Healthcare Digest 5/6: Fee for Service v. Bundled Payment Initiative

A significant intellectual challenge when thinking about healthcare is this: patients who spend more on healthcare aren’t getting better healthcare. They’re just spending more on the healthcare that the people who don’t spend a lot are getting.

This is counter to the American Way of Spending. If you pay more for something, the idea is that you’re paying more because it’s More Better, right? For instance, doesn’t bottled water taste SO MUCH better than the stuff you get for free from the tap in your apartment? Of course it does; it’s an inalienable right in the Constitution or something.

But healthcare. Boy. Healthcare. It’s breaking all the rules by subverting our expectation. A lot of us are paying a LOT; but we’re not necessarily getting a lot in return for the expenditure. The probably culprit? The Fee for Service model.

For those just joining us, Fee for Service is where “doctors are paid based on the number of medical services such as operations, procedures, and tests ordered.” The more things they throw on your bill, the more they get paid. This is care based on quantity. “The incentive structure discourages physicians from spending time with each patient because profits are tied to oversight of additional patients.”

A possible solution? It’s in the Affordable Care Act itself: Bundled Payment Initiative. BPIs coordinate care while cutting costs — or so those in favor of BPIs allege. “Hospitals that provide some of the most comprehensive, patient-focused care often employ bundled payment schemes where fixed sums are designated for a given diagnosis or episode of care. Under bundled payment models, multiple specialists coordinate care for a given patient, ensuring provision of comprehensive coverage.”

Monday’s Headlines

Videotape Your Surgery!: “In taking steps to reward high-quality healthcare and penalize waste, the Affordable Care Act has opened a new door for technological entrepreneurship in medicine. A new monitor that automatically reminds doctors to wash their hands before entering patients’ hospital rooms, for example, could lower the abysmal rate of hospital-acquired infections in the United States.” [Miami Herald]

More Political Posturing: “Ross Douthat is on a roll lately. He points out that the recent Oregon study indicates that expanding health care coverage isn’t the most cost effective way to improve the well being of the poor and lower middle-class. I would agree, but I would put the emphasis in different places, not because Douthat is wrong, but because Republican politicians might hear him wrongly.” [FirstThings.com]