Delivery System Needs to Be Re-Examined

By Harvey Billig

With the pending expansion of healthcare insurance to  millions of newly insured, it is time to re-examine the delivery system if one  wants true reform that is financially sustainable. This requires an analysis of  how to integrate doctors, hospitals, other providers, insurance companies and  pharmaceutical suppliers in a workable and affordable delivery model that can be  adopted relatively rapidly in most areas of the country.
This can be done  without creating new Kaiser Permanentes or large healthcare cooperatives by  means of loose coalitions of providers contracting with a cost-efficient  third-party administrator backed by a not-for-profit or for-profit insurance  company. The insurance company provides oversight and the necessary reinsurance  while physicians are the primary agents of utilization review.
This model is  called the community-based delivery system.

To address the elements of the model, one can best start  with considering the proper role of physicians. First, physicians are the best  ones to coordinate the care of patients and are already effectively contracted  in most cases by some percentage of Medicare reimbursement (i.e., 100% of  Medicare; 110% of Medicare, etc.).  Experienced actuaries can predict the number  of doctor visits for a given population, and this can be increased by also  paying physicians to head up the utilization review. My experience with at-risk  individual practice associations has given me an appreciation for the  effectiveness of this approach, and few physicians countenance overutilization  or poor medical practice by their peers. This also reduces the vast expense by  insurance companies in monitoring utilization. Physicians should be paid off a  standardized fee schedule with electronic billing and payment within five to 10  days. There is always the right to audit, and primary-care physicians should be  paid for case management services to control overutilization by confused and  concerned patients.
The next element is hospital services. There must be  reasonable and predictable charges for these services. The current system in  most states does not allow for regulation of hospital rates, but a number of  hospitals have been quite competitive. Perhaps  charges related to a premium  over cost report data might be one approach. Also in consideration would be the  expanded use of surgery centers and other alternative providers. It is important  to keep in mind that proper physician utilization review will reduce the  required hospital days as will proper case management (especially for  complicated cases).
The next consideration is to define the proper role of  insurance companies. First, it must be noted that insurance companies have a  vast level of experience in risk-rating, actuarial evaluation and re-insurance,  which are all required elements. The problem presently is that many large  insurers have inflated expenses usually because of ineffective utilization  review fraught with an excessive number of treatment denials (up to 30% or more  in some cases).  These denials lead to unnecessary expense at both the provider  and insurance-company level. An efficient system would have a third-party  administrator and an insurance company sponsor. The government might even  consider acting as the reinsurer in order to help mitigate extremely expensive  care (a form of catastrophic coverage). An exchange with open enrollment might  also allow for more insurance company competition with reduced marketing  expense.
The last element is the management of pharmaceutical costs.  Advancements in pharmaceutical research have provided us with many amazing  drugs, and a burgeoning generic market has helped many individuals afford  medication, but Americans are paying more than those in other industrialized  countries for the same medications. There has been the myth that Americans are  rich and should subsidize everyone else. The Veterans Affairs Department is able  to obtain less expensive medications, but others cannot. Community-based  delivery systems must be able to obtain affordable medications.
It is time to  get serious about the problems with the delivery of healthcare in the U.S. Any  expansion of coverage with an inefficient delivery system will surely bloat the  budget of all concerned. Additionally, there is the opportunity to create a  unique American model employing the newest and most cost-efficient methods and  modalities in a flexible manner.