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Provider Incentives – From Pacifiers to Training Wheels

Playing With ToysImagine boarding a plane to take a trip. Your expectations are to land safely and on time at your final destination. After all, you’ve already paid the ticket price with that particular airline.

Further imagine that AFTER you have arrived safely and on-time, your selected airline requires a bonus – or incentivized payment – from you because they performed their work to your expectations. Perhaps you provide a ‘tip’ upon arrival at the gate, or promptly receive an ‘add-on’ fee to your credit card.

What if this new type of payment approach also occurred within other industries? For example, you take your car in for routine maintenance and servicing. In this scenario, you pay the vendor not only the cost for the work but also a small incentive bonus because it was performed to your satisfaction.

Or, consider the employer who works with a benefit consultant and pays the contractual fee charged by the consultant. At the end of the contract period, the employer is invoiced a ‘bonus incentive’ because it was somehow determined that he/she received quality ‘outcomes’ throughout the contract period.

Wait! Under the aforementioned scenarios, the airline, auto-mechanic and benefits consultant are ALREADY getting paid to provide ‘presumed’ quality services to their customer. Why should these vendors be paid an incentive – don’t they have ample motivation to fulfill their promises to customers? That motivation can be in the form of repeat business, enhanced reputation, customer referrals and a host of other incentives – including business survival! Shouldn’t the inclusion of quality service be part of the ‘base’ price paid to the vendor?

Absolutely! Quality should be included, and, in most industries, it is the minimum threshold in which the vendors perform their services to the public.

But in today’s healthcare world, we are frantically searching for payment incentives to boost care-quality based on several factors that include disease management, patient satisfaction and safety, along with hospital re-admission rates. Such incentives are provided through the Medicare Hospital Value-Based Purchasing Program, in addition to new payment deals arranged through private accountable care organizations around the country.

One may reasonably ask this simple question:
“Why do we need to incentivize provider behaviors to do things they SHOULD already be doing?” These incentives are touted to be ‘cost saving’ or ‘cost neutral’, but shouldn’t quality and safety already be baked into the existing bloated prices for the care we receive?

Great question!

Revenue earned by today’s health providers is largely derived from third-party payers, such as government and private insurers. Because of this, provider revenue and subsequent behaviors are insulated from the end user – you and me – who seek care. By default, you and I are merely sideline spectators watching others determine how a nice chunk of our economy will eventually become priced for the services we seek. By not having a marketplace that allows for a true transactional buyer-seller relationship, incentives to push the ‘right’ provider motivations are in-vogue.

A huge trend in this country is to replace traditional fee-for-service reimbursement with incentive-based payments that encourage higher quality care and lower costs. Medicare, due to its sheer size, is taking the lead by boldly moving half of all Medicare payments in this direction by 2018. Private payers are also following with various experimental reimbursement methods.

Understanding the true motivations and behaviors of healthcare providers is obviously important to ensure that proper incentives are given. It does, however, seem quite paradoxical that we spend so much time, effort and resources to develop new toys to either motivate or pacify one-fifth of our economy to do what they should have been doing for years.

The reimbursement process has become a perpetual cat-and-mouse game between the payers and providers. And, you can be assured that ‘innovative’ payment incentives will proliferate into the unforeseeable future. Unfortunately, as the past has proven many times, unintended consequences eventually erupt from well-intentioned incentives, resulting in rather nefarious outcomes.

Perhaps someday, this mature sector can graduate from pacifiers to training wheels?

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Feeding Medicare’s Infrastructure

Mother Robin Feeds Young in NestMuch like a mother robin feeding her young, Medicare continues to ‘feed’ the infrastructure that serves our elderly – but, with a great deal of waste and inefficiency.

In their recent book, ‘Medicare Meltdown: How Wall Street and Washington are Ruining Medicare and How to Fix It,’ co-authors Rosemary Gibson (aka health care ‘rock star’) and Janardan Prasad Singh, spend a chapter on ‘Fifteen Medicare Facts That Will Astonish You.’ Learning astonishing facts can be fun. But when those facts relate to Medicare, they can be extremely sobering.

