United Health Group Settlement and Better Role for Managed Care Organizations
Posted by steven_spear | Under Business Strategy, health care, organizational learning, process excellence Wednesday Mar 25, 2009United Health Group was fined for manipulating its Ingenix database to cheat providers and patients for ‘out of network’ service payments. This problem arises from payment schemes based on resources used rather than value added. Ironically, data collectors like Ingenix are uniquely positioned to distinguish the most skillful providers from the least, so payers and patients can be informed when determining from where to seek treatment and would allow managed care providers to focus on their original mission—integrating the delivery of care so it is comprehensive, high quality, and affordable.
New York State Attorney General, Andrew Cuomo, announced a settlement requiring that United Health Group–a large health insurer–pay a reported fine of $50 million for underpaying patients and providers who use ‘out of network’ services (See “MCO’s Must Move System Towards Net Gain,” Tracey Walker, Managed Healthcare Executive E-New, February 15, 2009. The accusation is that UHG based its payments on what are ‘normal and unusual treatments’ according to a database maintained by Ingenix, which it turns out, is UHG owned. In effect, the assertion is that UHG staked the deck, marked the cards, and was dealing from the bottom.
One can easily imagine that this news will reinforce skepticism about the veracity and integrity of managed healthcare organizations: For consumers, it may well strengthen the view that MCOs are in the business of rationing care–often arbitrarily. For providers, it may well strengthen the view that MCOs are in the business of micro-managing care–intruding on doctor-patient relationships and moving clinical decision making to the hands of ‘faceless bureaucrats’ and pencil pushers.
However, before we use this settlement (not a conviction) to condemn an entire industry, let’s step back this in the context of the rationale for MCOs, look at how they achieve their objectives, and consider alternative ways to achieve those objectives.
First, MCOs were created to control costs and increase quality of care. Like with any ‘portfolio,’ the idea was that by pooling patients together and diversifying risk, you could reduce the overall average cost of care, while reducing the risk to any one person that he or she would be financially flattened by a catastrophic event. By integrating care networks, patients would have access to the appropriate provider, and by using collected data (the point of contention between A.G. Cuomo and UHG), cost and quality highs and lows could be identified.
The problem is, the relationship among payers (like UHG), providers (doctors, nurses, other health care professionals and hospitals, clinics, private practices, and other health care organizations), and patients has devolved into a zero sum game. Explicit or not, there are caps on how much can be spent on health care, so any gain by one party–more care for a patient, more payment to a provider, more profits to a payer–has to mean compromise by at least one other. Like in any zero-sum game, the ‘pie’ is viewed as fixed in size, so the bigger the slice one person gets, the less there is for everyone else to eat. This creates all sorts of incentives to cheat or to perceive cheating even if none exists.
There is a healthy alternative. The belief that a situation is zero sum depends on the assumption that whatever resources are being used, they cannot be used more effectively and efficiently. Said differently, to generate more output, more input has to be committed. To get more, more has to be paid or to pay less, less has to be expected. However, these assumptions are gross misrepresentations of care delivery in the United States. It can be much better and cost much less.
Well known are the statistics publicized by the Institute of Medicine and others that hundreds of thousands, perhaps millions, of patients each year are avoidably harmed–many killed–by break downs in care delivery processes: Urinary tract, surgical site, and central infections, ventilator associated pneumonia, wrong side surgery, patient falls, medication errors, and hospital readmissions that should never have happened were it not for a lapse in the delivery of care. An order may have been misread, an essential supply might have been missing, critical information might have been distorted or misdirected…
These system failures exact an enormous cost–both financial and in terms of human suffering. They are also the most visible symptoms of more pervasive inefficiency and ineffectiveness. Deeply involved in the better of care delivery, my colleagues and I have documented that some nurses spend at times 1/3 to 1/2 of their time doing the ’scut’ work of tracking down missing materials, information, and people–all of which cuts into the quality and quantify of care they can provide while increasing the work related stresses and frustrations. The experience of medical trainees is no better–the life of an intern and resident also are characterized by constant crisis management–relatively little being the management of actual medical crises, too much being the management of system crises that cause patient problems or respond to them poorly.
However, this reality of health care professionals being in a constant tizzy, which is caused by poor care delivery management and which exacts a huge penalty in quality and cost is completely unnecessary. As I explain in “Chasing the Rabbit: How Market Leaders Outdistance the Competition and How Great Companies Can Catch Up and Win,” breakdowns in care are often due to antiquated and unsophisticated approaches to managing the delivery of care. However, some providers have learned and applied more sophisticated approaches, achieving spectacular results.
In Pittsburgh, for instance, the rate of central line infections was cut by nearly 70% across the region as a whole. Some hospitals cut their rate to zero and sustained it at that level. Others made similar progress on a host of other bad things. Of course, Pittsburgh is not alone. Virginia Mason Medical Center in Seattle, ThedaCare in Wisconsin, Mayo, and Cleveland Childrens, and the many hospitals associated with the Institute for Healthcare Improvements 100 Thousand Lives Saved campaign have all started building reputations for ‘growing the pie’ and ending the zero sum situation–providing better care, to more people, at less financial cost, and requiring less stress, strain, and effort by providers. Everyone is better off, and often by enormous margins.
