VIEWPOINT
Health Care Cost and Value The Way Forward Laurence F. McMahon Jr, MD, MPH Vineet Chopra, MD, MSc
T
HE INCREASING COST OF HEALTH CARE HAS BEEN A
focal policy issue since the 1970s. During this period, many interventions aimed at moderating health care costs, including the managed-care movement and reforms in hospital and physician payment, have failed. It is estimated that by 2019, 19.3% of the US gross domestic product (GDP) will be devoted to health care.1 An increasing proportion of GDP committed to health is simply unsustainable. Although there is no more contentious area than the interface between health care delivery and public policy, the fundamental precepts of the health care cost conundrum are simple. Health care cost is merely the sum of services delivered multiplied by their price. To decrease overall health expenditure, either the cost, number of services, or both must decrease. However, this formula must be moderated by clinical value. Although it is easy to measure cost, quantifying value is problematic because it varies by patient preference and clinical circumstance. As the debate regarding the definition of valuable health care continues, a more fundamental problem has developed: the inability to eliminate services that offer little or no clinical value.2,3 Any rational attempt to address health care cost must first address these services. Existing Approaches to Control Health Care Cost Two approaches have been attempted to control health care expenditure: a cost-centric approach, which emphasizes constraining the cost of care vs a value-centric approach, which accentuates enhancing net value delivered for a given price. The cost-centric approach is frequently promulgated by nonclinicians and represents the motivation behind the development of health maintenance organizations and accountable care organizations. The goal of this model is to control cost by providing a global payment for health care services. Proponents of this approach rely on the assumption that global payments will lead to either a decrease in the number of services provided or a decrease in the price of services. Consequently, this construct hinges on the professional integrity of hospitals and physicians because it as©2012 American Medical Association. All rights reserved.
sumes that organizations will collaborate to improve the health of populations, that waste and inefficiencies will be eliminated, and that physician groups will “right-size” themselves for the good of the population. History has shown this to be a naive perspective. Rather, when faced with a global payment, members of the health care system often respond in ways that protect their own interests. For example, in a lawsuit naming Health and Human Services Secretary Kathleen Sibelius and then Centers for Medicare & Medicaid Services Director Don Berwick, 6 physicians allege that primary care physicians have been harmed by the agency’s overreliance on an opaque, imbalanced, and financially conflicted payment structure informed by special interests in the American Medical Association’s Relative Value Update Committee.4 In a tangible example of the “tragedy of the commons,” certain specialties have increased their spending at the expense of others, contributing, in part, to the current sustained growth rate (SGR) impasse in Medicare.5 There were concerns that the Boston-based, not-for-profit Partners Healthcare system used its market power to limit trade or artificially increase prices.6 The large pharmaceutical company Pfizer paid a record $2.3 billion fine and pleaded guilty to 1 felony count in settling federal criminal and civil charges related to Bextra and other drugs.7 Taken together, ample evidence suggests that major members of the health care system are unable to self-regulate for the good of society. In distinction to the cost-centric approach, proponents of the value-centric approach contend that only high-value services should be reimbursed. Accordingly, this approach rests on dichotomous interpretations of value for pay-forperformance measures. Although this approach is noble in construct, it fails to recognize that value is a continuum and not an absolute. For example, results from a randomized controlled trial represent an average across a continuum of risk. Thus, an intervention designed to reduce mortality in acute myocardial infarction will provide the greatest benefit to those at highest risk of death compared with those at lowest risk of death. This spectrum of value is blurred when results are presented as an average across a group with hierarchical risk because those at highest risk of death who Author Affiliations: Division of General Medicine, Department of Internal Medicine, University of Michigan Health System. Ann Arbor. Corresponding Author: Laurence F. McMahon Jr, MD, MPH, 300 N Ingalls St, Room 7C27, Ann Arbor, MI 48109-5429 (
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VIEWPOINT
