Demonstration projects are underway all across the country to improve the quality of primary care delivery by encouraging implementation of the “patient-centered medical home.” The most common approach is to convince health insurance plans and/or other healthcare payers to increase their payments to a primary care practice if it meets certain standards, most commonly the medical home standards developed by the National Committee for Quality Assurance (NCQA).
However, payers, and the purchasers they represent, are reluctant to pay more for medical home services without assurances that patient outcomes will be better and that costs will be saved elsewhere. And since there is no guarantee that meeting the NCQA standards will result in either better outcomes or lower costs, payers want to hedge their bets by making the payments as low as possible. But this creates a Catch-22: if the payments are too low to allow the primary care practices to make the changes in care needed to improve patient outcomes, then all that will happen is that costs will go up, the medical home projects will be labeled failures, and the healthcare system will return to its ineffective status quo ante.
Is there a way out of this dilemma? The answer could lie in the policy discussions being held around the country about ways to reduce preventable hospital readmissions. As noted in a previous post, many hospital readmissions aren’t directly the fault of the hospital. The largest number of readmissions occurs among patients with chronic disease, and their frequent admissions to the hospital reflect gaps in the primary care they’re receiving — which is precisely the problem the medical home projects are trying to fix. Studies have shown that with appropriate education and self-management support, hospital admission rates for chronic disease patients can be dramatically reduced, but today, payers don’t pay adequately or at all for those patient support services.
So on the one hand, we have a primary care improvement initiative without a clear outcome, and on the other hand, we have an outcome improvement goal without a clear strategy for achieving it. Could a marriage of the two can address the weaknesses of each? Absolutely: Payers should pay primary care practices adequately to provide evidence-based medical-home services to chronic disease patients at risk of hospitalization, and those practices should agree to an explicit focus on reducing the rates of hospital admissions and readmissions among those patients. The savings achieved by payers from reduced hospitalizations would more than offset the costs of the improved services, justifying funding those services at levels sufficient to achieve the desired results.
A story in the Pittsburgh Post-Gazette last fall demonstrates how current healthcare payment systems encourage higher costs with no better value.
A retired university professor found that an anti-nausea drug (Zofran) that he was paying $557 per month for at his local Rite Aid was available from an independent pharmacy for $46.58. This is not a brand name vs. generic difference — it’s the cost difference for the same generic product. In shopping around, he found that CVS was charging $420, Walgreen’s was charging $410, and Wal-Mart was charging $110, quite a variation, and all higher than the independent. According to the article, the wholesale price was under $17.
He had an unusually strong incentive to shop around — even though his prescription plan pays 80% of the cost, he has to front the money and get reimbursed. People with flat co-pays wouldn’t have either the incentive of the percentage co-insurance or the need to float the funds for the full price, and would likely go to the closest store.
A spokeswoman for Rite-Aid confirmed that. “Most of our customers are insured, and they have a wide choice of pharmacies for prescription services, and so convenience, value-added services, and days of operation, rather than price, are the primary drivers” of where customers choose to go, she said.
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