With the pending expansion of healthcare insurance to millions of newly insured, it is time to re-examine the delivery system if one wants true reform that is financially sustainable. This requires an analysis of how to integrate doctors, hospitals, other providers, insurance companies and pharmaceutical suppliers in a workable and affordable delivery model that can be adopted relatively rapidly in most areas of the country.
This can be done without creating new Kaiser Permanentes or large healthcare cooperatives by means of loose coalitions of providers contracting with a cost-efficient third-party administrator backed by a not-for-profit or for-profit insurance company. The insurance company provides oversight and the necessary re-insurance while physicians are the primary agents of utilization review. This model is called the community-based delivery system.
To address the elements of the model, one can best start with considering the proper role of physicians. First, physicians are the best ones to coordinate the care of patients and are already effectively contracted in most cases by some percentage of Medicare reimbursement (i.e., 100% of Medicare; 110% of Medicare, etc.). Experienced actuaries can predict the number of doctor visits for a given population, and this can be increased by also paying physicians to head up the utilization review.
My experience with at-risk individual practice associations has given me an appreciation for the effectiveness of this approach, and few physicians countenance overutilization or poor medical practice by their peers. This also reduces the vast expense by insurance companies in monitoring utilization. Physicians should be paid off a standardized fee schedule with electronic billing and payment within five to 10 days. There is always the right to audit, and primary-care physicians should be paid for case-management services to control overutilization by confused and concerned patients.
The next element is hospital services. There must be reasonable and predictable charges for these services. The current system in most states does not allow for regulation of hospital rates, but a number of hospitals have been quite competitive. Perhaps charges related to a premium over cost report data might be one approach.
Also in consideration would be the expanded use of surgery centers and other alternative providers. It is important to keep in mind that proper physician utilization review will reduce the required hospital days as will proper case management (especially for complicated cases).
The next consideration is to define the proper role of insurance companies. First, it must be noted that insurance companies have a vast level of experience in risk-rating, actuarial evaluation and re-insurance, which are all required elements. The problem presently is that many large insurers have inflated expenses usually because of ineffective utilization review fraught with an excessive number of treatment denials (up to 30% or more in some cases). These denials lead to unnecessary expense at both the provider and insurance-company level.
An efficient system would have a third-party administrator and an insurance-company sponsor. The government might even consider acting as the re-insurer in order to help mitigate extremely expensive care (a form of catastrophic coverage). An exchange with open enrollment might also allow for more insurance company competition with reduced marketing expense.
The last element is the management of pharmaceutical costs. Advancements in pharmaceutical research have provided us with many amazing drugs, and a burgeoning generic market has helped many individuals afford medication, but Americans are paying more than those in other industrialized countries for the same medications. There has been the myth that Americans are rich and should subsidize everyone else. The Veterans Affairs Department is able to obtain less expensive medications, but others cannot. Community-based delivery systems must be able to obtain affordable medications.
It is time to get serious about the problems with healthcare delivery in the U.S. Any expansion of coverage with an inefficient delivery system will surely bloat the budget of all concerned. Additionally, there is the opportunity to create a unique American model employing the newest and most cost-efficient methods and modalities in a flexible manner.
Harvey Billig III, M.D.ConsultantCarmel, Calif.
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