Can the Gang of Six Change the Way We Pay For Health Care?

A bipartisan group of senators is proposing to reduce the federal deficit by $3.7 trillion over the next ten years. This is seen as a way to overcome the debt ceiling impasse and deal with the nation’s long term financial crisis at the same time. What does this mean for health care?

The proposal would require Congress to find $300 billion in health care spending cuts in order to avert a planned cut in Medicare doctors’ fees. It may also require another $200 billion in cuts. And remember, this is on top of about $550 billion in Medicare cuts already legislated as part of last year’s health reform bill. If I were running a hospital, I would be feeling very nervous right now.

In general, the plan follows the outlines of the Bowles-Simpson (Obama debt commission) proposal. Yet when Erskine Bowles and Alan Simpson were in Dallas earlier this year, they said their health care proposal was nothing more than a line on a piece of paper. “We need you to tell us how to make that work,” Sen. Simpson told me.

Readers of this blog know that we regard all of the deficit reduction proposals as nothing more than lines on a piece of paper when it comes to health care. That includes the health reform law. The Obama administration’s talk about “value purchasing” is nothing more than empty rhetoric, backed by the threat of senseless price controls that the Medicare actuaries office says will put hospitals out of business and severely reduce access to care for the elderly and the disabled.

In general, there has been no serious proposal to reduce health care spending over the next ten years on Capitol Hill. Not on the right. Not on the left. Not Republican. Not Democrat.

So let us veer from the pack and ask what is shaping up to be the most serious question of the moment: How should the federal government pay hospitals?

The answer is going to disappoint you. There is no right way. Let’s make that stronger. No matter how it pays, it will be the wrong way. No matter what formula Medicare adopts, it will create perverse incentives for hospitals to game the system — by overproviding care, underproviding care and doing thousands of other things to maximize the revenue they get from the federal government.

Think about it this way. If crooks who provide no legitimate services at all can manage to extract 10% of all Medicare dollars, don’t you think legitimate providers can figure out ways to soak the system for at least 20% or 30% over and above what should have been paid?

Payment Formulas that Don’t Work. Consider some of the payment schemes that have been tried or considered:

  • If Medicare pays based on the hospital’s costs, as it once did, that creates a perverse incentive for the hospital to incur additional costs.
  • If Medicare pays so many dollars per day, that creates an incentive for the hospital to admit patients early and keep them late.
  • If Medicare pays a fixed price per procedure (the current diagnosis-related group system) regardless of how long the patient stays in the hospital, they will have an incentive to release patients prematurely — and when they are readmitted because of that fact, to try and bill Medicare a second time.
  • If Medicare pays hospitals 1% less if readmissions exceed a certain threshold (the latest plan), hospitals will balance the risk of early release against the risk of readmission in a way that maximizes the hospital’s bottom line — not in a way that maximizes the quality of patient care.

So how do we get out of this trap? My answer: Let the hospitals propose how they would like to be paid.

A Better Way to Pay. I first made this proposal to the Bush (43) administration about the time that Geisinger Health System announced that it would not charge payers (including Medicare) for readmissions after heart surgery. Essentially they were saying, “If we screw up, you don’t have to pay a second time.”

“Isn’t this an unquestionably good thing?” I asked a group of folks siting around the table in the Hubert Humphrey Building in Washington, D.C. Everyone agreed that it was.

“So why don’t you get on the phone and tell Geisinger that a warranty on heart surgery is valuable to Medicare and offer to pay them something for it?”

“Why would we want to do that?” one of the bureaucrats asked me, suspiciously.

“So then you can tell every other hospital in the country what you have done and invite them to also be paid in different ways if they can save Medicare money the way Geisinger is saving money or in other, better ways,” I responded, probably showing some irritation in my tone of voice.

“But Geisinger is already doing what we want them to do,” another chimed in. “We could never get away with paying a provider more than we have to pay.”

“Congress would be all over us,” a third person declared.

And so nothing happened. The only reason I remember the conversation so well, is that I found it so bizarre.

Anyway, I think there is a huge opportunity here, for any administration — Democrat or Republican — to radically change the medical marketplace. In “A Framework for Medicare Reform” and in a Wall Street Journal article, I listed a few of the hundreds of Geisinger-like providers who are saving Medicare money every year and being financially punished for doing so.

