Washington policymakers caught in the reform gridlock may find themselves left in the dust as forward-thinking industry leaders move to integrate healthcare financing and delivery. Such a transformation, if successful, could help reduce costs and lead to improved quality of patient care-accomplishing the twin goals of healthcare reform advocates without excess regulation.
The conversion now under way also is setting up a struggle over who is going to control the flow of dollars from the patient or the third-party payer to the providers of care. Some hospital executives believe the answer is to become part of one of the insurance-driven models, such as those being set up by Aetna Health Plans, MetLife HealthCare and FHP International. Others are becoming part of a provider-insurer partnership such as Allina-now forming in Minneapolis-or Graduate Health System in Philadelphia. But, increasingly, providers are coming to the conclusion that they can accept more risk under managed care and thus control more of the healthcare dollar.
As this week's cover story points out, providers are starting to act more like insurers. They're preparing to keep more of the premium dollar under capitation arrangements that cover both physician and hospital services, as illustrated in the story by Los Angeles bureau chief Louise Kertesz and Joanne Wojcik of our sister publication, Business Insurance.
This could be good news for medical care because providers are much better positioned than insurers to control costs and to rationalize the healthcare system. Insurers tend to focus on managing premiums and setting up health plan infrastructure, whereas providers can better manage to eliminate excess capacity and to change clinical procedures to eliminate fragmentation, duplication and inefficiency.
There's danger for providers in this approach. A recent report from New York-based Fitch Investors Service predicts that-based on current trends-70% of hospitals' revenues will be capitated before the turn of the century. If providers don't successfully price products, they will jeopardize their long-term financial health.
Because some plans may be undercapitalized, state insurance regulators also are concerned.
To bid on capitated contracts, hospitals will need sophisticated information systems, accurate actuarial data and precise cost-accounting procedures. Executives also must involve physicians and other medical and administrative staff in shared decisionmaking through networks in which incentives of all participants are aligned.
Above all, the community must buy into the efforts being undertaken. Attempts to track patient satisfaction will grow in the short term as integrated networks seek to provide increased value for the consumer. In the long term, executives must be prepared to be responsible for the health outcomes of a defined population of residents and to do so in an environment fraught with financial risk.