Medicare Advantage [bonus] by a third
(cutting it to 8 percent instead of 12 percent more than Medicare
itself would spend to care for the same patients), Medicare would save
enough money to avoid the cuts.”

But, as Goozner notes, “President Bush will have a say in all this.
He stepped into the fray yesterday by sending a letter to Capitol Hill
promising to veto any measure that cuts the Medicare Advantage plans.
According to Congressional Quarterly, he recommended Congress cut
hospital payments instead. The insurance industry, which is moving
aggressively to sign up more seniors for their HMO plans, is betting
that the president will come through for them.”

If Medicare pares physician’s fees by an average of 10 percent next
year—and another 5 percent, as scheduled, in 2009, the AMA warns that
many doctors will simply stop taking Medicare patients.  There are some
signs that this is already happening.

In his Wall Street Journal column,
Dr. Benjamin Brewer recently reported on doctors who have closed their
doors to new Medicare patients, including “a family doctor in rural
California named Deborah Sutcliffe, who stopped taking new Medicare
patients two years ago. Now she’s thinking about requiring her
remaining Medicare patients to pay her directly rather than taking her
fee via Medicare. If she goes this route,” he explained, “she’s allowed
to charge a slightly higher price. Medicare sends partial reimbursement
for the office visit to the patient, and the patient pays the
difference. This approach usually results in more overhead for a
practice, but the total collections for the same sorts of visits can be
15 percent higher.”

Looking beyond anecdotal evidence, an August-September MedPAC survey of beneficiaries found
that while 70 percent reported no problem finding a new doctor, that
figure was down from 2006, when 76 percent said that they could easily
find a physician.

Even if doctors are not yet abandoning their Medicare patients, it
is clear that they are trying to make up for lower fees by increasing
the volume of services they provide. According to the Commonwealth Fund,
“the volume of doctor services per beneficiary in 2006 grew by 3.6
percent. The highest rates of growth in 2006 were for ‘tests’—6.9
percent—and for medical imaging, 6.2 percent.”

Indeed, since 2000, Medicare payments to physicians have risen by an
average of 9 percent a year (see graph below from Hackbarth’s May
testimony before the House Subcommittee on Health) not because Medicare
is paying more per service, but largely because doctors are “doing
more” to their patients. Some observers have suggested that this is
because of the rise of new technology or changing protocols, but when
MedPAC analyzed the rise in volume, it could find no medical


As I have argued on this blog,
when doctors provide more services, patients don’t necessarily
benefit.  More tests can lead to the epidemic of diagnosis that I’ve
talked about here and here.  And more procedures and more drugs can lead to over treatment.

In response to these concerns, the Commonwealth Fund reports that
MedPAC is now considering a proposal that would require Medicare “to
establish a process for measuring and reporting, on a confidential
basis, the health care resources consumed by doctors in delivering
care. The aim would be to prod doctors who order too many tests and
services to begin to conform to the way medicine is practiced by some
of their more efficient peers…some commissioners said that after a
couple of years, tougher steps should be taken to discourage
inefficient care, such as penalizing it by paying less or by
publicizing which doctors are less efficient.”

MedPAC is not encouraging doctors to stint on needed care. But the
Commission recognizes that unnecessary care can be hazardous to a
patient’s health. Every test and every procedure carries some risk—and
if there is no benefit to balance the dangers, the patient is exposed
only to the risk.

Make no mistake: when researchers talk about “more efficient”
healthcare providers they are not referring to discount medicine. They
point to prestigious medical centers like the Mayo Clinic, the
University of California at San Francisco and Duke University as
benchmarks for care that is less wasteful—and leads to better outcomes.
At these hospitals, patients typically see fewer specialists, receive
more primary care and undergo fewer procedures. Ironically, higher
quality care usually goes hand in hand with less expensive care.

A Better Solution

Rather than slashing physicians fees by 10 percent , it would make
much more sense to cut fees to physicians and hospitals that are
cranking up the volume of the services they provide—without getting
better results.

Across- the-board cuts would unfairly penalize family doctors and
other generalists who, MedPAC recognizes, already earn much less than
specialists. In his May testimony,
Hackbarth pointed out how little Medicare reimburses doctors who
practice “cognitive medicine”—talking to and listening to the patient.
For example, he noted that in Chicago, primary care doctor receive $90
for a 30-minute office visit, while a specialist performing a
colonoscopy (which also takes 30 minutes) is paid $227.