stand to receive the most benefit from the intervention will appear to exhibit lesser benefit due to averaging. Conversely, those at lowest risk are perceived to have significantly greater benefit than they actually receive. Because more patients tend to have lower-risk conditions, this approach overestimates the net value of an intervention and erroneously justifies costs associated with often marginal improvement in outcomes. The Way Forward In the current US health care system, patients are tasked with determining the value of a test, drug, or procedure. Third parties externally moderate this decision through copayments, deductibles, noncoverage, and other such mechanisms. Physicians and hospitals are paid regardless of whether the services delivered are of high- or low-clinical value. This model is flawed and a new exemplar is necessary. The way forward is a new system in which payment for any test or procedure is directly linked to the clinical value it provides to an individual patient. Consequently, physicians would no longer receive the same payment for an intervention but rather, a tiered-payment based on the demonstrated value of the service. For example, placement of an elective cardiac stent in a patient with stable coronary artery disease who did not undergo noninvasive testing to demonstrate ischemia would receive significantly less payment than would the same stent placed in the setting of an acute myocardial infarction.8 Similarly, surveillance endoscopy performed before the recommended 10-year interval in a patient who previously had a normal colonoscopy would receive less payment than an appropriately timed follow-up examination.9 In this manner, physicians and health organizations would be motivated via higher payment to provide clinically valuable interventions. In relation to the ongoing health care debate, there is no “rationing” of care or intrusion into medical decision making. Rather, the introduction of clinical value-based incentives engenders a medical marketplace in which these domains become aligned at the level of the clinician providing the service. Although a systematic way to gauge value in health care is lacking, this model would offer several ways to promote this understanding while controlling health care costs. First, because payment is linked to the clinical value of services, an incentive would be generated for comparative effectiveness studies needed to enhance and inform future payment. Second, the medical marketplace would become inherently autoregulated as those most able to make clinically appropriate judgments (eg, physicians, health care organizations), would be placed at economic risk. Third, because both physician and facility payment would be affected, capital investment and workforce expansion would become inextricably linked to interventions of proven value. Fourth,
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this approach would preserve medical decision making and patient autonomy because it would only influence insurance or government payment. In every instance, patients and their physicians may elect services deemed to have a low clinical value, but patients would have to pay for them out of pocket. The creation of a value-based payment system cannot occur overnight. This proposal merely outlines the process of migrating to such a payment system. A credible first step, however, may be to immediately lower payment to both clinicians and hospitals for procedures, for which ample evidence has failed to demonstrate clinical benefit to patients, such as vertebroplasty.10 Conclusion The United States can no longer afford to allow its health priorities to be set by the vagaries of a payment system disconnected from clinical value. The health care system must evolve to provide the care that the population needs, supported by a payment system that reinforces this care. A medical market that is focused on physicians and health care organizations and based on providing clinical value to patients can enhance care and potentially reduce cost. This is the way forward. Conflict of Interest Disclosures: All authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr McMahon reported pending institutional grants from the Blue Cross Foundation of Michigan and the Agency for Healthcare Research and Quality. Dr Chopra reported no conflicts of interest. REFERENCES 1. Sisko AM, Truffer CJ, Keehan SP, Poisal JA, Clemens MK, Madison AJ. National health spending projections: the estimated impact of reform through 2019. Health Aff (Millwood). 2010;29(10):1933-1941. 2. Prasad V, Cifu A, Ioannidis JP. Reversals of established medical practices: evidence to abandon ship. JAMA. 2012;307(1):37-38. 3. Qaseem A, Alguire P, Dallas P, et al. Appropriate use of screening and diagnostic tests to foster high-value, cost-conscious care. Ann Intern Med. 2012; 156(2):147-149. 4. Klepper B, Kibb D. A legal challenge to CMS’ reliance on the RUC. HealthAffairs Blog; August 9, 2011. http://healthaffairs.org/blog/2011/08/09 /a-legal-challenge-to-cms-reliance-on-the-ruc. Accessed September 7, 2011. 5. Medicare Payment Advisory Commission. Moving forward from the sustainable growth rate (SGR) system. http://www.medpac.gov/documents /10142011_MedPAC_SGR_letter.pdf. Accessed October 14, 2011. 6. Weiszman RKL. US investigates Partners’ contracts—health network examined for possible antitrust violations. Boston Globe. April 29, 2010. http://www .boston.com/business/healthcare/articles/2010/04/29/justice_department _launches_antitrust_review_of_partners_healthcare. Accessed October 14, 2011. 7. Farquhar DB. Pfizer reaches record settlement with feds; yes, that is $2.3 billion with a ‘B.’ FDA Law Blog. September 2, 2009. http://www.fdalawblog.net /fda_law_blog_hyman_phelps/2009/09/pfizer-reaches-record-settlement -with-feds-yes-that-is-23-billion-with-a-b.html. Accessed October 14, 2011. 8. Lin GA, Dudley RA, Lucas FL, Malenka DJ, Vittinghoff E, Redberg RF. Frequency of stress testing to document ischemia prior to elective percutaneous coronary intervention. JAMA. 2008;300(15):1765-1773. 9. Goodwin JS, Singh A, Reddy N, Riall TS, Kuo YF. Overuse of screening colonoscopy in the Medicare population. Arch Intern Med. 2011;171(15):13351343. 10. Staples MP, Kallmes DF, Comstock BA, et al. Effectiveness of vertebroplasty using individual patient data from two randomised placebo controlled trials: meta-analysis. BMJ. 2011;343:d3952. doi:10.1136/bmj.d3952.
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