Friday, August 10, 2012

The future is coordinated care

Even if the Supreme Court overturned the Affordable Care Act last month, there was still no going back on health care reform. The passage of the legislation allowed the health insurance industry to peer into the future. Once they had a glimpse of it, they moved towards the light as a fly does towards a bug zapper. That light was bundled payments. It's simply irresistible. 

Why is something as simple as coordinated care so alluring to health insurance companies? Because they want to be able to control costs in order to make higher profits without being the "bad guys". After a couple of decades of costs spiraling out of control, the health insurance industry attempted to get them under wraps for the first time. Enter Health Maintenance Organizations (HMOs).

HMOs changed the health care system by having patients get referrals to specialists before they could see them. The idea was that the primary care doctor could take care of more and prevent the specialists from charging patients for unnecessary care. For the most part, it didn't work. Primary care doctors just took a cut for referrals to the specialists, which made the specialists charge more. Calling it institutionalized bribery would be a stretch, but not by much. This extra-party involved was filed as an additional "administrative cost" and barely slowed the rise of health care costs.

When it did work, the patients hated it. The primary care doctors would just tell the patients that the HMOs were not permitting them care that the specialist doctor recommended. True; they were. From the HMO's point of view, the specialist doctor was trying to overcharge their patients with unnecessary or cost inefficient care. Also true. Only problem is that patients deferred to their doctors expertise and therefore vilified the insurance company instead. Nobody wants to think of their doctor as trusty-worthy as a used car salesman; therefore the insurance companies became the "bad guys".

The HMO project ended in the late 90s and health care costs began to spiral out of control once more. Though, HMOs are being brought back and re-branded as Accountable Care Organization (ACOs).

Coordinated care is the solution to this problem. It moves the burden of making cost decisions from the health insurance company to the doctor. The doctor gets X dollars no matter what treatment they recommend plus a bonus if their patients become healthier. More cost efficient care they provide, more they get to pocket. If they can work together with other doctors, better off everyone will be. If they go too cheap, then the health insurance company has no problem letting patients everywhere know that a particular doctor is making more money at the expense of their health. If they go too expensive, then they end up going home without a paycheck. It works because in a large pool of patients, the group evens out closer to the median. This is the law of large numbers at work.

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