As an internist (a PCP for adults), one of my greatest challenges was finding a good specialist pool when referral was necessary. A specialist should be well-trained, judicious in use of resources, and at least reasonable in bedside manner. Interestingly enough, the best specialists were already the most judicious in their use of resources. At the other extreme were specialists from whom my patients needed “rescue”. There were a surprisingly high number of such specialists. One who was especially notable was a vascular surgeon who insisted that the majority of his patients needed quarterly ultrasounds of either their carotid arteries, abdominal aorta, or peripheral arteries in his office. Sometimes, he would do ultrasounds of all sites. He had no medical “indication” for doing these tests by standard indications. When patients asked him about the unusual frequency of testing, they were assured that the tests were necessary and not to worry since their insurance would pay for it. He was quite well known in the physician community but little could be done since his behavior was not illegal (immoral was an entirely separate question). If the money he took through unnecessary ultrasounds could have somehow been redistributed, thousands of unvaccinated children would have been vaccinated without cost to them.
The problem with the current system is that it is mostly “fee-for-service”. A physician (or hospital) would bill for services performed with varying degrees of oversight. Often, that oversight would miss the mark. On the one hand, the above noted vascular surgeon performed unnecessary ultrasounds screenings for many years apparently without much difficulty (mostly on Medicare patients). On the other hand, there were people like myself who needed to choose in order multiple different types of screenings. 1 of the most toxic methods insurance companies had of “controlling costs” was “preauthorization”. That is a statement from a physician to the insurance company describing why it should fund a test or procedure on an insured patient. One (again, of many) such example for me would be a patient with severe COPD who developed shortness of breath with fever and probably was developing pneumonia. In some clinical situations, I would bypass the emergency room evaluation and order a “stat” chest CT. Because many patients with severe COPD had uninterpretable chest x-rays, it was often necessary to jump straight to a CAT scan to discern the information that was necessary. However, to do this, it was often necessary to petition insurances for permission to do the study via preauthorization. In my example above, often the CAT scan would be disallowed because a chest x-ray had not been done. This is because the insurance screener, often an overworked, registered nurse was guided by a list of the preferred sequence of investigations on a page written by the insurance’s utilization review committee. However, knowing that previous chest x-rays on this patient showed chronic, obscuring changes such as emphysema and fibrosis, the best thing for the patient as well as the more cost-effective evaluation would skip the chest x-ray as noted above. To do this, most insurance screeners would require me to schedule an “audience” with a medical director who could allow me to bypass the chest x-ray. That was a very time-consuming process. I and my supporting administrative staff could easily spend 1 hour on 1 patient just trying to get a simple CAT scan ordered. Complying with the insurance company’s Byzantine protocol for obtaining a timely test which is not on their authorized list was quite exhausting, if not demoralizing.
So, the above 2 situations show the 2 sides of the same coin. In the first situation, the insurance company (i.e., Medicare) did not have the means to detect an overuse of certain expensive procedures, in this case ultrasounds of vascular structures (this is a common situation with the Medicare program). Absent that ability to detect procedures done without merit, the fee-for-service model continued to reimburse the vascular surgeon. On the other hand, when many physicians such as myself attempt to order special procedures for patients (especially commercial insurances), a preauthorization is often required and the procedure might be deemed “not indicated”. Even though frequently special procedures are necessary for the best patient care, the preauthorization will be denied unless the ordering physician can successfully appeal the decision to the medical director. This second case is unusually vexing since it is clinically the right thing to do for the particular patient and it will also save the insurance company money. However, given how much time and resources it takes to get an approval from the medical director on appeal, many physicians may bypass what is most ideal for both the insurance company and the patient and simply order the chest x-ray and then the CAT scan. A waiting room full of patients dictates this expediency. In this case, the preauthorization actually costs the insurance company more money.
Indeed, according to the Bureau of Labor and Statistics (8/2/24), our medical insurance system, a hybrid of government (Medicare, Medicaid) and commercial/market-based programs, has not at all controlled medical costs. Using the year 2000 as a baseline through 2024, the Consumer Price Index for all Urban Consumers (CPI-U) for medical care has increased 121.3%. In comparison, for all consumer goods and services the increase has been 86.1%. Put another way, medical costs have increased at a rate 40% more than the rate of all costs combined. So what is the answer to this exponential (literally) monster?
