Changing health care’s business model

By Steve Brawner
© 2015 by Steve Brawner Communications, Inc.

On Tuesday, the CEO of a major Arkansas employer announced a new offering that could cost it a lot of business someday.

Troy Wells, president and CEO of Baptist Health, announced his hospital system had received a grant from Verizon Wireless for a yearlong diabetes study. The study will provide 125 Pulaski County patients with tech tools such as wireless glucometers that will transmit glucose levels to medical staff when patients test themselves at home. The patients also will be given cell phones so health professionals can coach them up on taking care of their health. Another group will be given more old-fashioned equipment, and the results will be compared.

The technology will help medical staff keep an eye on their patients to spot problems early and help them stay healthy. All of the patients will be “medically underserved,” meaning they face barriers to health care. In other words, they’re probably poor, they’re often aged, and they need help managing their diabetes.

This kind of preventive telemedicine holds great promise for society. Aside from the human factor, it costs the health care system much less to keep a patient’s blood sugar levels stable than it does to intervene after the disease has begun to take its toll.

The problem is, what’s good for patients, and for their families, and for the health care system, and for society, is not necessarily good for Baptist Health’s bottom line.

Of all the problems with health care reform, the biggest is that not nearly enough has been done to address the system’s perverse financial incentives. Baptist Health, like most medical providers, makes its money by treating patients, not by curing them and not by helping them stay healthy in the first place. About the only time health care providers have a meaningful financial incentive to promote good health is when they’ll otherwise have to provide uncompensated or inadequately compensated care – which is probably the case with some of the patients in this study.

The health care payment system operates under a “fee for service” model. Medical providers bill insurance companies or the government for each procedure, regardless of the results and regardless of how efficiently they perform. Therefore, promoting a healthy population cost-efficiently is about the worst thing a medical provider can do for itself, financially speaking.

That’s not to say that doctors and hospitals don’t try to cure us. Frankly, they deserve credit for acting against their self-interest. But, like all humans, they respond to incentives. As a writer, when I’m paid by the word, I’m not going to cut the story short – and no, I’m not paid by the word for this column. Likewise, incentives shape how medical providers decide priorities, in how they invest resources, and in what interventions they recommend. The reason there’s no cure for the common cold is because it hasn’t been financially viable to invent one. For cold medicine, it has been, which is why pharmacies and grocery store aisles are stocked full of multiple varieties.

Reforms are occurring. For example, the state has been engaged in a years long effort, the Arkansas Payment Improvement Initiative, which is replacing the fee for service model with one based on “episodes of care” in some situations. Medical providers, state agencies and insurance companies together have determined appropriate costs for various health events. If medical providers’ costs over time are lower than that range, they receive a financial reward. If costs are higher, they’re penalized. The federal Medicare system is doing something similar.

After the Arkansas initiative began and the incentives changed, unnecessary antibiotic prescriptions for unspecified respiratory infections dropped 19 percent. As former Arkansas Surgeon General Dr. Joe Thompson, a pediatrician, told me, it had been easier for him to prescribe the medication than it had been to spend 10 minutes telling a mother why it wouldn’t help her child. Now that those unnecessary prescriptions could cut into doctors’ bottom lines, they might take the time to explain.

To create a healthier society and save on health care costs, the system must provide a higher profit for the good folks at Baptist Health when they prevent disease, or quickly cure it, or cheaply manage it, than it does when they treat it or operate on it. Doctors and hospitals often nobly act against their own financial self-interest, and thank goodness they do. But it’s hard to build a lasting business model that way.

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