Implementing the Better Way to Pay. Here are the parameters:

  1. The new payment relationship has to save Medicare money.
  2. Quality of care to the patients cannot go down, and providers should be free to propose new and better ways of measuring quality.
  3. The provider must propose convincing procedure for how we are to decide that parameters 1 and 2 have been met at some future date.

What Can Derail the Better Way to Pay. There is no good idea that cannot be undermined if the bureaucrats are determined enough. But here are some ways to avoid getting derailed:

  1. The provider does not have to be at risk. In fact, the insistence on this idea in all cases is a huge mistake. In Asheville, NC, pharmacists counsel diabetics. What they get paid for doing so is apparently much less than the savings in reduced physician visits and emergency room visits. But the pharmacists are not individually at risk (their incomes do not go up or down depending on Part B payments) and they shouldn’t. Extending this idea, suppose Medicare agrees to pay the market price of services provided by nurses at walk-in clinics. (Not Medicare’s fee, but the market price everybody else is paying.) I think there is a very good chance Part B Medicare expenses would go down. But that’s a risk Medicare should be willing to take, not the walk-in clinics. Finally, most providers are too small to credibly bear the full risk that a new payment system will save Medicare money. Let’s suppose all the general practitioners in an area want to be paid more to insure that more children get their vaccinations and present a credible case that the return on this investment will be positive. If we are convinced their case is solid, it is appropriate that Medicare itself take the risk, not individual physicians.
  2. Contracts for new payment arrangements should be easy to negotiate and consummate. Mounds of paperwork and endless delays in getting approval are the natural enemies of entrepreneurship.
  3. We must be willing to tolerate mistakes. Everyone in business knows that not every decision is a good one. In fact, if every new contract Medicare negotiates under this proposal works out perfectly that is prima facie evidence that Medicare is being too cautious in inviting new payment arrangements.

Consequences of the Better Way to Pay. As noted, the current system gives everyone on the provider side an economic incentive to maximize against reimbursement formulas. Think of smart people against dumb formulas and you’ll have a better sense of where we are right now. If what I am proposing were up and running and considered by everyone to be a real alternative, then everyone on the provider side would have an economic incentive to search for ways to save taxpayers money and raise the quality of care at the same time.

Actually, what I’m really proposing is not complicated at all. Just start paying people for doing what we want them to do. The only worry I have is that government may be incapable of doing it. So we should be open to contracting the whole enterprise out to Microsoft or some private entity, not constrained by the normal bureaucratic impediments.

Comments (31)

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  1. Vicki says:

    You have written about this idea before. I find it very persuasive.

  2. Devon Herrick says:

    Firms respond to incentives. If the incentive is to maximize reimbursement based on DRGs or fee schedules, providers will boost volume with little concern for costs. If the incentive is to maximize quality and cuts costs, providers will look for novel ways to improve efficiency and quality. The key is getting the incentives right.

  3. Brian Williams. says:

    The ideas in this particular blog post are among the most important of the debt crisis debate. Thanks for a great post.

    Yet, Congress and President can’t seem to get past the “face saving” stage. I can’t believe those guys govern us.

  4. Ken says:

    John, I think you are right, but I don’t think you have penetrated the Gang of Six. Their fallback is the same as Obama’s: price controls.

  5. Al says:

    John, none of the four payment formulas you mention include the patient in the decision making. Your answer to “Let the hospitals propose…” also doesn’t include the patient.

    Does the patient not exist?

  6. Robert A. Hall says:

    I will link to this from my Old Jarhead blog. Dr. Goodman’s articles are always on point. They raise questions that the politicians on both sides dare not discuss, because the answers are so painful that the people would turn against them. But the coming pain will be much worse, as we slide into the abyss.

    Robert A. Hall
    Author: The Coming Collapse of the American Republic
    (All royalties go to a charity to help wounded veterans)

  7. Kenneth A. Fisher, M.D. says:

    I propose a simpler system utilizing many of John’s ideas. Initiate Health Savings Accounts (HSA), accumulating tax free starting at infancy, encouraged by a tax credit for those paying income tax and a reverse tax for those not paying income taxes. These monies could only be spent on health care. Expensive items would be covered by high deductable health insurance that would be federally subsidized for the poor, thus providing universal coverage. This would be a lifetime system allowing for the eventual phasing out of Medicare and Medicaid. In this system each individual would be seeking a cost and quality advantage, fostering competition. This would be vastly superior to bureaucratic attempts at cost savings and price controls that have historically been failures and unfortunately are a center piece of the Affordable Care Act.

