10 Ways That Mass. Payment Reform Could Go Wrong

I had my introduction all ready. As the moderator of a panel held by the Massachusetts Health Data Consortium last week, I was going to introduce Paul Levy ("Not Running A Hospital") and Charlie Baker (not running for governor, at least not at the moment) as bringing in with them a "fresh gust of skepticism" about the direction of Massachusetts payment reform.

I figured the Charlie and Paul Show would offer a sharp contrast to the first speaker, Dr. Robert Galvin, the CEO of Equity Healthcare and a nationally known thinker on how to improve health care. The conference's program said he would "explain why the time is now for payment reform," so I assumed he was enthusiastic about the palpable Massachusetts political momentum toward global payments.

Nope. Or at least, it's not so simple. His nuanced presentation struck me as by no means a blanket endorsement of global payments for everyone, everywhere. In fact, there was a decidedly Cassandra-like tone to it. He warned about the dangers of a "one size fits all" mentality, and of letting health care institutions get "too big to fail."

And in a mental exercise that perhaps all decision-makers should adopt, he imagined a "future history" in which we pretend we're in 2022, analyzing the failure of Massachusetts payment reform. (This is known as an FMEA for Failure Modes and Effects Analysis.) So, looking back ten years hence, what might have gone wrong? His list, but re-ordered to put first the items I found most interesting:

1. We under-anticipated the resources needed to effect the changes (He spoke from bitter experience with the number of meetings needed to make organizational changes in health care. And watch out, he said: "To bring doctors and hospitals together, pay them globally and expect a miracle to happen, I think is magical thinking.")

2. We created organizations with too much pricing power.

3. We didn’t find a solution to the “who loses” challenge. "One person's costs are another person's revenues; you have to solve that."

4. The changes cost more than they saved.

5. We applied a national solution to local issues.

6. We didn't learn enough from past failures.

7. We didn't understand what worked and why.

8. Medicare fee-lowering crushed innovation.

9. Hospitals could not transform due to contradictory payment systems (They needed to "get heads into beds" to get paid yet also needed to "keep heads out of beds" under the global payment system.)

10. The new payment models couldn’t be administered.

Too big to fail?

"Here's my worry," Dr. Galvin said. "Remember 'too big to fail' in the financial sector? Could we unwittingly create something too big to fail in health care?"

It could be that hospitals and doctors and other care providers will come together and global budgets will work wonderfully to both improve quality and lower costs, he said; "You do see that in Geisinger and other places — but not as many as you might think." At the Mayo Clinic, he noted, the high efficiency and quality has not resulted in lower prices.

Federal health reform tends to encourage health care organizations to grow with few constraints, he said.  So “you now have provider organizations that are the economic engine of the town, and they’re highly admired. And it becomes very hard to rend them apart. And you end up now with the result that even if you have better outcomes, it hasn’t become more affordable for us."

"So I worry about that, and for the FMEA I’d say we need to figure this one out. We need big organizations because you need scale and capability, but you have to have either a market or some sort of regulatory force that makes sure competition occurs.”

(Calling Martha Coakley! Isn't this part of what the attorney general has been saying in her reports?)

Winners and Losers

Dr. Galvin also expanded upon his #9, the failure to solve the "who loses" challenge. Perhaps 30 or 40 percent of the doctors he talks with these days understand payment reform, he said. "I'm not worried about them anymore, as much as I am about consumers." He worries, he said about "how the public is going to take this once they figure out what we're talking about:'Nobody told me I couldn't have everything!'"

The managed care movement of the 1990s, he noted, was done in largely by angry consumers. "Anyone interested in payment reform had better understand this," he said. "Sooner or later, the person who didn't get the imaging or go where they wanted to go is going to have something to say about it. It's important to think through, when you think clearly about this, how to win them over."

Thus far, payment reform hasn't gone far enough here to start drawing "enemy fire," he said, but "I think we're fooling ourselves that we're not going to have another revolt. In my FMEA, it's number one."

Massachusetts is cool

To end with just a bit of provincial preening, Dr. Galvin told his Massachusetts Health Data Consortium audience that in terms of payment reform, with all the interesting moves toward global and bundled payments already under way here, "You've got the coolest market in the country by far."

Massachusetts health reform is, he said, a Harvard Business School case in the making about "how government, media, consumers and business leaders came together to change the market." What will happen next? Nobody knows. But "There is more going on here — and I think a lot of it very interesting and good stuff — than I see anywhere."

Bottom line: He backs "evolution, not revolution." And as a famous surgeon once told him, "Hurry up, but take your time."

Readers, comments? And check out Paul Levy's cogent report on the session at Not Running A Hospital.