Spotlight on payment reform in Massachusetts

The September issue of Health Affairs is focused on new ways of paying for health care, and it is chock-full of contributors from Massachusetts.

A major piece of payment overhaul today is the idea that doctors will change the way they manage care for their sickest patients if they get to share in some of the financial benefits of doing so. Ultimately, they could also lose money if they cost insurers more than expected.

A group of Boston researchers have created a primer for doctors and policymakers considering such shared-savings programs, which lead author Joel Weissman, Harvard professor and deputy director of the Center for Surgery and Public Health at Brigham and Women’s Hospital, called “way stations’’ on the road to a fuller health care overhaul.


Many large doctor or hospital groups already have the infrastructure and know-how to assume some of the risk in caring for their patients, or to accept the possibility of losing money. Five hospital systems in Massachusetts are taking steps to do that as part of the Medicare Pioneer program.

“Small practices just need to be brought along gently,’’ Weissman said in an interview. Even the benefits-only programs are “very complicated and very difficult to negotiate,’’ he said.

Along with Needham health care consultant Michael Bailit and others, Weissman laid out a set of principles for policymakers and physicians to consider. Payers and providers must agree on the point at which they will share savings, because smaller variations in costs could be related to chance and not actual changes in how doctors treat patients, they wrote.

As often as possible, they said, payers should join forces so that doctors are not trying to meet different goals on cost and quality for each insurer.

“The lack of a coherent and unified program works at cross purposes with true system redesign,’’ they wrote. “If only a minority of payers participate, then the size of the incentive may not be big enough for provider participation to be worthwhile. As a result, providers find themselves with one foot in the accountable care world and another foot in the volume-based world.’’


Austin Frakt, Boston University assistant professor and health economist at VA Boston Healthcare, compared accountable care organizations with the failed capitation model of the 1990s, when doctors were put on a strict budget for each patient’s care.

“Is history doomed to repeat itself?’’ Frakt and Rick Mayes, a researcher at the University of California, Berkley asked. They explained that ACOs are different than the 1990s model: They provide stronger infrastructure for providers to change their practices. They include systems for sharing savings or losses with doctors rather than instituting hard caps on payments. And they include incentives for improved quality of care, not typical under capitation.

But time will tell, they said, whether accountable care organizations will do enough to keep doctors from short-changing patient care to save money or to help doctors understand and adjust to the new financial framework. Another challenge is the influence of market power as hospitals and doctors merge into large provider networks.

The authors wrote:

We believe that the new payment models being pursued under health reform have sufficiently evolved from the failed capitated arrangements of the 1990s to make them a worthy experiment. However, some observers are skeptical that newer models can save a sizable amount of money, arguing that only full capitation or similar models will do so. Yet as we explained, policy makers and stakeholders are justifiably wary of repeating the failed capitation experiment. It is not yet evident how to resolve this Catch-22. Full capitation did not succeed, but models that fall short of it might not, either.


The United States remains in the same situation it has been in for decades: unsure of how to bend the cost curve while maintaining or improving the quality of care. With accountable care organizations, the search for the sweet spot between provider and payer risk continues.

In another article, Brandeis health economist Stuart Altman looked at the benefits and pitfalls of a new program by Medicare to “bundle’’ payments, paying hospitals and doctors one fee for treatment of each patient with particular conditions, such as a hip replacement.

Dr. Thomas Lee, chief executive of the physician network for Partners HealthCare, is lead author on a paper that examines Geisinger Health System’s method of tying about 20 percent of salary to measures of quality of care, research, and financial performance for about a third of its staff physicians.

Lee is a member of the system’s board of directors. He and executives from the Pennsylvania health system explained that some of the performance-based pay is tied to how many units of service the doctors perform. In other words, doctors get more money for providing more care at a time when state and national health policy is moving away from incentives for doctors to perform more tests and treatments.

“This approach acknowledges the reality that as long as fee-for-service payments remain common, the volume of services performed will be an important factor in an organization’s financial health,’’ the authors wrote. “Nevertheless, Geisinger’s experience over the past decade suggests that fee-for-service productivity can coexist with incentives to improve quality and efficiency within the same compensation system.’’



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