• Very good comment

    … from steve, first quoting my most recent post on rationing:

    “If the system permits exceptions and pays for the more expensive procedure because a doctor orders it and says it is really necessary then we’re back where we started. Doctors are going to want the higher reimbursement associated with the more expensive procedure.”

    I think this is where ACOs might work. If you calculate the size of the population that would benefit from the more expensive surgery, you could budget accordingly. Let the physicians within the appropriate specialty divide up the cases accordingly.

    Not only does this solve the heterogeneity problem with respect to comparative effectiveness based payments, but it also marries value-based insurance design, consumer-directed care, and ACOs. That is, the system pays capitated rates to integrated provider groups for the expected cost (taking account of patient heterogeneity) of the cheapest procedures that work well. Doctors agree to provide the procedure they think best, having already been compensated for it (value-based). Patients who want a  procedure more expensive than recommended would pay the marginal cost (consumer-directed).

    This puts a heavy burden on quality monitoring. Providers could offer the cheapest procedure to everyone, even knowing it isn’t optimal for everyone. Could patients be protected from that form of “gaming”? This is hard to solve.

    Later: No, it isn’t that hard. If we know how to compute the expected cost taking the heterogeneity into account then we know when providers are over-prescribing the cheapest procedures. That is, one need only monitor the rate of procedure type and penalize for more than trivial deviations from expectation. Providers would be encourage to save by preventing the need for procedures, not on the distribution over procedures for a given condition. Recognize that this is, in effect, rationing of procedures: 10% of this, 15% of that, 75% of this other one. The difference is that it is done somewhat implicitly through financial incentives. Kind of an elaborate game just to end up back to pretty explicit rationing. Still, worth thinking about for more than that 10 minutes I have so far.

    • So let me see if I get the final analysis right: the idea put the onus on ensuring that the treatment is the best one (from a patient outcome point of view) on the patient, the one party in the transaction who knows the least about managing clinical outcomes.

    • @Steve-I think it is always good for patients to be informed. People should ask questions. In this particular scenario, I don’t see the onus lying upon the patient anymore than usual. The scenario would require physicians to monitor themselves. Ideally, I think, they decide to pay themselves the same amount for each procedure. That way, no individual physician would benefit from doing an excessive number of more expensive procedures. Doing the medically correct procedure would pay the same as doing the one that would pay more. The group would have the incentive to stay within guidelines as their would be no extra benefit from performing the more expensive procedures.

      steve (another one)

    • Austin
      Good thought. Except, see here:

      and, here:

      I know you are fully aware of this, but I still think we are years away from appropriate measurement.


    • well, technically, if you’ve got a sophisticated enough set of data where your ACO’s quality guy could note over-utilization; similarly, your payer and ACO could also use that same set of information to come up with a more sophisticated capitation rate.

      I think if we reach the point where we know how many necessary MRI’s, CT’s, times in the cath lab, etc., to expect from a certain size population with certain demographics, we can adjust capitations rates and also use that data to better train physicians.

    • ThomasEN:

      To continue my link trail:

      You may be familiar with PROMETHEUS. They are doing what you suggest above.


    • Can we see a set of stats that compares citizens of these other countries to American citizens WITH health insurance only?

      My guess is that all of our countryfolk who don’t go to the doctor until it is too late are dragging down our average…
      I’m sure you would say “THAT is the point!!”….I would say “Yes – that IS the point”…but we would be making different points I believe:)