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A new system to control costs puts doctors on fixed budgets to treat patients. Will it be good for consumers?

By Arlene Weintraub
Globe Correspondent / February 6, 2011

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The drive to control skyrocketing health care costs is pushing to the forefront a system that puts doctors on fixed budgets to care for patients, rather than reimbursing them for each procedure they perform.

This system, known as global payments, is expected to be widely adopted over the next few years, according to health industry analysts. In Massachusetts, several health insurers, including the state’s largest, Blue Cross Blue Shield of Massachusetts, are already experimenting with global payments. Meanwhile, Dr. JudyAnn Bigby, the state’s secretary of health and human services, is preparing legislation that is expected to propose that all health providers in the state adopt global payment models.

So what would that mean for patients? Under the hoped-for scenario, they are likely to undergo fewer unnecessary tests and procedures and get more personalized attention from their doctors. And if global payment works as proponents hope, patients may finally get a break from relentless increases in health insurance premiums.

When Dr. Richard Lopez, chief physician executive at Atrius Health, the state’s largest independent doctors group, is asked to describe the impact of global payment, he offers a vignette about an imaginary overweight man named Steve Johnson.

If Johnson were to visit a physician who participates in a global payment plan, he would get more than an admonition to lose weight and eat better. That’s because the plan awards bonuses to doctors for keeping patients healthy.

The doctor would send Johnson down the hall to see a health coach, who would put together a weight-loss and exercise plan. Johnson would then be able to log on to a website to see blood test results, schedule doctor visits, and send e-mails about his progress to his health coach. As Lopez imagines it, Johnson would lose 20 pounds while getting his high blood pressure and cholesterol under control.

“Under global payment,’’ Lopez said, “patients can expect better coordinated care, and more touches in between their doctor visits.’’

Global payment systems have emerged in the last few years as a potential solution to the rising costs and quality concerns of traditional fee-for-service approaches. Although global payment models vary, they all operate under the same basic tenet: Health insurers work with physician groups or hospitals to determine fixed budgets, based on past spending to care for patients.

To manage care within those budgets, doctors, hospitals, and other providers across the health services spectrum would form networks or alliances called accountable care organizations. Potentially, some health care specialists worry, global payment could restrict patients’ choices by forcing them to get all their care from narrow health networks.

“It’s the subject of much debate,’’ says Ann Robinow, a health care consultant in Minneapolis. She predicts, however, that most patients would continue to have a choice of health plans, including those that provide easy access outside of networks.

At first glance, global payment may seem similar to capitation models that HMOs adopted in the 1980s and ’90s — and then abandoned in the face of a broad political backlash.

In those days, doctors were paid a flat fee per patient, regardless of the patient’s health — a system that limited access to care and indirectly rewarded doctors for avoiding the sickest patients.

By contrast, global payment systems are “risk adjusted,’’ meaning they don’t treat all patients the same. A practice that sees many people with diabetes or chronic heart failure, for example, would probably get a higher budget than one that serves mostly healthy patients.

Another major difference: an intense focus on quality. Global payment plans pay bonuses to physicians who adhere to certain quality measures, such as keeping a diabetic patient’s blood sugar under control.

The goal of global payment is lowering costs by keeping patients healthy and out of the hospital. Nearly $600 million, or 8 percent, of Massachusetts hospital admissions in 2006 were for conditions that could have been treated in doctors’ offices or prevented altogether, according to a 2009 state report.

Proponents say savings from global payment would ultimately benefit consumers by limiting increases in premiums, which have risen rapidly over the past two decades.

“The cost of care cannot continue to go up year after year,’’ said Deborah Devaux, a senior vice president at Blue Cross Blue Shield of Massachusetts. “All of us need to recognize that the community is asking us to be more efficient.’’

Ideally, say industry executives and analysts, the transition to global payment would be invisible to most patients, who would continue to choose from a menu of employer plans offering different services, rules, and costs.

Chronically ill patients, such as those suffering from high blood pressure, are likely to notice the biggest changes. For example, they may receive more frequent calls from their doctors urging them to come in for tests to track the disease and effectiveness of treatments.

But all that coordination among doctors and patients requires real-time data, meaning expensive technology upgrades that may not be affordable to small practices. As a result, critics say, a state-mandated global payment system may prompt some physicians to retire and others to join larger practices, leading to fewer choices for patients.

“We’ve already seen significant consolidation,’’ said Dr. Neil Minkoff, medical director of the Massachusetts Association of Health Plans, a Boston trade group. “I worry that smaller, independent providers will need to join larger entities in order to compete.’’

Both supporters and critics of global payment agree that any mandate should be flexible, and phased in slowly, so patients and providers can adjust. Thomas A. Croswell, chief operating officer of Tufts Health Plan, suggested a five-year transition.

“We think the change makes a lot of sense,’’ he said. “But change is always disruptive.’’