Perspective
Payment Reform and the Mission of Academic Medical Centers
N Engl J Med 2010; 363:1784-1786November 4, 2010
- Article
U.S. academic medical centers (AMCs) are facing new challenges to their financial well-being. As payers seek to control health care costs, teaching hospitals and their medical staffs can anticipate continued payment reductions. Under the fee-for-service system, hospitals respond to payment cuts by increasing their volumes of admissions and ambulatory services while improving efficiency. Although costs per case may decline, overall costs do not. The inevitable result is a further reduction in per-case payments, and the cycle continues — with many undesirable consequences. Costs are inflated, and the quality and safety of care are eroded as the result of unnecessary or inappropriate tests and procedures.
Rather than perpetuating this cycle, AMCs stand to gain by exploring payment reforms that promote evidence-based, rather than income-driven, care. Several such reforms are being proposed or tested, including payment per episode of illness, various forms of capitation, and an annual payment for the care of a defined population. Any of these approaches may include extra payments for meeting or exceeding quality standards. Commonly referred to as bundled payment, these approaches reflect the principle that health care providers should be reimbursed on the basis of the outcomes of care, not the inputs used to achieve them. Bundled-payment programs thus prioritize the discriminating use of health care resources, and the evidence shows that they can achieve cost savings while preserving hospitals' revenues and physicians' incomes. Despite concern that bundled payment may cause underutilization of services, experiments have shown that it does not have this effect. Some experts therefore predict that health care organizations will increasingly embrace bundled payments.
Recent reports from the Institute for Health Care Reform and the American Hospital Association outline the issues raised by bundled payment and its relevance to AMCs.1,2 There are good reasons for AMCs to explore bundled payment: it is more consistent with their core values than is fee for service, and their teaching and service missions can benefit from its successful implementation — in part because by discouraging the unnecessary use of tests and procedures, bundled payment would encourage students and residents to hone their ability to diagnose disease through careful listening and physical examination. Recent generations of medical students have been seriously deficient in these skills, owing to increasing reliance on the myriad tests and procedures available at AMCs. Yet most diagnoses, particularly those made in the physician's office or the emergency room, can be made by means of careful medical history taking and physical examination. Tests are then used principally to confirm, not to seek, a diagnosis.
Some estimate that unnecessary or inappropriate tests and procedures account for as much as 20% of health care expenditures. Bundled payment will penalize providers for these wasteful uses of resources. In such an environment, medical educators must become more discriminating in the way they use and teach students about diagnostic tests and procedures. Critical assessment of resource use should become an essential element of teaching rounds. Criteria for appropriate uses of tests and procedures should be included in quality standards and pay-for-performance programs. Similar, albeit more liberal, criteria should be applied in evaluating trainees and students. Directors of laboratories and diagnostic imaging centers, for their part, must eschew internal competition for cases and help to educate faculty members and trainees about the most appropriate applications of various technologies.
In addition, in the context of direct patient care, faculty members should educate students and residents about how health care is organized and paid for and how to measure the financial effects of the treatments they recommend. Residency-program directors and deans for medical education should consider how these and other approaches to appropriate resource use might be applied wisely and effectively, regardless of the payment method.
Although educating cost-conscious physicians is a desirable end in itself, these lessons would be more effective if cost considerations were incorporated into practice in rational decision making. What is the likely incremental diagnostic value of the test or procedure? Will the result influence treatment? What are the risks? If teachers, particularly trainees, routinely raised such questions, students would follow their lead and carefully weigh the consequences of unnecessary tests and procedures. Payment reform may be the stimulus that finally gets physicians to use health care resources wisely — a responsibility that some of us urged our colleagues to take on decades ago.3,4
Achieving these educational objectives will not be easy. The intense pace of hospital work is not conducive to a reflective approach to resource use. Fee for service may remain the system of choice for some services. Not all AMC faculties will buy into the imperative for cost control. Some risk-averse physicians will always elect to do more to avoid the possibility of missed diagnoses or undertreatment. There are, however, some converging trends promoting these educational objectives: AMCs' expansion of primary care services, their evolution into accountable care organizations, the emergence of the concept of the advanced medical home, and the increasing amount of time that residents spend in ambulatory care settings.
In addition, bundled payment may promote better teamwork between doctors and nurses. Medical and nursing educators have long talked about the importance of interprofessional learning, yet successful programs are rare. In most hospitals, much of the work of doctors and nurses is not as integrated as it should be. Except in intensive care units, communication is too often indirect. Nurses' observations are usually documented separately from those of physicians, as are the treatments they provide. Bundled payment will be an incentive for hospital leaders to help their medical and nursing staffs reduce these inefficiencies by integrating their work more effectively. Among the results should be an improved learning environment for students of all the health professions.5
Bundled payment may also improve the environment for primary care providers at AMCs. The presence of a strong, professionally satisfied primary care group is essential for the successful implementation of bundled payment — and for producing graduates who wish to pursue careers in primary care. Many department heads at leading medical schools still see their mission as training subspecialists only. But many physicians who enter practice after completing their residencies or fellowships settle within 50 miles of where they trained. So if there is to be a strong referral base, faculties must understand the importance of vigorous academic primary care programs.
Bundled-payment systems will require AMCs to address income disparities between primary care physicians and subspecialists — disparities that tend to be less pronounced in highly integrated delivery systems. AMCs will need to develop more centralized financial systems and management philosophies, although doing so will require a culture change at medical schools. High priority must be placed on recruiting faculty members committed to the health of the overall enterprise. Faculty search committees will need to focus less on candidates' research accomplishments and more on their leadership skills.
Some argue that bundled payment will place AMCs at a financial disadvantage, but these centers have thrived regardless of how they are paid. They are the sole providers of many complex services, and the fact that private insurers pay them more than community hospitals for less complex services reflects their competitive advantage. Academics who collaborate with industry in developing medical products will continue to introduce new technologies; under a bundled-payment system, the key will be to determine, early on, whether each technology truly has an appropriate and necessary role in patient care.
I would urge medical and nursing educators to begin a dialogue with the directors and governing boards of teaching hospitals about the importance of payment reform in preparing students to become wise stewards of health care resources. These leaders, through their national organizations, should explore opportunities for receiving bundled payments. As a start, the Association of American Medical Colleges and the American Hospital Association have expressed their support, in concept, for these payment reforms.
Disclosure forms provided by the author are available with the full text of this article at NEJM.org.
Source Information
From the University of Rochester School of Medicine and Dentistry, Rochester, NY.
- References
References
1
Hoangmai HP, Ginsburg PB, Lake TK, Maxfield M. Episode-based payments: charting a course for health care payment reform: policy analysis. Washington, DC: National Institute for Health Care Reform, 2010.
2
American Hospital Association Committee on Research. Bundled payment: AHA synthesis report. May 2010.
3
Griner PF ,Liptzin B . Use of the laboratory in a teaching hospital: implications for patient care, education, and hospital costs. Ann Intern Med 1971;75:157-163
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Hiatt HH . Protecting the medical commons: who is responsible? N Engl J Med 1975;293:235-241
Full Text | Web of Science | Medline5
Gittell JH . A relational model of how high performance systems work. Org Sci 2010;21:490-506
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