How Should Insurers Pay Doctors and Hospitals for Healthcare?

In the debate over reforming healthcare, one issue that is rarely discussed is how to reform the way insurance companies pay for healthcare.

One recent change that received a lot of publicity was a decision by Medicare (and some private insurers) to stop paying for treatments required as the result of serious medical errors – so-called “never events.”

A couple of recent postings in The Wall Street Journal Health Blog have explored the issue of reimbursements. One posting noted a push by Blue Cross Blue Shield in Massachusetts to shift away from paying for every procedure to a system in which a flat fee is paid to take care of people, healthy or sick – with bonuses for meeting certain targets concerning patients’ health. (An interesting idea.)

More recently the Health Blog reported on a study published in the Journal of the American Medical Association. The study stemmed from the idea that doctors should be paid for the quality of the care they provide, not the quantity. Some people propose doing that by measuring how a doctor’s practice compares to (or deviates from) national averages for particular quality measures, such as blood-sugar control in diabetics. The study examined whether small practices see enough patients for valid conclusions about quality of care (and concluded that the number of patients is too small at many practices for valid comparisons).

I have problems with that last concept. In any situation where quality matters, we lean advocates believe you should not be striving to match others, but striving continuously to achieve perfection.

However, that begs the question of what should be the basis for payment. The Health Blog notes that the same issue of JAMA that reports on the study also contains an editorial written by Don Berwick of the Institute for Healthcare Improvement, who makes some suggestions.

They include asking patients “how well they feel treated,” to measure qualities such as timeliness and responsiveness. Another possibility, he says, is moving toward measuring actual outcomes that are the reason people go to the doctor: “health, function and comfort.”

From a lean standpoint, measuring outcomes makes the most sense. It all relates to value, which is what lean is all about. Payment should be made for that which the customer defines as value. And if the customer is the patient, value is most likely defined as good health.

But it’s more complicated than that, since medical outcomes cannot be guaranteed. For example, doctors may do all the right things in treating someone critically ill, yet the patient may die anyway. The doctors still deserve to be paid for their efforts.

It is a tricky, complex situation with no easy answers. Any suggestions?