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Editorial | Island Voices

‘Value-based’ payment a threat to Hawaii health care

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The architects of the federal Affordable Care Act (ACA) blamed high U.S. health costs on excessive and unnecessary care.

We are told, "fee-for-service drives volume" and new payment models will pay for "value, not volume."

This rationale is flat-out false in Hawaii.

Thanks to our Prepaid Health Care Act, we had the most cost-effective health care system in the country, with broad risk pooling, comprehensive benefits, no deductibles and low co-pays, and relying largely on small independent physician practices paid with fee-for-service.

Prior to the ACA, we had the best benefits, the lowest per-capita Medicare spending, and among the lowest health insurance premiums in the country.

Believing it to be the root of the problem, the Centers for Medicare and Medicaid Services (CMS) is pushing to replace fee-for-service with "value-based payment." Doctors and hospitals are to be paid "up-front," with bundled payment for an episode of care or prepaid care for an insured population.

Unlike with fee-for- service, the incentive under "up front" payment is to minimize "volume" of services.

To counter the perverse incentive to minimize necessary care, the ACA demands that physicians computerize and provide detailed documentation to measure and reward "quality."

"Value-based payment" also creates a perverse incentive to avoid poorer, sicker, more complex patients whose care would likely cost more and might bring down quality metrics.

The ACA provides for risk adjustment, transferring money from plans with healthier to those with sicker populations, but this, too, requires detailed data from doctors on diagnosis and severity of illness.

Risk adjustment formulas are complex and easily gamed, and we are already seeing extensive "up-coding" of diagnoses by doctors, hospitals and health plans to maximize payment.

Hawaii has a shortage of doctors generally, especially for primary care. Our physician workforce is older, and we are losing around 100 physicians a year to retirement and out-of-state moves. Loss of physicians is accelerated by demands for computerization to provide detailed data to CMS and health plans for "quality" metrics and risk adjustment.

On Oct. 1, the U.S. will switch to a much more complex diagnostic coding system, ICD-10. Unique among countries using this system, CMS wants physicians to use the full detail in the codes, backed by documentation in their notes, in order to be paid. This will require doctors to spend almost as much time documenting as seeing patients.

Doctors must choose between cutting their patient load and income, or staying at work hours longer to complete the required documentation. Hawaii physicians close to retirement will likely retire, worsening our physician shortages.

"Value-based payment" ignores the fact that the most cost-effective health care systems pay doctors with simpler versions of fee-for-service, including other countries and Hawaii’s experience with our Prepaid Health Care Act. It ignores the huge difficulties in developing valid, meaningful quality measures due to the complexity of health care, and the administrative burdens and costs these reforms impose on doctors, hospitals and health plans.

Americans see doctors less and have fewer hospital days per capita than any other industrialized country, and Hawaii has low utilization within the U.S. The ACA is adding more administrative burdens, trying to further squeeze already low utilization. The major driver of excessive cost in U.S. health care is exorbitant administrative cost, not unnecessary care, and we are making this worse.

Preparations for "value-based payment" in Hawaii so far are associated with escalating administrative burdens, accelerating loss of doctors, increasing refusal to accept Medicaid and Medicare, avoidance of sicker, more complex patients, increasing ER and hospital use, and rapidly rising health insurance premiums. Where is the "value"?

Let’s abandon "value based" payment that isn’t, and refocus on reducing administrative burdens and salvaging our physician workforce.

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