Inside A Practice

NELSON, MD: ‘Value-Based Payment … What Could Go Wrong?’

By Dr. Robert Nelson, | Direct Primary Care Physician | Advocate for free-market healthcare & patient-centered reforms | Entrepreneur | Writer

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APRIL 29, 2015 – Did you ever get suspicious when a solution to a problem is given the hard sell; or when the newest business or financial theory is declared as the next great paradigm shift that will bring an industry out of the dark ages and into the 21st century?

When solutions are lobbied for hard by pundits, policy makers and academics, it should cause our BS (bureaucratic stupidity) meter  to beep.  Not to be over cynical, but motives of purveyors often end up being about control, profit, political influence and power; and not about utility and efficiency or what is best for the people served by the industry.

Those of you that are old enough to have been paying attention to healthcare in the 1980’s and early 90’s will remember when primary doctors were transformed into “gait-keepers” or “quarterbacks of the healthcare team” and designated to lead the capitation movement that was supposed to usher in a new era of cost control, efficiency and better outcomes. Suffice it to say, it didn’t quite work out as planned.

Then there was GM’s answer to affordable gas-efficient imports: they put a crappy 4-cylinder engine in over-size chassis and called in the Cadillac Cimarron.  But I digress…

These “solutions” have one thing in common: They did not address the right problem, so they were destined to be an epic fail.

The same, I suspect, goes for the newest savior of the healthcare industry: Value-Based Payment Models, or VBP for short.

Value is commonly defined as:  Quality or Derived Benefit / Price or Cost

Dr. Robert Nelson of Atlanta, GA

Dr. Robert Nelson of Atlanta, GA

But here is where is gets tricky.  In healthcare, real prices and consistent prices are very hard to come by.  The list prices (CPT codes and charge master’s prices) are simply artificially inflated benchmarks which help sustain and push-up insurance premium prices, used to negotiate payer contracts, help support Medicare reimbursements and used as a starting point to derive fake discounts that PPO networks can tout to their prospective business clients.

Moreover, comparative prices from institution to institution are almost impossible to know based on the way large vertical providers are often reimbursed at higher rates for same services compared to independent physicians based on contractual payments.  This is in contrast to a consumer-based market value where demand, competition and preferences influence prices – where as in our third-party healthcare consumer demand (patients) and their dollars have been excluded from having anything to do with determining these prices.



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