Hackbarth explained that specialists’ fees have climbed in part
because, as a MedPac report pointed out last year, Medicare has relied
“too heavily on physician specialty societies . . . to make
recommendations about how much specialists should be paid for
particular services.”  Noting that these groups “have a financial stake
in the process and thus little incentive to identify over-valued
services,” MedPAC recommended that Medicare itself should “play a lead
role in identifying over-priced services.” In addition, the report
suggested that the group reviewing fees should include physicians who
“would not directly benefit” –for example, physicians who work on

In the same testimony, Hackbarth argued that Medicare should do
everything that it can to promote primary care, by re-examining fee
schedules, and charging lower co-pays when patients see a family
doctor. As evidence , he pointed to work done by researchers at
Dartmouth, that I have written about here,
which shows that in regions of the country where Medicare patients see
fewer specialists and more primary care doctors, costs are lower and
outcomes are at least as good–and often better.

The bottom line is that Medicare needs to trim doctors’ fees with a
scalpel, not an ax.  Otherwise, primary care physicians will begin
turning away Medicare patients; seniors would receive less preventive
care, and down the road they would need more expensive, more aggressive

But where will Congress find the money? Will legislators prune
payments to private insurers to avoid whacking doctors? Robert
Laszewski  keeps a close eye on the beltway’s healthcare politics on
Health Care Policy and Marketplace Review, and he predicts an 11th  hour compromise:
“There will be a deal in the Congress on the doc cuts and Medicare
Advantage and it will occur later in December [rather] than earlier. It
might even slide into the early part of the New Year with a retroactive
effective date to January 1.”

Is he right? I’m not sure. But I do know this: at some point in the
near future, Congress is going to have to begin paying attention to
MedPAC’s recommendations.

23 thoughts on “Complaints about Medicare Advantage Mount…While Congress Contemplates Slashing Fees Traditional Medicare Pays Docs

  1. Aside from the volume of services, another problem is upcoding – doctors commonly bill that 30 minute visit code for a visit that actually takes 10 minutes. they also bill for more complex procedures when simpler procedures are done.

  2. Dr. Marc Stone–
    Yes, I know. I recently had an allergic reaction to something and needed to find a primary care doctor.(My old doctor no longer takes insurance)
    I went to a doctor who talked to me for 20 minutes, took my blood pressure, ordered some blood tests, and billed my insurer for a physical–$450.
    I let my insurer know that I didn’t have a physical and I’m not going back to her (Her office was also pretty dusty!)

  3. Just within the last couple of months, all of the largest for profit insurers have developed physician rating systems that are intended to identify the highest quality, most cost-effective doctors (not the cheapest) and then give their insured members financial incentives, like lower copays, to use the doctors who earn the insurer’s top rating. NY State Attorney General, Andrew Cuomo, after expressing some concerns about the program, worked out agreements with each insurer that provide for both adequate transparency with respect to the criteria employed to determine the rating as well as provisions for outside, independent review.
    Medicare is well behind the private sector in this effort if it is just starting to collect the information on a confidential basis. Even if it eventually publishes lists of both cost-effective and high cost providers, unless it gives beneficiaries financial incentives to use the better providers, it will not realize the full value of the information for either beneficiaries or taxpayers. Physician (and eventually hospital) lobbying groups will use their clout to tie CMS’ hands as long as possible while the commercial insurance sector can move ahead with its effort. Bottom line: a publicly funded health insurance system has some inherent disadvantages and is not necessarily the best approach to maximize value delivered for money paid.

  4. doctors are “doing more” to their patients. Some observers have suggested that this is because of the rise of new technology or changing protocols, but when MedPAC analyzed the rise in volume, it could find no medical explanation.
    It’s no surprise to me. In my ER, patients are older, sicker, and we have more tools at our disposal. And since our malpractice premiums quintupled in 2003, we have been a lot more risk-averse. Also, it’s easier to get a CT scan, or MRI or what-have-you, as the hospitals have bought and installed more equipment.

