While Harry Reid dithers about the final shape of the Senate’s reform legislation and industry quivers over the prospect of a federal excise tax on medical devices, some key actors – both public and private – are forging ahead with creative initiatives to control health care costs and improve quality and consumer choice.
The really interesting developments on those fronts in the past week came in programs announced by the attorney general of New York and by Children’s Hospital Boston, in conjunction with three major Massachusetts-based private insurers. Both programs have important reimbursement implications and both address critical issues that are essentially ignored in pending Federal legislation.
On Oct. 27, New York AG Andrew Cuomo announced his effort to develop an independent database on physician charges and a new website where consumers will be able to compare prices before they choose their doctors. The infrastructure for the initiative consists of a not-for-profit company, FAIR Health Inc., and a research network to be headquartered at Syracuse University, and is funded with approximately $100 million in settlement monies collected by Cuomo’s office as a result of his investigation of data misrepresentation by United Healthcare’s Ingenix subsidiary.
Ingenix maintained a database of physician charges for different services by geographic area and sold data on “area prevailing charges” to insurance companies. The insurers in turn used Ingenix’ data to determine how much they would pay when patients sought care from “out of network” providers – providers with whom the insurer didn’t have a negotiated payment rate. Typically, when that happens, the insurer pays a percentage of the area prevailing charge and the patient is responsible for the difference between that allowable and the actual charge; if the actual charge is substantially higher than the area prevailing charge, the patient’s co-payment responsibility can be significant.
Cuomo’s office found that Ingenix was systematically understating area prevailing charges, thereby passing hundreds of millions of dollars of excess cost on to patients (and to providers in the form of uncollectable billings) while lowering the amounts paid by insurers. He initiated legal proceedings and succeeded in shutting down the Ingenix database and securing sizable settlements from Ingenix’s parent company – itself a sizable insurer – and from other major insurers that had profited from the fraud.
The new website is the innovative element in Cuomo’s program and it will have national reach. Consumers will, for the first time, have a readily accessible resource to discover how much a doctor will charge for a service, how it compares to charges of others and how much an insurer will pay – a tremendous boost for informed consumer choice. Taken together with ongoing programs (see this and this) for developing and giving consumers access to provider quality data, the charge database and website may well make a real difference in giving health care consumers the kind of information they need to be effective buyers in a truly competitive market. And economists tell us that will certainly help to control costs.
On Nov. 4 The Boston Globe reported an extremely interesting and wholly voluntary private sector initiative to control cost increases in pediatric medical care. In an agreement with the three largest regional private insurers (Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim Health Care and Tufts Health Plan), Children’s Hospital Boston and its physicians will reduced planned fee increases by 50 percent to 75 percent and the insurers will return 50 percent of their savings in the form of funding for ongoing cost reduction and quality improvement pilot programs at the hospital. The hospital will maintain its own contributions to the pilot programs and the entire program will be overseen by an Advisory Committee with representatives from the insurers, the hospital, the hospital’s physician’s group and the Massachusetts Dept. of Health and Human Services.
A look at the three ongoing pilot programs at Children’s is interesting. One is focused on giving physicians better and more immediate feedback on treatment outcomes – leveraging information technology to improve care decisions. The second seeks to enable primary care doctors to deliver some services that are now typically referred to specialists – moving care from high cost to lower cost providers and settings. The third directly addresses new payment models for pediatric care – taking on the perverse incentives of fee for service medicine.
All three of these goals are widely recognized as important potential elements in a reformed healthcare delivery system. None of the three is a central component in the national legislative proposals now under review.
National legislation to broaden access to health insurance and to regulate and increase competition in the health insurance marketplace is a necessary but far from sufficient condition for healthcare system quality improvement and cost control. I’ve worried that the political effort to reach consensus on the most basic insurance extensions and reforms will consume the energy needed for effective action on payment system reform, quality initiatives and a host of other things that need to be addressed to take us where we want to go. Well, here are some signs that there is more than one way to move the system in the right direction, and that we need not be limited in our aspirations by the fecklessness of congressional politicking and posturing.
Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.
