Medicare strategy would reduce health care costs

This article originally appeared in the Sacramento Bee.

After my doctor retired, I got an education in the new ways of American medicine.

For more than 30 years, I had my annual physical at his office, where he practiced with a small group of colleagues. The physical followed a routine. He would interview me (Smoking? No? Good!); instruct me to put on a backless gown; check my eyes, ears and other body parts; and then escort me down the hall for five separate tests: urine, blood, chest X-ray, EKG and artery ultrasound.

Mercifully, the results also were routine. He would call me the next day, tell me all was well, see you next year.

My new doctor is part of USC Keck, a large L.A.-based medical center. I saw him in January. He interviewed me. I donned the backless gown. He looked me over. But I took only one test: blood. He also called me later to report all was well.

I asked him to explain the difference in testing. His answer told me a lot about why less is sometimes more, and why the government and insurers are pressing to end the practice of paying medical providers based on how many services they perform.

Indirectly, I also got a glimpse into the dynamics that are making small medical practices disappear.

My new doctor said that other than the blood test, which can detect a considerable array of abnormalities, I was not a candidate for the other tests. In fact, he said, those tests turn up a fair number of so-called false positives, which are only disproved after a round of even more expensive testing. He asked me in a somewhat disbelieving tone if I had those tests every year.

He left me wondering: Had my previous doctor been running up the bill?

If that was what he was doing, even with the best of intentions, he was not alone. Charging fees for each service is the way most doctors and hospitals get compensated, and is the engine that drives health costs steadily higher. Insurance companies and Medicare and Medicaid have tried to control them by setting up elaborate schedules of how much they will pay for each service.

Not surprisingly, perhaps, the deeper the discounts the more services that get billed.

Now Medicare is taking the lead in trying another strategy. Using authority granted under the Affordable Care Act, Health and Human Services Secretary Sylvia Burwell last month announced that in 2016, 30 percent of all Medicare payments would be in the form of programs tied to quality outcomes. That figure will rise to 50 percent by 2018. Big insurers are also insisting on contracts with incentives for better quality and lower cost.

In other words, my doctor might be paid a designated sum for specifically making sure I was healthy, but not for a variety of tests. If I needed a knee replaced, the hospital would charge a single amount, and not for the scores or hundreds of components that now make up such a bill.

This kind of “bundling” would make comparisons among providers more transparent, more accountable and possibly even more competitive.

USC Keck is already adjusting to the new realities. About 50 percent of its business comes from Medicare. It is big enough to employ efficiencies of scale in its labs and in new electronic health records, among other departments. It is confident that it can sustain patient quality and still make a buck, even as it adjusts to the new financial pressures.

Not so my previous doctor. His office has a lot of overhead sunk in X-ray, EKG and ultrasound equipment. And the expense of digitizing all those paper patient records, as new regulations require, is huge.

No wonder he retired.

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