Overcoming Scarce Resources to Enact Health Care Reform

State health care reform efforts have provided valuable lessons on how to build health care delivery and payment systems that promote quality, efficiency and care coordination. And during this year's AAFP State Legislative Conference here on Nov. 4-5, a panel of experts related their experiences in realigning incentives in the health care delivery system.

During the session "Dollars Drive Decisions: Delivery System Reform and Provider Payment," Karen Tseng, J.D., assistant attorney general for the health care division of the Massachusetts attorney general's office, talked about experiences with health care reform in her state.

Massachusetts enacted a universal health care reform plan in 2006 that included an individual health insurance mandate and has been grappling with rising health care costs since that time. In response, the state has started conducting annual studies of the health care marketplace that are focused on payment and delivery system issues. According to Tseng, last year's study (77-page PDF; About PDFs) discovered "big differences in prices that insurers pay to different providers."

"We could not find a connection between payment differences and value for patients and the public," said Tseng, noting that higher payments primarily resulted from greater market leverage, or clout, which created distortions in the health care marketplace.

"We also found that those increased payments to a select number of providers with high market clout have been responsible for over 75 percent of the increases in health care spending in each year for the last five years," said Tseng. These types of payment disparities are a good place to start when trying to reign in health care costs, she noted.

Tseng said that this year, Massachusetts officials studied (83-page PDF; About PDFs) the effect of global payment methodologies on physicians and other providers and found that wide differences in payment -- which were not tied to health care value -- exist within the global payment system, as well.

"We find that some providers are being paid over $400 per member, per month where other providers are being paid less than $300 per member, per month to take care of populations with the same health status score," said Tseng.

She called these findings "very troubling" and explained that such payment differentials make it increasingly difficult for physicians who are paid less to compete effectively.

"As each of your states moves forward in considering different forms of payment reform and global payment, it is extremely important to first set the global budgets at the right place, and second to be mindful of marketplace dysfunction and how different providers are being reimbursed," Tseng told attendees.

She added that, according to the Massachusetts studies, "primary care providers, with adequate data and resources, are the foundation of effective care coordination." These are common themes for achieving care coordination, said Tseng. Having data and information to track patient care and adequate resources to fund an infrastructure and to bear risk are vital.

Panel speaker Glenn Rodriguez, M.D., chief medical officer of Providence Health and Services in Oregon and Southwest Washington and a member of the Oregon Health Policy Board, also addressed the effect of scarce resources on health care reform in Oregon.

In 2003, the state was hit hard by an economic recession, forcing officials of the Oregon Health Plan to disenroll about 800,000 beneficiaries from the Medicaid program and to establish copays and premiums for the first time.

Since then, Oregon has sought to rebuild its health policy framework, and, in 2009, it enacted legislation recognizing "primary care as the explicit foundation of the new health care system," said Rodriguez. That legislation also directed state officials to develop state-based standards for the patient-centered primary care home, Oregon's version of the patient-centered medical home.

The state also is in the process of developing community-coordinated organizations, or CCOs, Oregon's version of accountable care organizations, or ACOs, said Rodriguez. The CCOs are designed to integrate physical, mental and oral health and will serve as the primary agent for health system transformation in the state.

Meanwhile, according to the third panel speaker, anesthesiologist John Zerwas, M.D., Texas has established its own ACOs, which are known as health care collaboratives. The collaboratives allow physicians and health care systems to join together to work with insurance companies without violating antitrust provisions, said Zerwas.

Zerwas, who is a state representative for the 28th district in Texas, and other officials made sure that physicians, rather than hospitals, have the predominant role on the collaborative boards. This helps ensure appropriate delivery of services from a financial perspective, said Zerwas, adding that the overriding purpose of the collaboratives is to better coordinate care and drive prevention, wellness and efficiency of care while reducing duplication of care.