Saving Healthcare

Costs are soaring, so many experts say the solution is to turn financial incentives upside down

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Josh Green is a leader in the effort to reinvent healthcare in
Hawaii by focusing on the quality of care, not the quantity.
He's also chair of the state Senate Health Committee,
medical director of the Hawaii Independent Physicians
Association and a doctor.
Photo: Rae Huo

"Let me frame healthcare for you in a big way,” says Josh Green, state senator from Hawaii Island. “The big picture is that the rate of increase in the cost of healthcare is unsustainable. The U.S. is spending $3 trillion annually on healthcare – you can take that number to the bank. And as an aside, 10 percent of that, or $300 billion, is for diabetes alone.”

In Hawaii alone, healthcare costs exceeded $8.8 billion, or more than 13 percent of the state’s economy in 2009 and rising fast.

If you ask Green what the solution is, his answer is informed by his multifacted view of healthcare in Hawaii: He’s chair of the Senate Health Committee, medical director of the 800-member Hawaii Independent Physicians Association, and a full-time emergency-room doctor and family-practice physician. For Green, and for many other experts, the best way forward is a set of concepts known as the Patient Centered Medical Home.

PCMH flips the priorities in healthcare, adding more resources to primary care for prevention and wellness programs. Advocates believe it will eventually change the curve on healthcare cost.

“Dealing with diabetes and other chronic disease is central to containing healthcare costs,” Green says. “First, we have to do better on care. ... Second, we have to contain costs. The concept of PCMH does both of those things. It allows people to have extra resources for prevention and health management up front so we don’t just take care of people at the end, when they’ve already gotten so sick they’ve had a heart attack or had to lose a toe.”

Primacy of primary care

Green is a major supporter of HMSA programs designed to foster PCMH and primary care. Hilton Raethel, senior VP for health services at HMSA, explains the roots of the company’s new policies.

“We really believe that primary care in Hawaii – and across the United States – has been underemphasized for decades,” Raethel says. “Let me give you one number: the ratio of primary care physicians to specialists. In Europe, for example, they have approximately two-thirds primary-care physicians to one-third specialists. In the United States, we have about 35 percent primary care physicians to 65 percent specialists.” In other words, the ratios are flipped. “Studies also tell you that there’s a direct correlation between that ratio and the total spend on healthcare,” he says. “More referrals equal more tests.”

Furthermore, Raethel believes that the de-emphasis of primary care is to blame for many of the problems in healthcare quality.

Steve Ribbink, HMSA’s executive VP and CFO, points out that inefficiency in the system works both ways. “We know that the whole system is based on over-use, which creates wasteful spending. But there’s also an under-use situation where someone didn’t get medical treatment earlier, when they should have, and what could have been a non-event becomes an emergency. We want to change the delivery model to provide the right service at the right time in the right place.”

Quantity vs. quality

The most effective way HMSA can influence how care is provided is by changing the way it reimburses physicians. “The current system rewards quantity, not quality,” Raethel says. Doctors are usually paid for the number of patients they see and the procedures they perform. This encourages costly treatments at the expense of prevention and wellness care.

HMSA knows it can’t change those incentives overnight because most of the healthcare system is built on the fee-for-service model. So it is starting by converting 15 percent of its reimbursements from fee-for-service to quality-care payments. These amount to per patient monthly payments for practicing clinically proven methods of preventive care – for example, making sure patients with diabetes get their annual eye and foot exams. The theory is that it’s a lot cheaper to pay for early and regular screening than it is to pay for amputations or blindness later.

What does the change mean for a medical practice? Wearing his physicians association hat, Josh Green puts some numbers to the theory: “If you have a practice of 1,000 patients in the program, you get a minimum of $2 per member per month up to $7. It’s usually about $5 per patient extra per month. That means a doc with 1,000 patients would be getting an extra $60,000 a year.” The hope, he adds, is that practices will use that extra money to pay for resources that allow them to improve care: such as after-hours services, an extra nurse’s aide or a nutritionist.

Green thinks HMSA’s 2010 earnings report, showing the company’s first “profits” in five years, is a sign the new program is already working. “They’re definitely linked,” he says. “I think that’s what the CEO would tell you. There’s absolutely a linkage in my mind.” In any case, Green is encouraging HMSA to expand the program.

In April, nurse practitioners were added to the list of primary-care providers; the next group Green says he’d like added is OB/Gyn doctors. “I’ve asked HMSA to get to a point where a full 50 percent of their reimbursements to primary care providers are based on the management fee for maintaining a large panel of members.”

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