  5. Shadow-Fax and Barry–
    Thanks for your commments.
    I’m curious: why do you think the patients you are seeing in your ER are older and sicker than patients you have seen in the past? (Only a tiny percentage of baby-boomers have hit 60, and that’s not really old).
    Also, why do higher malpractice premiums make you more cautious? Did they go up because your ER lost a lawsuit or had to pay a huge settlement? Of did they go up for everyone in your city?
    I guess what I’m saying is that I can see why an actual case of malpractice would make everyone more cautious going forward, but I’m not sure why the fact that premiums went up would make you more risk adverse . . .
    There are many problems with the rating system that Cuomo eventually approved, but the main one is that you just can’t judge quality of care by looking at individual doctors.
    First the pool of patients that an individual doctor sees is too small, and so overall quality can be easily distorted by a few patients. The New York plan of rating physicians tries to use software that “adjusts” for the fact that some doctors simply take more difficult cases–but the adjustment is crude.
    And the rating system doesn’t adjust for whether the doctor takes poorer patients and whether his patients tend to be non-compliant. (The two tend to go together since poorer patients are usually less well-educated and less medically literate. Their lives also tend to be more chaotic, making it more likely that they will forget appointments, forget to take their medicine, etc.
    The end result of New York’s rating system is that doctors who fear a low rating will begin avoiding difficult cases, poor patients, and non-compliant patients–the people who most need care.
    Secondly, and this is even more important, when patients are seriously ill or chronically ill (which is where most of our medical dollars are spent), outcomes are rarely the result of what any one physician did.
    Typically, patients see a primary care physician and one or more specialits.Patients over 65 typically suffer from 3 to 5 different chronic conditions.
    If they are hospitalized they can easily will wind up seeing a dozen doctors.
    In other words, today medicine is a team sport.
    As a recent Health Affairs article points out:
    “Recognition that U.S. healthcare suffers from serious gaps in quality and widespread waste has stimulated a broad array of public- and private-sector initiatives to improve performance . . .
    A distinguishing feature of many of these efforts, however, is their focus on the individual provider as the locus of both performance assessment and accountability. …. The limitations of this approach are increasingly apparent. The provision of high-quality care for any serious illness requires coordinated, longitudinal care and the engagement of multiple professionals across different institutional settings. Also, many of the most serious gaps in quality can be attributed to poor coordination and faulty transitions.” (Elliott S. Fisher, Douglas O. Staiger, Julie P.W. Bynum, and Daniel J. Gottlieb
    “Creating Accountable Care Organizations: The Extended Hospital Medical Staff”
    Health Affairs, January/February 2007; 26(1): w44-w57.
    This recent article in the NEJM is even more specific. It describes” the care patterns for 1.79 million Medicare beneficiaries and show that care is typically highly dispersed among many physicians.
    Even when a patient was assigned to the physician who billed for the greatest number of that patient’s evaluation and management visits, that physician accounted for only 35% of the patient’s total visits. The average patient saw two primary care physicians and five specialists, working in a median of four practices, over the course of a given year. For patients with a chronic condition, such as diabetes, coronary artery disease, or lung cancer, an even greater number of physicians and practices were involved in care. These findings highlight both the need to improve the longitudinal care of Medicare beneficiaries and the difficulty of attributing accountability for care to a given physician or set of physicians.”. “Care patterns in Medicare and their implications for pay for performance.” N Engl J Med 2007;356:1130-1139.
    Finally, you suggest that private insurers are blazing a trail, and that Medicare is far behind. The opposite is true. As the Health Affairs article points out:
    “Reform of the payment system to reward improved performance at the level of the hospital and its medical staff is already the focus of current and planned Medicare demonstration programs.
    The Physician Group Practice demonstration program, for example, rewards large medical groups that achieve specified targets for technical quality while reducing the growth of overall costs. The Centers for Medicare and Medicaid Services (CMS) recently announced a new demonstration program (the Physician Hospital Collaboration Demonstration) specifically intended to bring hospitals and medical staffs together to improve care across episodes that go beyond a single acute care hospital stay. ”
    MedPac is now considering a propsal that would follow the method of payment Fisher describes in the Health Affairs article.

  6. “Aside from the volume of services, another problem is upcoding – doctors commonly bill that 30 minute visit code for a visit that actually takes 10 minutes.”
    Well if you consider that CPT 99213 is the most common code billed by physicians; which by the way are 15 minutes, what data shows this volume of upcoding to CPT 99214 or 99215?
    There is none. While I agree that upcoding does happen, it is not common. What are more common, are insurance companies down coding.