  8. Frank Timmins says:

    John, In trying to understand the idea here I have a what is probably a stupid question. You wrote:

    “Let’s suppose all the general practitioners in an area want to be paid more to insure that more children get their vaccinations and present a credible case that the return on this investment will be positive. If we are convinced their case is solid, it is appropriate that Medicare itself take the risk, not individual physicians.”

    Are you suggesting literally that Medicare would involve itself in reimbursement to GPs for childrens’ vaccinations, or is this merely an example of the concept of Medicare having outcome risk shifted from doctors (or hospitals) to the government? I’m just trying to keep up here.

  9. Virginia says:

    I agree with Mr. Fisher. I’ll add the following:

    The problem with Medicare is that it’s Medicare; the idea of third party payment for most medical care is fundamentally flawed. As long as people don’t decide on a provider based on quality and cost, the system will continue to malfunction.

    When I gaze into my crystal ball, however, all I can see is Medicare continuing to cut reimbursements, more hospital consolidations, and eventual bankruptcies as reimbursement continues to fall below cost.

  10. Mike says:

    Would the CMS “innovation” center try this idea?

    Would the Congressional Budget Office doubt potential savings and continue a bias favoring price controls?

  11. John Goodman says:

    @ Al

    Yes the patient exists, but right now Medicare is paying the bills. The question is: how should it pay?

    @ Ken and Virginia

    I like your privatization idea. It sounds similar to what we proposed in Framework for Reforming Medicare. But that takes many years. In the meantime we have immediate problems to deal with.

    @ Frank

    Good catch. The example of childhood vaccinations is more appropriate for Medicaid.

    @ Mike

    Agree. The CBO doubters might not score this idea correctly. But we should try it and find out.

  12. Al says:

    John, then it appears society is stuck in a never ending dilemma that can never be satisfactorily solved. That a third party is paying the bill doesn’t mean the patient cannot be involved in many fashions including paying a part of the bill that cannot be discharged by third party payers. That goes a long way to controlling costs and need not be a tremendous burden on the vast majority of Medicare patients.

    As an example, one that was discussed years ago, have Medicare cover the catastrophic portions and return some funds to the patient so they can be directly responsible for the 20%. There are lots of savings with this approach including the savings on ending secondary insurance and reduced requests for care. This does not necessarily cause any change in the quality of care delivered. Sometimes it can improve care. Just look at diabetics that have to pay cash. Sometimes they appear more responsible and are more apt to listen to ways that one can control blood sugars and reduce the need for office visits.

  13. Kevin Stuckey says:

    It is almost impossible to comprehend how far out of touch most of our government policy-makers are with real world economics. With a growing population that is also aging, the demand for medical increases. However, as the “demand” for medical care increases, the number of physicians (especially primary care physicians…i.e.”supply”) declines. This is not due to capable, intelligent practitioners wanting to withhold care or services. It is due to the out of touch geniuses in Washington working to “save money” by reducing compensation as the providers’ workload increases. That is a major reason, we see many, many cases in which medical services, tests & etc. are often replicated on the same patient. Docs and hospitals aren’t trying to “get rich” simply by treating a few patients, they’re trying to make a living and a fair profit while their compensation is steadily reduced or impaired by regulation.

  14. Frank Timmins says:

    This has probably been discussed before but it seems to me we should be looking at enabling HSA type medical savings accounts that can be used just as the standard “Medicare supplements” peddled by AARP and others. Instead of tossing away $1,500 to $3,000 a year on these “gap” plans that really only pay Medicare deductibles and co-insurance leftovers, Medicare recipients could be stashing away these dollars to use when needed.

    Has this ever been examined – anyone?

