02/09/2012 11:55 am ET Updated Apr 10, 2012

Health Care Cost: Small Fixes Won't Cut It

The influential Congressional Budget Office (CBO) recently issued a disheartening report showing that 10 Medicare demonstration projects designed to reduce health care costs were largely ineffective. The results were surely discouraging, but perhaps not entirely surprising.

The report looked at six demonstrations focused on disease management and care coordination, and four focused on payment reform, in Medicare's fee-for-service program.
Disease management and care coordination programs aim to help patients with chronic illnesses learn how to monitor their symptoms and change their behaviors to manage their disease more effectively. Most importantly, care managers can help ward off health declines and avoid the use of expensive health care services. Payment reform programs change the financial incentives to reward health care providers for delivering high-quality care more efficiently.

Some useful lessons emerged from the disease management initiatives (for example, hospital readmissions and Medicare costs were lowered in the programs where care managers and physicians had more frequent and more in-person interactions with patients), but cost savings were not sufficient to offset the fees associated with the intervention.

On the payment reform side, one bright spot emerged: a bundled payment demonstration involving seven hospitals and associated physicians reduced spending by approximately 10%, without compromising quality. The other three payment reform demonstrations, which paid bonuses to health care providers who achieved certain quality or efficiency benchmarks, produced little or no savings.

How could this be?! Haven't all of the health care pundits -- even me -- been beating the drum that, if we really want to get health care costs under control, we need to do a better job with disease management, care coordination, and payment reform?

Well, yes. And I will continue to beat that drum.

What I take away from the unsuccessful demonstrations is not that we should throw up our hands and move away from care management and payment reform. Quite the opposite: we can't make meaningful change by tinkering around the edges of a broken system, so we need to get serious about an overhaul of our payment and delivery systems.

The CBO report says to me that we need:

  • Real payment reform that eliminates the fee-for-service model. Today, our system rewards more care, not better care. A bundled payment approach, like the successful demonstration program evaluated by CBO, would encourage coordination of care, reduce unnecessary procedures and duplication of effort, and improve efficiencies. Here in New York, Montefiore Medical Center is steadily moving toward this model; Maimonides and NYU also are preparing to try out the bundled payment idea.
  • Functional health care teams. Effective care coordination requires a team of health care providers: physicians, nurses, pharmacists, social workers, community health workers. Each team member needs to play the right role. For example, the care coordination demonstration programs all used nurses as care managers, but perhaps a nursing assistant or a diabetes educator could perform that role as effectively, but more efficiently. Transformation within a system requires leadership, commitment, and buy-in from the top, but also from the frontline providers who care for patients every day and will need to change the way they practice. And, it requires the skills to do so. I know many physicians who would embrace the team-based model if they had the right coaching to be effective team members, but their training and practice has prepared them to deliver care within a solitary and hierarchical structure. Changing the structure of the care team is not an easy task!
  • Timely availability of data. The CBO report found that providers who had real-time access to information about patients' hospital admissions, emergency department visits, and interactions with other members of the health care team were more successful in reducing Medicare costs. Electronic medical records and information-sharing are key elements of successful delivery system reform. And, because many patients float from provider to provider, we need to link key health care information across a range of health care practices and hospitals.
  • Better mechanisms for identifying the highest-need, highest-cost patients. The more successful demonstration programs targeted their interventions to a set of patients who were most likely to require frequent care (for example, patients with multiple chronic health condition, or those who had been hospitalized recently for complications related to a chronic illness). A targeted approach offers the best opportunity for significant gains in quality and efficiency for the patients who can benefit most.

I see real promise and opportunity for big, bold changes in our health care system. Health care providers throughout New York State and across the country are experimenting with new models of health care payment and delivery -- health homes, patient-centered medical homes, accountable care organizations -- focused on reforming our current system, not just layering on new processes or making small tweaks. Not every experiment will work, not every intervention will be successful, but we have a unique window to try -- and maybe fail, and try again--to make meaningful, lasting change in our health care system.