Thanks Jeff… lovin’ the exchange! Just sayin’ metrics, metrics. depends on lens….
Bottom-line is we still live on a production driven healthcare ecosystem – ‘capitation’ (PMPM) still a fraction of total contract spend (even if you include ‘lite versions’ ie, bundled payment, DRGs, or ambulatory case rates, or OWA’s [other weird arrangements]).
Share of GDP has been and continues to disproportionately claim an obscene allocation of the U.S. (public, private) spend and growing; all while a grand COST SHIFTING CHARADE proceeds under the convenient ‘consumer directed/skin in the game’ brand play by payors/health plans/or more aptly put ‘benefits solutions providers’.
There are no more ‘health insurers’ per se. they’ve collectively failed to manage clinical risk. PERIOD. They are ‘transaction processors’ increasingly living off of ‘fees’ and investment returns as ‘banks’, with the great hope that ‘technology plays’ (mhealth, digital health, tech-enabled patient engagement), etc… can cure the beast.
So yes, today and in the near term, clever (and well paid) managers’ are subject to production incented growth or share objectives (even amidst declining units primarily due to the slowing (and cost shift) economy and reduced discretionary spending for elective services).
The handful of creative ‘comp plans’ that scaled the transformative shift from volume to value remain a fraction of total [see my piece ‘Eating Glass’ https://acowatch.me/2014/08/14/eating-glass-a-davita-healthcare-partners-hiccup-or-physician-integration-implosion/ about Craig Samitt’s abrupt departure from DaVita/Healthcare Partners ] are at least on the table given the ACO triple aim sustainability mission. If units decline, skilled managers find ways to drive UP price. Consolidations are precisely that, no?
I remember when per diems and case rates were first introduced back in the 80s. The CFO calculus was pretty simple: budget revenue requirements divided by projected units of service and voila, you got your case-mix adjusted average basis for both service tiered or global per diem contracting. Pretty simpleton, but true!
When shift to ambulatory from inpatient began, Outpatient surgery/procedure case rates were benchmarked to historical inpatient revenue yield. Only growth of physician owned ASC’s forced some competitive restraint to price [ and that theme remains alive today via OIG report: http://www.beckershospitalreview.com/finance/oig-says-bring-down-hopd-rates-for-surgery-to-asc-rates-cms-disagrees-11-things-to-know.html ]. That the aggregate trend UP is rather obvious, no? It has not abated from a total cost of care perspective – the only measure that really matters.
Thanks for sharing Jeff. I am not an economist, just a grunt in the c-suite who negotiated a fair amount for global (hospital, physician, ancillary and pharma) full risk downloads (from licensed entity to risk bearing delivery system) via multiple health plans in different states.
Things don’t seem to change much in the ‘healthcare borg.’
Please consider offering your thoughts as well! The original blog post is here.