Something that I have been mulling over for the last couple of months is this concept about aligned incentives. Whenever a discussion about payment reform comes up, there is a lot of discussion about finding the right ways to make providers (and perhaps patients) do what we want them to (or do what is right, which is not always the same thing). This seems to have been distilled to financial incentives, in the form of pay for performance or capitation.
The first thing about this is that there are many other non-financial incentives used in other countries quite successfully. Peer respect (or conformance), professional and personal standards are examples of these. I worry that when you make everything about the financial incentive, you may eventually lose the ability to 'coerce' people without offering them money. With the limited number of metrics you can follow, and their limitations, this could be a problem.
The bigger issue is is that I think the main problem with the US healthcare system is that the incentives are all aligned. The fragmentation of the system (a conglomeration here, a health system there, a clinic over there) means that the incentives are aligned for everyone to try and extract as much money as possible. While obviously there are many people out there will good intentions and interests, it appears that market share is a predominant concern of many of the CEOs that we meet. Having the right business model is the best plan of attack, as they need to remain productive. Nonetheless, I can't think of a public hospital in Australia that would be actively trying to increase its market share, it would be just trying to work out how best to deal with the patient population it serves.
This offers two possibilities. Some US systems (such as Geisinger/Kaiser) actually allow patients within the network to be cared for and followed, and not fall through the gaps of a single payer system where integration is not such as strength. On the other hand, the US system seems to really favour productivity, which must incentivize over-servicing, and this is likely to persist, regardless of the payment strategy (since capitation alone does not seem to be emerging as an option).
I would be interested in what people think about this.
Friday, October 12, 2012
Wednesday, October 10, 2012
End of life costs
While doing research on the relationship between age and health spending, I discovered that most countries spend less money on a 80 year old than a 70 year old (hospital spending during a given year). This may not be too surprising: They may die from different dieases, they may be too fragile to receive treatment, and (more controversially) expected remaining life years may be used in a rational calculation of costs and benefits before deciding on a treatment. Now, it is easy to suggest possible explanations, but more difficult to determine to what extent they are true.
In any case, I was surprised not so much by the pattern, but by the size of the effects. In Norway average end of life spending on a 90 year old is half of the spending on a 70 year old.
By the way: The pattern in the US is the same, but the slope is not as steep (30% reduction vs. 50% in Norway between 70 and 90 year olds). Many people suggest it has something to do with culture, which may be true but it is often just supported with anecdotes.
Another possible explanation is the fee-for-service system which creates a financial incentive for the hospital to continue with treatment even when it is very unlikely to yield benfits. Combined with an insurance system in which the patient or her family do not have to pay, this means that the central actors have a motive to continue even when there is little hope. In a (Norwegain) DRG system the incentive is the opposite: To provide as little as possible since the reimbursement is fixed and does not increase even if the patient stays for a long time. One system may overprovide, the other may underprovide and we do not know which is closer to the optimal point, but there seems to be a clear difference in the spending pattern.
Anyway, here is the graph I made based on Norwegian data (Average hospital spending in 2010 for all people in that age group i.e. not only hospital patients)
In any case, I was surprised not so much by the pattern, but by the size of the effects. In Norway average end of life spending on a 90 year old is half of the spending on a 70 year old.
By the way: The pattern in the US is the same, but the slope is not as steep (30% reduction vs. 50% in Norway between 70 and 90 year olds). Many people suggest it has something to do with culture, which may be true but it is often just supported with anecdotes.
Another possible explanation is the fee-for-service system which creates a financial incentive for the hospital to continue with treatment even when it is very unlikely to yield benfits. Combined with an insurance system in which the patient or her family do not have to pay, this means that the central actors have a motive to continue even when there is little hope. In a (Norwegain) DRG system the incentive is the opposite: To provide as little as possible since the reimbursement is fixed and does not increase even if the patient stays for a long time. One system may overprovide, the other may underprovide and we do not know which is closer to the optimal point, but there seems to be a clear difference in the spending pattern.
Anyway, here is the graph I made based on Norwegian data (Average hospital spending in 2010 for all people in that age group i.e. not only hospital patients)
Tuesday, June 5, 2012
Saturday, June 2, 2012
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