  7. Maggie- “Yes, I know. I recently had an allergic reaction to something and needed to find a primary care doctor. (My old doctor no longer takes insurance)
    I went to a doctor who talked to me for 20 minutes, took my blood pressure, ordered some blood tests, and billed my insurer for a physical–$450.”
    I wouldn’t really fault the Doc for trying to squeeze your insurance company, as the doc probably doesn’t even know that your claim was billed as a physical for 450$. However, I would fault the Doc for hiring an inexperienced medical biller and or third party company. This happens allot as doctors hire inexperienced billers (to save money) and they (doctors) wonder why revenue is down and denials are through the roof. The healthcare billing / reimbursement system is so complex and archaic that hiring a novice medical biller will be the death of a practice.

  8. Scott–
    I hadn’t stopped to think about it, but you could be right. Whoever did the billing may simply have made a mistake.
    On the other hand, the dusty office alone was enough to put me off.

  9. Scott-
    The last two visits I made to two different physicians (one ER and one office) were both level 2 and billed as level 4. That’s anecdotal, I know, but even if the distribution of visits hasn’t changed it doesn’t mean docs aren’t billing the same codes they used to but are spending less time with each patient or increasing their volume with more follow-up visits that should be coded lower but aren’t.

  10. Maggie,
    in regard to shadowfax’s comments about malpractice. The fear of malpractice suits is pervasive in the world of medicine I have seen time and time again doctors who know better order tests in out of fear or “defensive” medicine. You do not have to be sued to suffer from this. You do know how ever that you can do everything right, and everything possible and still be sued and lose, the decisions come down to the emotions of a jury (that is why ob is so litigenous, everybody thinks they deserve a healthy baby, and juries agree). The assumption about higher premiums is that there must be more law suits. Additionally, even if you win you lose, the first thing all of them ask is “have you ever been named in a law suit”. FInally, when the insurance company settles out of court (you have no say in this) your name still makes the bad doctor list. I think you have to practice medicine to understand this, but to have a patient, a judge, a lawyer and a jury say you did wrong when you have dedicated your life and your energy to not do wrong has an impact that is not describable in words.

  11. Dr. Matt–
    I’m very sympathetic to how horrible it would be to be accused of malpractice. Even if the case doesn’t go to court–being deposed by lawyers, grilled by your own hospitals lawyers, etc.
    But the fact that malpractice rates go up doesn’t mean there are more suits. It has a lot to do with the business cycle of the insurance industry. And, of course, greed in the insuranced industry.
    And surprisingly, settlements and awards are not growing nearly as rapidly in the U.S. as in the U.K., Canada and Australia.
    I completely understand why doctors fear being sued, but if you look at the actual numbers, the chances of being sued are really quite small. (I’ll post about this sometime.)
    Everyone (including docs) thinks that malpractice suits are much more commonplace because conservatives (who hate “plaintiff’s lawyers” i.e.,lawyers who bring lawsuits against large corporations on behalf of consumers–would like to put plaintiffs’ lawyers out of business. Malpractice lawyers are lumped together wtih other
    plaintiffs’ lawyers.
    The fact is that some plaintiff’s lawyers really are incredibly sleazy “ambulance chasers” but others really are protecting individuals against corporations that have no conscience–including some hospitals and doctors. (From what I have read, John Edwards has been a good plaintiff’s attorney taking valid cases adn protecting people.)
    As for malpractice cases, you probably remember the “Tenet” case where two doctors at one hopsital in California knowingly performed hundreds of unnecessary heart surgeries. The corporation’s top executives knew about it and let it continue.
    I’ll post about malpractice sometime. I don’t think malpractice cases should be tried by juries of laymen. The medicine is often too complicated and laymen respond to the emotions rather than the facts.
    But I do think we should find a way to have these cases decided, through arbitration, by panels of doctors, nurses and other medical professionals who would understand what went on.