  15. wanda j. jones says:

    John–Some additional concepts to consider:

    We really need a three tier form of payment with each tier managed as close to the patient as possible:

    Tier 1: Primary care: Memberships with a chosen medical group, preferably one practicing in a managed corporation. Use the funds from the HSA to pay for the membership. Have the group explain that this covers visits to the office but not the hospital ER, and that an additional fee is charged if patients do not comply with treatment plans. Make the membership pool a “mutual” pool, to give all the members an incentive to support each other in weight loss, control of high blood pressure and the like.

    Tier II: Chronic disease membership with an integrated group, registered with one or more clinical programs; for a full work-up, diagnostics on their chronic conditions, management of acute episodes, and continuing care. This cries out for “staging” of their chronic conditions, assignment to treatment plans, and periodic payments to the group for continuing care, with quality measures being: how many members are enrolled in specific care plans, how many are compliant, how many have been helped not to progress to more serious stages of their diseases, and how frequently are patients seen, evaluated, and helped.
    A colleague of mine has devised a “cohort capitation” to accomplish this–a monthly payment throughout a treatment year for such cases as prostate cancer. Here, the incentive to undertreat is back-stopped because the patients know what they are supposed to get. Too, the reporting happens to be exactly what the medical group would want to do for its own clinical care management, so passing on these results would not be a separate act. Moreover, the group can brag on their results to the exact audience that wants to know; the group becomes the evaluator, as well as a source of support. The provider can propose a long term contract to the government for the clinical programs for which it is prepared to manage chronic disease in this way–from enrollment throughout a disease life cycle. The incentive for the provider, obviously, is to have as large a number enrolled as it can get, and to continually innovate to do more care management and fewer interventional services. At this level, all the providers can be compared on the same things.

    Tier 3. Should be tertiary and quartenary one time diagnostics and therapeutics where the patient only needs it one time. Should be a negotiated fee for service/packaged price combining the physician and hospital costs. Medicare can contract within a region with the provider that has the best overall results, whether or not its actual pricing is the lowest. They will save mucho money by making all the providers bid for the privilege of being paid their bid price. In the 9-County Bay Area, for example, open heart surgery is done in about half of its 66 hospitals–when maybe only 6 should do it. At Stanford, for example, patients come from all of Northern California, the rest of the state and the 13 Western states.

    I have some articles on this topic; would you like them?

    Keep this up: I’m afraid that Medicare staff is fairly bound up by custom and regs. To me the best site for experimentation would be the various private insurers who contract as a “Medicare Advantage” plan.

    Sorry for the length…

    Wanda Jones, New Century Healthcare Institute, San Francisco.

    Tier 2.

  16. John R. Graham says:

    Perhaps an element of Dr. Goodman’s proposal which should be emphasized more is that “all health care is local”.

    A reform proposed by a hospital system in one town may not work at all in another town, so the Administration should not do what President Obama seems to want to do: Read the latest New Yorker article by Dr. Atul Gawande and say, “Look what they’re doing in Podunk County that is working. Let’s fund pilot programs to replicate it from Florida to Alaska.”

    Letting the hospitals come up with ideas and letting them run with them instead of trying to figure out some national standard would be a big step forward.

    But I’m not sure Medicare should be paying pharmacists or nurses at all, even if their services reduce total costs. That should be done by the private plans which are paid by Medicare vouchers (in the Ryan plan) and they must certainly bear risk.

    With respect to chronic illness, the Medicare Advantage plans (or whatever the government wants to call them) should also not be on annual contracts. They should be longer term contracts where the voucher is not how every many dollars a year, but the senior gets the net present value of the cost of his illness and the senior is free to move from one plan to another through the years. Plans would compete to keep the seniors who suffer from the chronic illnesses in which the plans specialize.

    The longer a plan keeps a senior, the more it would earn. Now that I think of it, we could even see these payments securitized by Wall Street and traded. Wouldn’t Barney Frank love that!

  17. Chris Ewin, MD says:

    I’m trying to follow. Who is going to keep up with all that data??…Not Doc’s running their own practices.
    Ain’t gonna happen.

    the way to save money in HC is to keep patients out of the hospital in the first place. Primary care concierge Docs reduce hospitalizations by 60-65%. And the patients pay them directly. No more bean counters, CPT, ICD9 codes…Only increased access to care at a reasonable price.
    With all that money saved, then Medicare and Medicaid will be able to pay specialists appropriately for their skills and years of training.

