Time For Healthcare’s Market Press
What is the path forward for physicians who want to remain in private practice, outside the constraints of health system employment? How will the environment change and what new demands will that place on practices and physicians?
There are now concrete signs that healthcare’s purchasers are exhausted and seeking new solutions, that a competitive marketplace is emerging and getting increasing traction.
For decades, fee-for-service payment, inclusive health plan networks, and a lack of quality, safety and cost transparency have been enforced by health industry influence over policy, effectively neutralizing the power of market forces.
Without market pressure, physicians have felt little need to understand their own performance relative to that of their peers. The variation of physician practice patterns within specialties has been high, with some physicians’ “optimizing their revenue opportunities” by veering wildly away from evidence-based practice. Even so, until recently in this dysfunctional environment, it has been nearly impossible to identify high and low performers.
The impacts of this variation on cost have been staggering. Healthcare premiums – where costs throughout the system converge – have grown 4.5 times as fast as general inflation for more than a decade. Over the same period, personal healthcare expenditures – contributions to premium and out-of-pocket payments – have consumed $4 of every $5 dollars of the growth in household income, and the percentage of working age Americans (and their children) with private coverage fell by 14%.
While implementation of the health reform law dominates the healthcare news, there is little in it that will substantially drive down cost or improve quality, at least in the near term.
At the same time, though, a mushrooming cottage industry is dedicated to disrupting the many ways that healthcare organizations profiteer. Most are within niches – e.g., primary care, evidence-based formularies, chronic disease management, oncology benefits management – but a few have taken a more multi-vectored approach.
One of the most powerful of these mechanisms is the narrow, high performing network. A core tenet here is that “choice” in healthcare, particularly in the absence of performance information, is a false value. Giving patients’ access to doctors who consistently produce poorer outcomes at higher episodic cost does nobody any favors.
The logical solution is to identify physicians who produce better care at lower episodic cost, then contract with and steer to them. The smart money will also pay them higher rates for excellence.
Evaluating physicians is not difficult. It requires medical/surgical, full continuum regional claims data sets large enough to yield credible patient sample sizes for specific conditions.
Narrow networks built on this approach are exploding around the country. One firm I recently encountered has developed narrow regional provider networks in 138 markets around the country. The premium costs of members of Savannah Business Group, a small regional business health coalition that uses data to identify high performing providers and then contracts directly with them, are significantly below those of non-members in the same metroplex.
The business requirements of becoming market competitive are enormous. In an environment that must ultimately move away from fee-for-service to some form of risk, an ability to confidently manage a population of patients within parameters is paramount. Larger practices with more resources are necessary to finance the infrastructure required for this level of management, as well as to facilitate the team-based care that is needed to optimally manage clinical and financial risk.
When markets work, they lavish rewards for excellence and are unforgiving of mediocrity. Look at Toyota and Chevrolet, Google and Hewlett Packard, Costco and JC Penney.
Physicians will succeed who understand that the challenge is as much in business as clinical processes. Those who simply hope for the best probably will not.