  12. Maggie,
    I think you and I are coming at this issue from different angles. The insurers tell me that they have worked closely with the medical specialty societies to develop appropriate metrics for measurement, and they have embraced transparency so doctors can challenge the rating if there are special circumstances.
    You have written that some $700 billion of our annual medical spending is either wasteful, unnecessary or inappropriate. The services, tests, procedures, drugs, etc. that comprise that spending have one underlying fact in common – a doctor issued an order or a prescription that drove the utilization that accounts for the spending. I don’t think there is any argument that some doctors practice more defensive medicine than others. Some own labs, diagnostic and imaging equipment and utilize it more than doctors who don’t own such equipment in order to drive revenue for their own financial benefit. If I’m a primary care doctor who makes lots of referrals to specialists, it would help me enormously if there were a sensible rating system that spoke to both the quality and the cost-effectiveness of the specialists’ practice patterns. If everyone is having their utilization tracked and the utilization of specialists to whom I refer patients were a factor in determining my own rating, I would certainly make it my business to learn who the most cost-effective doctors are in each specialty relevant to my practice.
    Despite the best efforts of insurers in areas like disease management, identifying centers of excellence, etc., both of which save money, nobody has yet figured out how to stop doctors from finding areas within the system to drive utilization in order to sustain and increase their own incomes. Rating systems, even if imperfect, can help to drive at least some of the waste out of the system, in my opinion.
    As for more complex patients, Medicare Advantage already provides risk adjustment payments to insurers who wind up with an insured population that is sicker than the average or benchmark population. Insurance executives, including Chief Medical Officers, that I’ve talked to tell me that the system CMS developed to do this is actually pretty good. There is no reason why a similar technique cannot be used as part of the mechanism that determines ratings for individual doctors.
    Perhaps some of the doctors could weigh in on this. If you don’t like the rating systems that are being rolled out, what alternative suggestions do you have for driving the unnecessary, wasteful and inappropriate care out of the system?

  13. Barry–
    I am a proponent of measurement and ratings. The issue is whether it is ready for prime time.
    I read a nice analogy somewhere on the web that likened the science we have now to how one might rate a restaurant: “like going to Bouley (fine NYC restaurant) and giving it one star due to a dirty fork and spotted wine glass.” While not apples to apples, it is not apples to oranges either most would agree. The current metrics are just too squooshy for my taste, and until we have a workable model (sorry, I have yet to see one), I am afraid many of us will be brandished unfairly.
    Additionally, unless the measurement system utilized in MCO #1 scores me the same as MCO #2, assuming I am practicing in a similar fashion between both patient sets, I have to question the validity of current approach.
    Again, I am all for measurement. In fact, I want to work with the system to bring it to fruition–I have nothing to fear, nor do most docs who are paying attention and have their eye on the ball. But like Maggie points out, the intangibles are great. While judging an orthopedic surgeon on whether he/she gave appropriate antibiotics (“yes or no”) has reasonable face value, one has a much harder time determining the meaning of HbA1C levels for primary caregivers responsible for diabetic panels. A huge bunch of inputs, and unless a doc is more than 2 SDs outside of the norm, frankly, even as a physician, I wont waste my time considering the grade. Most physicians will tell you that, and that should be a good indication of our feelings with this crude tool. Even for my own folks, grades at this juncture wont factor into any of my decision making as to whether I choose doc x vs y. That really drives the nail in the coffin, yes?
    Anyway, we have talked a great deal on this site about ways to cut waste. “MD Zagats” is one of them, I just want to make sure an appropriate model is piloted, useful, and is consistent across the medical landscape before we launch a leaky boat. Unfortunately, I fear the Titanic is already sailing.

  14. Brad,
    Thanks for your input. It’s always very helpful to me to get feedback from docs who are currently practicing. Just recently, I suggested to an executive from one of the large insurers that the insurance industry would be better off if it could / would develop a common industrywide approach to physician rating as opposed to each insurer going its own way with its proprietary solution / competitive advantage mentality. Perhaps some specialties lend themselves to quality and outcomes measurement much more easily than others, and rating approaches could start with them. I certainly appreciate your comment with respect to HbA1C and the diabetic panels. I’m also curious about the extent to which you can identify specific patients that are consistently or often non-compliant and how you think they should be handled within the context of a rating system.

