Payment for medical care is slowly approaching a turning point. Traditional fee for service has been largely replaced by managed care discounted fee for service plans. These plans with their intrusive gatekeepers and low fees are well known to us all. Furthermore, the new Medicare requirements for evaluation and management are a nightmare to implement. One loses the focus on the patient's needs as one tries to make sure that all of the unimportant and irrelevant issues the government requires for their concept of patient care are observed and documented.
It therefore seems a logical step to implement prospective payment that goes beyond fee for service. Medicare is establishing a database to track payments from diagnosis to death for elderly cancer patients by stage and diagnosis1,2. This database can help Medicare establish a prospective payment system. The New York Times, in an editorial January 7, 1998 chides Medicare for being "far behind the private sector in developing teams of physicians to manage disease"3. These are early warning signs that Medicare may eventually shift away from the fee for service payment plan, and may contract for integrated care.
Integrated care would represent one fee for an entire event. For example, the management of early breast cancer would be one event. This management fee would include payment for one year and include a single fee covering the diagnostic mammogram, diagnostic radiology staging procedures, diagnostic biopsy, lumpectomy or mastectomy with node dissection, radiation therapy and/or chemo/hormonal therapy. For example, the payor may hypothetically negotiate with the prime contractor a fee of $20,000 for each case. Managing such a case would require an entire coordinated team of diagnostic and therapeutic radiologists, medical oncologists, anesthesiologists, surgeons, and the hospital administrators working together to provide a quality service at an affordable price. The proposal is to have the prime contractor (hospital, surgeon, medical or radiologic oncologist) share the risk. The prime contractor can have either a risk sharing or fee for service subcontract with the subcontractors. Obviously it is important to know one's cost and have standardized clinical pathways to avoid disaster. If the contract contains a cost of 2 days of hospital stay for a mastectomy, and a surgeon decides to keep his patients 4 days, that will profoundly raise the cost. If the correct cost is not built into the contract, the provider may well wind up losing money on every case. Similarly, if one of the doctors treats the patients with aggressive chemotherapy that requires a 20% readmission rate for toxicity, that would also mandate costs that exceed the revenues, and cause the program to fail. Since the payment is for the total package, individual procedures, such as exams, CBC's, and other procedures are no longer required to be scrutinized for payment. It is expected that competition from various provider groups would limit the price, as the contracts are subject to competitive bids each year.
Oxford Health Plans is the first HMO to develop an integrated patient care program4. Their primary aim is to reduce their specialist costs, but a secondary aim is to reduce theri cost of scrutinizing every action taken by the physician5. After extensive negotiation, we are preparing to sign an agreement of the above nature. The risk is ameliorated by negotiating a risk corridor, so that our potential losses and potential windfall profits are limited. This is a good way to "pay one's dues" to develop expertise in dealing with this type of coordinated patient care. Oxford has run into serious financial problems, and the entire venture may therefore fail if Oxford goes bankrupt6. Even if this were to happen, the concept is sound enough to be picked up by other carriers in the near future. I believe that physicians should be prepared for this concept, and develop a plan to serves the doctors as well as the payor.
REFERENCES
1. Riley GF, Potosky AL, Lubitz JD, Kessler LG. Medicare payments from diagnosis to death for elderly cancer patients by stage at diagnosis. Med Care. 1995; 33(8):828-841.
2. Manton VG. The complexity of chronic disease at later ages: practical implications for prospective payment and data collection. Inquiry. 1996; 23(2):154-165.
3. The New York Times. January 7, 1998; A-18.
4. Advanced Health, Oxford and Cardiology First sign agreement to bring better coordinated care to New Jersey patients suffering from heart problems. Yahoo Business Wire. May 7, 1997.
5. Oxford switches to flat fee for specialists. Medical Society of the State of New York News of New York. 1997; 52(11):1.
6. Oxford Health Plans. The Daily Trouble (Archive). The Motley Fool. Yahoo Finance; January 6, 1998.