Perhaps you can use one or many of these facts to ‘wow’ guests at your next dinner party. Better yet, use them when meeting with those elected to Congress.

1. If Medicare were a country, it would be the 20th largest economy in the world.
That’s right, larger than the entire economy of Sweden – and double that of Ireland!

2. Medicare wastes the equivalent of New Zealand’s entire economy.
In 2011, Medicare spent $560 billion, yet about 30 percent ($170 billion) was wasted and did not benefit our seniors. Where did it go? Blame it on overtreatment, inefficiencies and poor management. (Source: Institute of Medicine)

3. Between now and 2030, Medicare will be adding population equivalents of Austria, Hong Kong, Israel and Switzerland to its rolls.
In 2013, about 49 million people were covered by Medicare, and in 17 years (2030), an estimated 33 million more Americans will be covered.

4. Ten thousand boomers sign up for Medicare every day.
That’s 10 thousand per day for the next 20 years!

5. During a lifetime of work, the average person pays $60,000 for Medicare.
Look at your pay stub, this is the money deducted for the Medicare payroll tax.

6. A new retiree can expect to receive about $180,000 in Medicare benefits.
A person pays in $60,000 and expects to receive, on average, $180,000 in benefits. Economics 101 can’t explain this type of math – unless we mortgage our future.

7. Your federal income taxes pay for a growing share of Medicare’s costs.
Subtract #5 above from #6 (answer: $120,000). From this amount, seniors pay for hospital outpatient care and doctor visits (Part B) and prescription drugs (Part D). The rest is paid by federal income taxes and borrowing – which raises the federal debt.

8. The number of corporate healthcare firms on the Fortune 100 list has increased from zero in 1965 to 15 today.
These firms have benefited greatly from the current Medicare infrastructure. According to Gibson and Singh, the ties that bind Wall Street and Washington in the healthcare industry are strong and their interests are often at odds with those of seniors and boomers.

9. The federal government borrows money from China to pay Medicare bills from hospitals, doctors and drug companies.
Currently, interest rates are low, but can (and will) change in the future. This is not good for our long-term debt problem.

10. President Obama and Rush Limbaugh agree on this fact.
Paying for Medicare is not sustainable at the rate these costs are growing.

11. Between now and 2035, the healthcare industry will reap from Medicare a larger share of the country’s gross domestic product.
As Medicare grows, the federal government will have less money to pay for the nation’s infrastructure, investments in science and technology, education and national security. According to the Congressional Budget Office, if we do nothing to curb this cost, Medicare will consume nearly 25 percent of the value of all goods and services our country produces by 2082. In 2006, Medicare spending was at three percent of GDP.

12. The number of doctors who specialize in caring for seniors is shrinking when more are needed.
The median salary for geriatricians is lower than almost all specialties, threatening the number of new doctors willing to fill this growing role.

13. Medicare’s money for hospital care begins to run out in 2024.
This fact about Medicare Part A comes from a non-partisan report by the Medicare trustees.

14. An estimated, 79,200 Medicare beneficiaries die each year because of preventable harm in hospitals.
This is just an estimate. We really don’t know because actual data of those fatally harmed is seldom reported on a consistent basis. Based on a 2013 report in the Journal of Patient Safety, this number could be much higher.

15. Annual Medicare fraud and abuse is equivalent to one million seniors’ lifetime Medicare contributions.
FBI fraud estimates can be up to 10 percent of what Medicare spends – about $60 billion. In addition, this amount does not include the mistakes made in coding payments and calculating the money Medicare owes to providers. In 2010, Medicare estimated $48 billion was made in ‘improper payments.’

‘Medicare Meltdown’ not only points out the problems but provides a road map on how Medicare can be fixed in the future. Much of what we need is the political willpower to make changes so that we can efficiently provide the necessary care to our seniors.

After all, a mother robin has only so much food to distribute.

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