  15. Brad and Barry–
    Brad thanks for your comment. In terms of private insurers trying to rate individual doctors, I’m afraid you are right: the Titanic is already sailing.
    The insurers are using crude tools and I am afraid that, whatever they say, they are primarily interested in reducing costs. So we may see another cycle of “managed care” similar to what we saw in the 1990s, when private insurers tried to manage on price, while claiming that they were looking at quality.
    For-profit insurers just don’t have the standing –morally or politically–to be making the decisions about what our health care system should cover.
    The further problem is that most insurance company executives have not trained as physicians and they are not accustomed to dealing with the complexities and ambiguities that the human mind/body present. Nor are they accustomed to recognizing that each human body is unique and different bodies will react differently to different treatments. Sometimes we know why, sometimes we don’t.
    Insurance company executives are actuaries. They are used to dealing with hard statistics and averages, lumping everyone together as they try to calculate risk. In other words, their minds work like hand-held calculators.
    A physician has to take so many more variables into account . . .
    This is why the idea of trying to grade individual physicians is, as more and more researchers realize, foolish. (See the articles I cited in Health Affairs and NEJM)
    Barry– Read the articles. They point out that the pool of patients a single doctor sees is too small; too many adjustments have to be made to account for patients who are poor, who are non-compliant, who are very old, who suffer from multiple chronic conditions, etc.
    In addition, most of our health care dollars are spent on patients who are seen and treated my multiple health care providers; it’s usually impossible to single out one doctor who is reponsible for the outcome
    Ideally, panels of physicians at NIH or at Medicare who have no financial stake in the ratings and who do understand the ambiguities of medicine would look at outcomes for very large groups of patients and then grade the entire cluster of health care providers–hospital plus doctors–who treated them.
    The Health Affairs article describes how this could be done. It involves creating a virtual group practice made up of the cluster of doctors who refer most of their patients to a particular hospital, plus the hosptial itself. The researchers would then look at outcomes for that entire large pool, and grade the hospital and doctors, together, as to how their patients did when compared to other virtual groups.
    One advantage of this system is that it would encourage doctors and hospital to collaborate, since their bonuses would depend on everyone working together.
    YOu’d still have to “adjust” for hospitals and doctors in inner cities who see more patients who are poorer and sicker, but with very large pools of patients, this would be easier to do.
    MedPAC is now recommending that Congress think about having Medicare pay=for-performance in exactly this way–bundling payments to hospital and referring doctors together. See the testimony that I refer to in my main post.
    Brad–So, the Titanic may not have sailed after all. MedPAC’s thinking about these issues is becoming increasingly sophisticated. And candidates like Hillary Clinton are very familiar with MedPAC’s reports.
    So there is a good chance that Medicare reform may
    bring us quality measures that work.

  16. Maggie,
    I understand the conceptual appeal of the virtual group practice. I have a couple of concerns, however. First, I assume that the doctors in the virtual group are still independent practitioners and are not employees of the hospital. Second, it would be quite a challenge to figure out how to divide the revenue between the hospital, individual doctors, labs, imaging centers, physical therapists, prescription drugs, etc. if Medicare attempts to pay on a global capitation basis with a tiered bonus based on outcomes performance above some pre-defined benchmark level. Defining the benchmark would, in itself, probably be difficult. Finally, as I’ve said before, some doctors practice more defensive medicine than others and some are high utilizers, in part, to maximize their income, sometimes from doctor owned equipment and facilities. The question is what mechanism do you have to penalize high utilization and drive practice patterns back in line with more cost-effective peers?. Even if insurers have no involvement in this process whatsoever, I think it is still important to track utilization by individual doctor since their decisions to admit patients to the hospital, order tests, prescribe drugs, consult with patients and perform procedures themselves drive virtually all healthcare costs within the segments of hospital charges, physician and clinical fees, and prescription drugs. Hospitals, for their part, don’t even feel comfortable with the concept of episode or package pricing for the entire continuum of care related to a single core procedure like, say, heart bypass surgery. Both dividing up the revenue among providers and determining how much care will be needed, including care related to complications, is a tougher challenge than most hospitals are prepared to take on.
    Even Kaiser, which employs salaried doctors, owns most of the facilities where patients receive care, and therefore controls most of what happens across the care continuum, does not have significantly lower costs than its competitors in California, is not gaining meaningful market share in California, and has not been able to successfully replicate its business model outside of California. Why? Many people don’t like the HMO product conceptually because of both the closed network nature of it and the perception that providers are financially rewarded for treating less rather than more which patients are likely to see as denying care.