  18. Mark Pauly says:

    John, isn’t the fundamental problem that “we” do not know what we want to buy? Suppose “we” did know how many knee replacements we want Medicare to buy for the population of seniors in Dallas. Then Medicare could start by offering a low price for a knee replacement of a given quality (with warrantees or double-your-money back if not satisfied guarantees if you like), see how many hospitals and clinics would offer to do how much, and increase the price until the quantity offered equaled our target quantity. Do the same thing with heart transplants, admissions for congestive heart failure, and down the whole DRG line. And then stop. But the problem is that the people who run Medicare, and the taxpayers who are the ultimate buyers, do not know how many knee replacements is the efficient amount to buy—and, for that matter, neither do doctors or patients. We are dissatisfied because we are trying to solve an impossible problem unless and until we decide what we want (and to do that like an economist you will also have to know what different things cost). I have great admiration for Geisinger but I do not know if they would have made the right tradeoff between readmission and telling people to die quietly, and neither does anyone else. I do have a rough idea of what I want from my own health insurance, but I do not expect to get that when I go on Medicare because it won’t be my doing.

  19. John Goodman says:

    @ Mark Pauly

    Agree. Even my reform is no subsititue for patients spending their own money in a real market.

    @ John Graham

    Agree completely.

    @ Wanda Jones

    Send your articles, please. I don’t know how care should be organized. I am willing to let the market determine that.

    @ Chris Ewin

    I don’t know if your numbers are accurate, but I like what you do.

  20. Dr. Bob Kramer says:

    Why do the gurus of health care think that by reducing reimbursement and services, when the only way we can reduce the deficit is by improving care, and making quality the hallmark by which we look at the medical profession. And second, by removing the “competition” by physicians to maximize their own profitability. The way our system works now, any patient who seeks care by a physician is there because he has a problem, and he wants a quick “fix”. The doctor who says “you don’t need what I do” is, in the eyes of many, really foolish or even stupid, because you can’t charge for doing nothing. As long as you don’t have the incentive for doing the right thing, no matter how good you are, this model will never work. Gold standards, best practices etc, etc are worth nothing, and will remain so until we can devise a system where we reward doing the right thing as well as doing what is technically the best in that community.

  21. Al says:

    Bob K (“you don’t need what I do”). I think you are correct, but the way to reward the physician for doing nothing when that is best is to make the patient have some skin in the game (It doesn’t take much.). Patients are pretty smart when it comes to their own dollars and they don’t like to waste them on useless or marginal care so they will gravitate to the physician that they believe treats them best with the lowest cost.

    Years ago if an elderly patient was faced with cancer of the pancreas and only a couple of months of survival with or without treatment the patient would decline spending his own money so that he would not bankrupt his family. They generally would decide to forgo the costly treatments that only added a little bit of extra grief coupled with the tiny bit of hope that always exists.

    Today the attitude is why not add that negligible bit of hope. I have coinsurance anyhow so it costs me nothing and my family will be secure. The patient might have that miraculous cure even though neither the physician nor his colleagues ever saw one in their entire careers. In the end the families that are paying the taxes spend a fortune for someone else’s chemo, scans, physicians, hospital etc. while these people forgo the necessities of life for themselves and their children. It’s a bad trade.

    The alternatives that keep being proposed over and over again simply mean that the government has to continuously up the ante eventually using brute force to get their way. This was graphically demonstrated when the government some years ago opened an FBI office in south Florida, not to protect against terrorism rather to monitor the spending habits of the providers. Despite all of this and more, costs continue to rise, quality does not seem to rise proportionally and satisfaction is falling.

  22. Patrick Skinner says:

    John’s recollection of the Gov’ts response to a great idea being out of the question reminds of our meeting with Kay Bailey on Cooperatives in TX. We suggested they wouldn’t work due to the inevitable ‘death spiral’ where the healthy ones leave the group, causing the required premiums to increase, which causes the medium risks to leave for lower premiums, which leaves only the bad risks left until no one can afford the premiums and it implodes. Kay Baileys response was – it doesn’t matter if it works, it’s what the people want!

  23. Chris Ewin, MD says:

    All of you should read the other numbers…

    A third-party evaluation of 2008 data showed that MDVIP patients had 61.3% fewer hospitalizations compared with similar patients in commercial insurance plans, and 74% fewer hospitalizations compared with Medicare patients of similar age, gender, and disease risk.

