by Gregg A. Masters, MPH
The future is already here, it’s just unevenly distributed – Attributed to William Gibson
As a soldier mainstreaming both HMOs and (‘attorney in fact‘ vs. messenger model) 2nd generation PPOs (that re-priced claims to contract rates) into ‘mainstream medicine‘ in California vs. the then prevailing 2nd or 3rd tier physician/provider networks during the 1980s, and then migrated these alternative payment business models into Texas, Colorado and the U.S. writ large, I will attest to these ‘pockets of innovation‘.
We learned in California particularly via physician owned and governed global risk bearing primary care or select multi-specialty medical groups, who aggressively contracted with hospitals, specialists, and ancillary providers including lab and imaging services on a ‘most favored nation’s basis‘, that a minimum of 25% savings of the prevailing spend was in evidence and routinely operationally demonstrated.
When ‘OSHPD’ (the California Office of Statewide Health Planning and Development) published their ‘efficiency rankings’ of hospital performance, they found the Kaiser Permanente Foundation Hospitals as a group operated at 75% of the statewide average cost basis. In other words, had all patients in the State of California received their care from the KP system, the aggregate spend would have been 25% less of a then very large, and today, still growing number.
While only an opinion, I suspect absent C-suite motivations (the undeniable allure of bonus and incentive compensation even in the so-called ‘non-profit’ 501c3 space) to ‘sand bag‘ and ‘shadow price‘ in an increasingly competitive 3rd party payor or health plan environment, we might have seen even more of these ‘efficiencies‘ (cost reductions at the population level) infused into the performance results of the ‘managed care organization‘ (MCO) cohort competing in the space.
I mention KP as they are the quintessentially integrated delivery system (IDS) model, ie, from a legal, operational and 3rd party finance point of view. Their results produced by a combination of mature culture, infrastructure and leadership that embraces risk assumption (vs. the risk aversion of health systems who practice the prevailing ‘heads in beds‘ philosophy) could be exported to similarly motivated and aligned ‘value based‘ (alternative payment) operators.
Fast forward a few decades for CMS (Centers for Medicare and Medicaid Services) latest salvo to tame the rapacious appetite of a fee-for-services driven, health system revenue center optimized business model.
The webinar featured in this post was sponsored and curated by America’s Physician Groups (APG) formerly operating as CAPG (the California Association of Physician Groups), it unbundles CMMI’s (the Center for Medicare and Medicaid Innovation) “New Models: Primary Care First and Direct Contracting”.
The complete deck is available here, and the webinar is available here.