  17. Barry–
    First, Kaiser has been successful outside of California–Atlanta, if I remember correctly, is one of its biggest success stories.
    Secondly, while Kaiser is not significantly cheaper than other health care in California, it is not nearly as expensive or wasteful as many health care providers in Southern Calfornia, where many fewer doctors or on salary, and many more are fee-for-service solo practioners.
    (Search UCLA hospital on http://www.dartmouthatals. org)
    MOre importantly, Kaiser remains one of the national benchmarks for quality care. Overall, outcomes, patient satisfiaction and doctor satisfaction are higher. California employers like Pitney Bowes have told me that if they didn’t offer Kaiser as a health plan, they couldn’t be able to get employees.
    Once patients are on Kaiser they stay–for generations. Doctor loyalty is also very high. Very low turnover (though Kaiser does fire some doctors) and a waiting list of doctors applying to work at Kaiser.
    On rating individual doctors–you are wrong when you envision an indivdiual doctor admitting a patient to a hospital, then ordering tests etc etc etc.
    These days, the patients care in the hospital is likely to be overseen by a hospitalist (someone who works for the hospital on salary) and a bevy of specilalists consulting on the case.
    Oftentimes “your doctor” (who orginally sent you to the hospital) drops in to visit you only occasionally. Some doctors in private practice like ot have more involvement, but they are spending less and less time in hospitals.
    The model you envision–of a doctor in private practice closely overseeing the patient’s hospitalization applies only to a small number of very wealthy patients.
    And even in those cases, hospitals are beginning ot say “no”–you can’t use that piece of equipment or order that test unless you have authorization showing that someone is going to pay for it.
    As to the details of how payments would be made–read the Health Affairs article for some detail.
    MedPac (the medicare payment advisory commission—which is made up of very smart people with a lot of experience in figuring out payment systems) thinks that what the Health Affairs article proposes can be done.
    Finally, you’re still ignoring the basic problem with grading whether a doctor is overusing resources with his small group of patients–the patient pool is too small, and a small group of “outlier” patients who may be very hard to identify (i.e. non-compliant patients,patients who tend to have reactions to drugs and must be moved to more expensive medications, patients who are elderly, somewhat confused and forget to take their meds in the right order; older depresssed patients who forget to eat when they are home alone or become very depressed in the hospital . . . It doesn’t take too many of these patients to skew results in a small pool.
    And how do you identify how many of these patients an individual doc has? Follow them home to see if their taking their meds, changing their bandage? Give them a questionnaire asking if they are mixing alcohol with their meds??
    IN a very large pool these outlier patients wash out.

  18. Maggie,
    I took your advice and searched the Health Affairs archives and found the article from Volume 25 by Karen Milgate and Sharon Bee Cheng titled “Pay-For-Performance: The MedPAC Perspective.” I applaud their effort, and I hope that both the National Quality Forum and Leapfrog can continue to advance the state of the art of performance measurement and quality assessment. One issue that probably needs further study relates to how much in bonus potential it would take to get physicians’ attention and, to what extent, would CMS be better off if it directed money that might be available for doctor and hospital bonuses into lower copays and hospital deductibles for beneficiaries if they use a provider that earns CMS’ top rating. That way, the better providers would be rewarded with more business.
    Care that takes place within a hospital inpatient setting is an especially important area to focus on, I think. For many hospitals, 50% or more of their inpatient admissions come through the ER. In those cases, doctors often are treating patients they don’t know and have never met while available medical records may be unavailable, incomplete or non-existent. If there is a relationship and a circumstance that is tailor made for defensive medicine, this is it. With a very significant piece of all healthcare costs accounted for by hospital charges and physician fees for procedures that take place in a hospital, outcomes information and utilization tracking would be useful, even if risk adjustment mechanisms are imperfect.
    In the case of utilization at the individual physician level, notwithstanding your point about inadequate sample size, I want to make the following two points: First, it could well be that, say, all cardiologists in Miami have average risk adjusted utilization clustered within a narrow range as they practice within a community standard that has evolved over the years and achieve generally similar outcomes within their geography. Yet, cardiologists in Minneapolis, as a group, might achieve similar outcomes with half the utilization. If this could be clearly demonstrated and communicated to the public in an understandable and transparent way, it could help to bring about some convergence in practice patterns between and among regions even without bonus compensation or lower copays for patients. Second, if I’m a practice manager for a medium or large size multi-specialty group practice and I have one or two docs that are much higher utilizers than their peers, I would like to know that. If they can demonstrate a good reason for this based on the characteristics of their patient base, fine. However, if they are just doing too much defensive medicine or too many unnecessary or marginally useful procedures, I want to know about it so corrective action can be taken including dismissal if necessary.
    I think CMS might also be able to get more for its money if it helps push along the creation and widespread adoption of interoperable electronic medical records. There is a lot of duplicate testing that happens, especially in hospitals, when multiple doctors treating the same patient don’t know what each other is doing. The same is true for adverse drug interactions.
    As for primary care doctors, I know the UK came up with a system that evaluated doctors on, if I remember correctly, 147 separate metrics with points assigned to each totaling a maximum possible score of 1,050 points. Bonus money was distributed based on how many points each doctor amassed. The end result was that doctors earned far more bonus money than NHS expected, though I don’t know if the whole process was considered a success or not. I do recognize that evaluating outcomes and utilization is especially difficult for primary care doctors as compared to, say surgeons.
    As a patient, I know I would like to have as much price and quality information available in an easy to access, user friendly format as I can get to help me (and my PCP) choose specialists and hospitals when I need to.