  24. Chris Ewin, MD says:

    Al – well said

  25. Wanda Jones, New Century Healthcare Institute says:

    This is a comment on Al’s comment about skin in the game, illustrated with a pancreatic cancer patient’s not choosing end of life interventions. There’s another rubric to figure out, which is how to have medical care of a particular specialty available when you do need it, regardless of payment method. It’s called “slack in the system.” In other words, how do we figure out how to have enough docs around when need and money are in alignment when a lot of business is either regulated away or priced out of sight? Doctors are either there or not there. As we move into various forms of pre-payment, the question will be how many doctors to recruit and put on salary relative to the numbers and ages of people we will have signed up? Older HMO’s do it by a population to doctor ratio of from 800 to 1 or 1000 to 1, while Kaiser has gone to team staffing so the ratio is something like 10,000 to a team of doctor, several RN’s and PA’s and a case manager or two. The price of planning too tightly is queuing. In the Fee for Service work environment, doctors do enough work to produce an annual income that will keep them in practice, which either means low volume at high price, high volume at somewhat lower price, or moderate volume priced at the market.

    When considering people with chronic disease, the alternative is a periodic payment from the patient or the health plan to the doctor or the medical group. People who have open heart surgery, for example, go home with their disease condition unchanged.

    Pricing varies a lot with the doctor to population ratio in the area, as shown by the 7 physicians per 1000 in San Francisco. So that brings up a question of how to redistribute doctors who may have too much slack time, charge too much and try too hard to lock up some sub-sub-sub specialty so they get all the referrals for that problem. {Pediatric retinal surgeon)

    What is probably true is that the health field is in a white rapids condition trying old and new methods to the point that the river smooths out again and real planning is again possible.

  26. Frank Timmins says:

    @ Wanda Jones

    Ms. Jones, what is your concept of “real planning”? In other words, who would be involved in the planning and for what purpose?

  27. Al says:

    Wanda, your questions regarding the number of docs needed is a good one. One thing is certain we need twice as many doctors if the bureaucracy takes up half their time.

    I don’t think there is as much a shortage of doctors as there is a shortage of common sense in government. The most productive doctors were those in private practice working around 60 hours a week always cutting their vacations short because they had a payroll to meet. Government’s answer to the potential shortage of physicians is to supply physicians with more work mostly of a bureaucratic nature. Additionally government likes to intimidate physicians so they retire prematurely. It wasn’t uncommon years ago for colleagues to advise elderly physicians that they were too old to practice. We don’t see much of that any more because along with spending time with the bureaucracy physicians spend time with their financial managers to figure out how close to 55 they can retire.

    There are a whole slew of things to consider when calculating the number of physicians we actually have. One should not use the per capita method rather how many hours of physician care there are with sick patients.

    I appreciate those doctors that are members of MDVIP or similar organizations. As a rule they are practicing good medicine, but they care for a max of 600 patients when earlier in their career they might have treated several thousand. No complaint as they give the patient what the patient wants and needs, but one can’t count them as a full physician.

    Likewise, many physicians underpaid by Medicare and insurance companies are encouraged to see patients for things that are not covered by insurance so they can earn an adequate income. Some of them are our best physicians. One can’t count them as a full physician either even though they fulfill an important service outside of what is normally reimbursed. These are just two examples of many that tend towards increasing the numbers of physicians needed though not because the per capita number is low rather the number of hours spent by physicians with sick patients is low.

    Thus this whole concept of how many physicians we need is a loaded question without an easy answer. Concentrate physicians and they will do more in depth work. Spread them out and they will provide more needed care. Government cannot spread them out without putting a gun to their heads creating many unintended consequences. The only way to appropriately distribute the time and effort of physicians is to move towards the free market. All these other programs that leave the patient out of the equation such as pay 4 performance, risk payments etc. are simply feel good solutions because none of them can appropriately function in today’s world.

