ALBUQUERQUE, N.M. — Last week’s news that ABQ Health Partners, a 184-physician medical group, will no longer accept Lovelace Health Plan insurance is a very big deal, and not just because a lot of patients will have to decide whether they want to change doctors or change insurance.
The relationship between the companies has run aground over what most experts say is a key question that must be resolved if health care delivery is ever to become efficient: Can we change the way physicians and other health care providers are paid for their services?
Navigating that change successfully is essential to solving the problem of rapidly escalating medical costs. The dispute between Lovelace Health Plan and ABQ Health Partners shows that meaningful health care reform isn’t as simple as one would hope.
Health policy experts have long argued that providers’ financial interests don’t align with the interests of insurance companies, the employers and governments that pay most of the nation’s health care bills, and the patients.
Providers get paid when they provide a service. More services mean more money. Thus, there is little financial incentive, for example, to set up efficient systems to ensure tests are necessary and that they aren’t repeated unnecessarily.
Medicare, Medicaid and most insurance companies reimburse doctors for treating diseases and performing procedures, not for keeping people healthy. Doctors generally get paid no matter how poor or inefficient the care they offer might be. As ABQ Health Partners CEO Harry Magnes puts it, under the current system, sick people are an asset to medical practices and healthy people are a liability.
On the other hand, healthy people are an asset to insurance companies, employers and government payers. They are cheaper to care for than sick people, and healthy people are more productive workers. For all of us, good health is not only less expensive than illness; it is its own reward.
So while providers have financial incentive to provide unnecessary and inefficient care, insurance companies, governments and patients all have a financial stake in improved and more efficient care.
The challenge is coming up with a way to pay physicians and other providers so they make money by providing improved and more efficient care.
ABQ Health Partners’ solution is to merge with HealthCare Partners, an 8,300-physician group based in California. This merged practice will start offering what it calls coordinated care. If it works as intended, instead of treating a child’s asthma and sending him home, the practice might send a social worker to inspect the home for roof leaks that cause mold that can cause asthma. Instead of treating a diabetes patient’s retinopathy, the practice would assign a case manager to coordinate all the services a diabetic needs, including guidance from a dietitian. Instead of ordering a second test if the first test results are lost, the practice has an incentive to make sure test results are never lost.
Healthy patients would become an asset to the practice.
Magnes wants Lovelace to give the practice a percentage of the premium it receives for each person it insures who wants to see an ABQ Health Partners doctor. The practice would spend that money pretty much as it wishes. In return, Magnes and the rest of the doctors would promise to do everything the Lovelace customers need, no matter what the problem, no matter what the cost.
In principle, Lovelace is fine with this. It has been experimenting with these kinds of innovative payment mechanisms for some time.
Lovelace Health System CEO Ron Stern said last week the insurance plan’s problem wasn’t with the dollars but with the risk the doctors say they are prepared to take.
Insurance companies earn their money not by crafting benefit plans and cutting checks to hospitals. They earn their money by taking risks – and they can be substantial. Molina Healthcare of New Mexico once saw its entire year’s profit wiped out by the cost of caring for just two very ill children.
Insurers mitigate risks by anticipating them through complicated actuarial modeling, by keeping enough reserves to see them through if they underestimate the risk, and by getting enough customers under contract to spread the risk.
Lovelace says it isn’t certain ABQ Health Partners is up to that task. If the practice underestimates its costs, Lovelace is still on the hook to make sure its members get the care they require. Plus, it isn’t in Lovelace’s interests to see a large medical group fail if it doesn’t handle the risk properly.
Beyond that, Lovelace says it’s not sure what ABQ Health Partners is proposing is even legal. Insurance companies are licensed in New Mexico to assume risk. Medical practices, until now, are not.
The companies’ relationship is further complicated because Lovelace Health System is also a provider of care through its hospital network. Magnes says that to the extent patients are healthier, the number of patients in Lovelace beds goes down, and so does Lovelace’s revenue stream.
That may well be true, even though Lovelace has several programs in place designed to improve hospital quality and efficiency. Federal law and a very competitive marketplace make such programs a matter of survival.
A class-action lawsuit filed in California by a patient against HealthCare Partners suggests that in aligning some interests through its shared risk approach the practice creates a new divergence of interests.
The suit claims HealthCare Partners uses its control of health plan members to put large numbers of patients into the hospitals where it gets the best deals, and thereby lowers its expenditures and improves its profits. The suit says the patient’s preference for one hospital over another is subordinated to the practice’s financial agenda.
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— This article appeared on page A1 of the Albuquerque Journal