Getting A Grasp On Global Payments: Prix Fixe Vs. 'I'll Have The Lobster'

As the Patrick administration pushes Massachusetts forward toward the cost-cutting phase of health reform, one of its guiding concepts is to shift the state from "fee for service" to "global payments." That is, instead of being paid for each bit of care they give, health care providers will be put on an overarching "global" budget for each patient.

But how do we know that global payments work? And do they really save money? WBUR's Martha Bebinger asks those important questions today in her report here, and takes a look at the early experience of some local global-payment hotspots: Commonwealth Care Alliance, Harvard Vanguard and Blue Cross Blue Shield. Already, she reports:

There’s a lot going on behind the scenes. Physicians are joining large practices so they’ll have help managing budgets. Clinics, rehab centers and hospitals are forming new alliances that put all our care under one umbrella group. And health insurers are negotiating contracts that send nurses to patients’ homes to avoid a hospital stay, but hold providers financially responsible if they don’t stick to a budget. In theory, these connections are supposed to lead to better care and lower costs.

“That makes a lot of sense in theory, but in practice, what does it mean?” asks MIT economics professor Jon Gruber. “What is the global budget?

“Who sets the global budget and for which payers? How much uprooting do you want to do, based on the limited evidence we have, that this will solve our theoretical problems?” Gruber continues. “I think it’s great we’re having this conversation. I just think it’s premature to say it’s a solution.”

Yet another early adopter of global payments, Lowell General Physicians Hospital Organization, is featured in a piece by Pippin Ross in the latest issue of the magazine CommonWealth, here.

Read both pieces and you come away with the impression that there are some positive initial experiences, but the jury is still very much out on whether global payments are a major solution for ever-rising health costs. And then, as Paul Levy hammers home on his Not Running A Hospital blog here, there's the transparency problem: It's awfully hard to tell how well even initial global payment experiments are working when so many of the financial figures involved are not publicly available.

Well, at least I picked up a couple of wonderful new analogies: In Pippin's piece, Dana Safran of Blue Cross says that the current fee-for-service system creates a mentality of "If you're paying, I'll have the lobster." In contrast, the story's headline describes a global payment system as "prix fixe."