  28. Ron Bachman says:

    It seems to me that hospitals are the department store dinosaurs of medicine. We need to break up the expensive high overhead, constant building and construction, financial boondoogles called hospitals in favor of a new business model based on competition for patients. The current government reimbursement model and level of uninsureds produces the argument that certain services can not be segmented from hospitals because the excess payments for those services supports the hospital’s ability to serve the uninsureds. Let’s get rid of certificate of need. As Regina Herzlinger has stated, 76% of purchases in a real consumer market (retail) are made through specialty stores because they bring the latest technology, products and style to the market faster. Let’s let “malls” develop with competiting stores. No business changes until they begin to lose customers. Let’s focus on how a new system of reimbursement breaks up the hospital monoply on all but the most severe patient services.

  29. Wanda Jones, New Century Healthcare Institute says:

    “Real planning” is a prelude to decision-making by someone or organization responsible for something new that requires changes in resources or methods.

    In contrast, what I would call “Fake Planning” is gathering a group of people in the room that demonstrate “diversity” and having them express their preferences and goals.

    Real planning:

    € A hospital building a new building, or adding a new program, or shutting
    down one that does not work.

    € A hospital doing a physician practice pattern study to determine whether
    to engage in a hospital-sponsored formation of a new group practice prior to capitaliing a new medical office building on their site.

    € A collaborative study by the public health department, the Mental Health
    department, the county hospital and the University’s Department of Psychiatry to plan and design a new style of mental health center with associated inpatient facility, where the funding will necessitate a public vote.

    € A study of the main ethnic risk groups in a service area to find out
    which are being well-served for those conditions directly related to genetic risks of specific ethnic groups, with a view toward co-designing and developing a combined program of member orientation, genetic assessment, familial education, and disease prevention or case management. Examples are Jewish people at risk for Tays-Sachs; People of Latin or Native American origin who are at elevated risk for diabetes; and Black people who carry the gene for Sickle Cell anemia. Then, there are Caucasians who carry genes for Familial Hypercholesteremia.

    Fake Planning:

    € An “instant conference” on the catch phrase of the moment designed to
    bring in people who expect to obtain grants or contracts, or otherwise profit from the new, new thing. Notice how much has popped up about ACO’s when there has been very little progress beyond issuing impossible regulations.

    € Webinars by a collection of instant experts who allege that they know
    all about something, when they just have actually read the regs or the law, and may know the industry in general.

    € “Strategic planning” via a consulting engagement with a large firm,
    where the majority of the work is interviewing and collecting historical data. The firm may bill itself as “process consultants” as distinct from “content consultants” because they don’t know enough to do that part, so the product is their report, it is not solid recommendations for fundamental change that leads to a decision on the part of the client. (Ben there…)

    € Political -style “planning” done by staffs of legislators via searching
    the literature, making a list of stakeholders, inviting them to a public hearing, collecting testimony, publishing it in the Congressional Record, then drafting a bill or two that ignores all the warnings and caveats. “But we heard from over 70 organizations….”

    The steps in planning vary by the type of decision to be made, its scale, the affected parties, how it fits into other decisions being made, and the relative power of the decision-makers. So one process does not fit all. To me, however, it is easy to distinguish decisions made without planning than to prescribe the Platonic ideal of planning. Sometimes, the experience of the CEO and the relative power of the medical director can be enough to say:
    “We are going to close this under-performing pediatric unit and transfer all kids to Children’s hospital.”

  30. Bob Deuell says:

    Your proposal regarding Nurse Practitioners in independent clinics violates two requirements of changing the system for the better. It does not save money because studies have shown that NPs in independent practice order more tests and refer to consultants more often than mid-level providers under supervision or primary care physicians. Secondly, quality decreases because you are channeling patients to providers with less education and experience in their training. With more referrals and more tests, you are increasing the time and financial barriers you recently pointed out in another column. The solution is more primary care physicians who are paid at higher rates. That will bring more medical school grads to those specialties and will give them a greater margin of time to spend with their patients.

  31. ttx says:

    all it does is kill old and disabled people and why do you put more people on medcaid and then cut so that the feds can stop all fed pay to medcaid so the states have to pay all then the feds can say we are back on to top
    the debt they do not care for the people that need medcaid or medcare the gov has taking out of the these funds for years and now they need to pay it back stop cutting Social Security & medcaid & Medcare pay it back gov you own it pay it back and stop the cuts and you in congress keep saying the people want this will you have not talk to the people get out in to the real world but you won’t because you don’t care at all