There is a problem that prevents such efforts from spreading, but large payers such as UHG, the Blue Cross Blue Shield organizations, and federal health care systems such as Medicare and Medicaid and Veterans Services are uniquely qualified to solve it.
The problem is that great providers find it hard to be rewarded for their excellence and it is equally hard to penalize the poor providers.
Why?
Currently payment schemes are largely based on measuring inputs and effort, not outcomes and results. Across the spectrum of preventative, primary, chronic, acute, urgent, and extended care, the more time and resources spent on patients, the more providers get to claim. Then the argument goes on between the patient, payer, and provider as to who gets to pay for what piece, without any accounting for the quality and effectiveness of the care provided. It is akin to a Marxist approach of ‘from each according to his ability, to each according to his need.’ Maybe it is a good way to define charity, but it is certainly a proven horrible way to run economies and their key sectors.
Imagine purchasing any other product or service in such a fashion. Looking for an auto? The higher the labor content and the more material consumed, the more you would pay–regardless of how much scrap was generated or how poorly the car looks and runs. Need your hair done? The more time in the salon, the more you would be charged–regardless of how much damage was done to your hair or how foolish you look. Want something to read? The more words on a page and the more pages in the book, the more you would pay–regardless of whether the book was any good or not.
In any other realm it would be ridiculous, but in health care it is the norm. You don’t pay based on the quality of the knee repair, hip replacement, birth experience, or end of life care. You simply pay based on what was spent to provide the care, good or not. And, when choosing care, you are awfully disadvantaged in finding out where you can get the best care–who is better or worse at the stem to stern, start to finish process. Rather, you might get referred based on personal familiarity or the reputation of a particular professional. Maybe you’ll pick a hospital actually famous for its research, unknowing that their clinical care is so poorly managed that patients are regularly harmed and killed. It is no wonder we are in such a mess–too many uncovered, too many exposed to avoidable risk, and too much spent on a disappointing situation.
There is a solution. The Centers for Medicare and Medicaid have recently promised that they will stop paying providers for the added costs of treating ‘never events.’ The provider will be responsible for the additional nursing time and medications for cleaning up a urinary tract infection, and so forth.
This is not retributive . This is a first but critical step in doing something fundamental to having a well functioning system: Measuring outcomes and making choices based on those measurements. True, in this case the measurement is the rudimentary one of ‘did something happen or not?’ However, with their already available access to clinical and cost data combined with time, effort, and ingenuity, can one doubt that payers could develop risk and acuity adjusted measures of quality and cost for ever more sophisticated and complicated situations?
This would be profoundly revolutionary. Finally, payers and patients would know which providers are doing better and who deserves more traffic. Payers and patients would be able to choose intelligently as to where and how they will spend their time and money. Those providers who have invested in and accomplished much in improving previously ineffective and broken care delivery processes will be rewarded with more business and those who continue to squander time, money, and patient well-being will rightly see a diminishment in their share.
The net result will help convert MCOs from primarily rationing care and payment to directing it to the best possible sources. And this will help achieve the 30+ year old original mission and intent of MCOs of controlling costs while improving quality.
Related posts:
- Measuring Value-Added, not Compliance, Key to Health Care Reform
- Spear on Bloomberg: What’s health care reform missing? Quality!
- Krugman concedes main objection: In fact, more care needn’t cost more…
- Spend more to get more? Not necessarily in health care
- Measuring Therapeutic Effectiveness and Cost–One Part of Better Care for All
I have just read the above comments and even though this is the first thing I have ever read that you have written the early returns create a sense of like-mindedness. You touched on a multitude of topics which I would like to pursue but I will limit my comments to the following statement you made:
Why?
Currently payment schemes are largely based on measuring inputs and effort, not outcomes and results.
I am a pharmacist and I have spent many years trying to meet the needs of patients, the person or entity paying the bill, my employees and then my company or the one that employees me. I have been involved in managing pharmacy benefits since the 80’s and I am disturbed by the fact that decisions in this industry are made based on components like discounts, rebates and admin fees and little if any consideration is given to outcomes associated with cost, quality and service.
I believe the root cause of this is an unholy alliance between pharmacy benefit managers (PBM’s) and pharmaceutical companies. Just as the magician/illusionist draws our attention to their left hand the “magic” is happening in their right hand which is under the table or at least out of sight. The PBM’s and pharmaceutical companies draw our attention to bigger discounts, larger rebates, lower admin fees, increased compliance(with no documentation of better clinical outcomes) and newer more convenient dosage forms (aka “me too drugs”) while ignoring the unearned margins they have created for themselves without producing any additional benefit for the patient or the payer. They will also use the buzz word of the day such as transparency, DUR, evidence-based medicine, pass through pricing, etc. although if you read carefully they will have their own definition of these words. This is the most sophisticated shell game ever invented.
I will get down off my soapbox now, actually I won’t, but I will conclude my comments by saying I have just formed a new company, RxResults, which is working with our College of Pharmacy on an Evidence-Based Medicine program that uses a lowest net cost model and is trying to draw the attention of employers and health plans to outcomes instead of results.
I would welcome the opportunity to discuss your thoughts on pharmacy and how it fits into a comprehensive healthcare model.
Tery Baskin PharmD
This read has been actually worthwhile, the tips was 100 % great! Keep up the good work.