  19. “As for primary care doctors, I know the UK came up with a system that evaluated doctors on, if I remember correctly, 147 separate metrics with points assigned to each totaling a maximum possible score of 1,050 points. Bonus money was distributed based on how many points each doctor amassed. The end result was that doctors earned far more bonus money than NHS expected, though I don’t know if the whole process was considered a success or not.”
    I dont understand this comment. OF COURSE IT WAS SUCCESSFUL, unless you are trying to argue that the metrics they set were not evidence of improved quality of care.
    This is what routinely happens to these “pay for performance” models. Doctors do very well by the metrics and get paid more, and then the rug gets pulled out from underneath them, despite the fact that they were meeting the quality parameters that were set out for them. You reward their quality by slashing reimbursements across the board. Its a total joke.

  20. BTW, the ONLY way to avoid incessantly increasing payments to doctors (requiring per-procedure reimbursemnts to get slashed) is to pay doctors on a flat salary. Let me say that again: ITS THE ONLY FREAKING WAY!
    There is no method of FFS reimbursement that will absorb that phenomenon.
    Now you can try a bunch of modified FFS schemes that try to cut down on this “waste” but the only way to do it is to incur MASSIVE overhead structures and payments.
    A flat salary structure kills 2 birds with one stone: massively reduced admin/overhead expense trying to police the “waste” and you get much reduced costs overall.
    Its the ONLY way to go.

  21. Joe Blow-
    I agree that fee-for- service leads to a huge amount of paperwork and encourages overtreatment.
    At many of our best, and most efficient medical centers, docs are on salary (the Mayo Clinic and the Cleveland Clinic come to mind.)
    And going forward, I suspect more and more doctors will become part of large multi-specialty groups (whether real groups or “virtual” groups that aren’t necessarily located in the same building). Especially as we begin to adopt health IT, doctors will need the economies of scale that come with large groups.
    And that model is most often associated with docs on salary. To people in the East, this seems like a huge change–and there may be resistance. But in the West, it’s a familiar model (Kaiser, etc.).
    Large group practices also encourage the teamwork that we need in health care today.
    We may well have some sort of bonuses (tied to outcomes) in addition to salary, but I do think it makes most sense if at least 90% of a physician’s income comes in the form of salary.

  22. re: salaried docs.
    Be careful on this one. Many physicians are working the equivalent of overtime due to overwhelming patient demand. They put up with the long hours and “squeezing people into the schedule” partly because they get paid for the extra work. Move the system away from that and docs will move towards more sanity with their schedules, and your access problems just get worse.
    Mayo may be somewhat unique given their endowment and “VIP” patients that pay huge out of pocket costs for their extensive (and lucrative) workups. Not sure their experience is applicable to the wider health care system when it comes to financial matters.

  23. pcb–
    First, let me emphasize that I think that primary care doctors, and other “generalists” (family docs, pediatricians, gerontologists)who practice “thinking medicine” talking to and listening to patients, serving as medical “homes” and proving preventive care are underpaid.
    They should be paid more, per patient, to keep their patients well. If we did that, it wouldn’t be so hard to get an appt. with a family doc. There would be more of them. And they could spend more time with you.
    Meanwhile, some (not all) specialists are overpaid for certain services. And I suspect it might be better for these docs (and patients) if perverse incentives (fee-for-service payment) didn’t tempt them to try to squeeze more patients into their schedules.
    They would be better off on salary. People do better work when they are not so rushed and stressed.
    You are right that the Mayo Clinic is a unique place. But it is not the only place where docs are on salary: at the Cleveland Clinic, Kaiser Permanente and many academic medical centers physicians are on salary.