The answer, in combination with all the measures discussed previously, is global capitation. Each month, a responsible care entity would be paid a fixed fee per patient. Based on information reported earlier, the United States spends about $13,490 /patient/year. So as a hypothetical starting figure, a responsible entity would be paid $1100/month/patient for all of their medical care. Then, the responsible entity would (initially) have a hypothetical 1,000,000 patients for which to care. So each month, the responsible entity would receive $1.1 billion, a fixed amount, for all of its patients. The number of patients under care would have to be large so that averages would be predictable. Immediately, all such entities would be compelled to improve the health of its patient population to reduce costs. Utilization of services would be more closely monitored. Most importantly, preventive services and early interventional services would quickly be emphasized. From earlier in this article, the useless and frankly immoral repetition of services (i.e., frequent vascular ultrasounds) by the vascular surgeon would stop because he would no longer be given extra money to do unnecessary tests. Indeed, for his panel of vascular patients, he would be given a fixed sum per month also. Screening, preoperative care, operative care, and postoperative management of members of his panel would all have to be done for a fixed sum. For checks and balances, if this vascular surgeon was not treating the panel of his patients well, the patient’s primary care physician would pull them from him and refer them to another vascular surgeon. Additionally, preauthorization would no longer be necessary. Since the responsible entity will pay no extra money for services deemed necessary by the PCP, preauthorization would not affect any bottom-line. Indeed, from top to bottom every aspect of healthcare administration would be immediately subject to review and streamlining. Currently, thousands of billers spend millions of hours just trying to appeal denials of payments each and every year. That cost would instantly evaporate.
Let’s think about this even more carefully.
Clearly, any healthcare entity working under the global capitation model will emphasize more attention early in the disease course or, using the Markovian model terminology (see the article of June 1, 2024), “upstream”. This is the natural consequence of saving money by not letting a disease progress. By shifting the emphasis to earlier treatment, the patient and the healthcare organization both benefit. Indeed, there is a direct alignment of incentives. Hypertension is an example (1 of a great number of disease processes), which if prevented or successfully treated, would prevent costly disease states such as “strokes”, “heart attacks”, kidney failure, and many other diseases which compromise (if not kill) patients and are expensive to treat. Under global capitation, the system will emphasize primary care methods (prevention, early intervention, and the like) and avoid costly treatments like thrice weekly dialysis treatments. Currently, Medicare will pay fee-for-service for each and every new patient who succumbs to renal disease and needs dialysis. The incentive to prevent this is quite limited. However, under a new system in which the carrier is not paid a single cent extra for each new dialysis patient, we will see all sorts of creative incentives for prevention. Yearly blood work for serum creatinine and urea will be monitored. Urinary albumin will be screened. These screenings are quite inexpensive. Risk factors will be discussed and addressed at the yearly physical exams. Earlier referral to a specialist (in this example, nephrologists) would be made by the primary care physician if the PCP could not reverse the renal damage. With universal healthcare, emphasis on prevention of hypertension by educating patients will be standard. Depending on one’s source, only 50% of patients get routine physicals. With everyone covered by universal care, that major obstacle will evaporate.
Put still another way, the treating healthcare entity will “feel” a financial incentive gradient to treat people better and earlier.
Acknowledging the obvious, in spite of all this vigorous emphasis on prevention and early intervention, many will still become quite ill and need critical care or other expensive services. However, fewer patients/year will need these expensive interventions because they will have been found “upstream” and their health preserved.
Under global capitation,
- Insurance companies as such will no longer exist. Replacing them will be leaner organizations which I call responsible care entities.
- Physicians will not have to spend countless hours/year fighting utilization reviews within insurance companies as there will be no pre-authorizations or post-date reversals. More patients will be seen per unit time.
- The best physicians, who know what to do and, therefore, treat patients well and efficiently, will be rewarded based on their superior patient outcomes. Colleagues will improve their practices by learning from these peers.
- Siloed physician care, i.e. care by an insular, group of physicians with short-lived patient interaction(e.g., ER physicians, hospitalists, physiatrists, etc.), will be incentivized to contact and coordinate with the patient’s PCP for best possible outcomes.
- By emphasizing “upstream” care, the responsible care entity will quickly identify the need to have a good balance of different physicians (healthcare ecology). With fewer patients progressing to chronic disease states, fewer specialists will be necessary. The specialists who are in the organization’s panel will be busier and need their primary care colleagues to refer appropriate cases to them. For example, stable renal patients need not see a nephrologist every quarter unless that stability changes. Therefore, there will be higher demand for PCPs whose threshold for referral reflects their good training. Well-trained PCPs will be reimbursed sufficiently to attract medical students into that field because the pay differential between primaries and specialist will narrow.
- Financial policies for patients will be carefully developed. Patient compliance is critical for successful, efficient medical care. Consideration of the patient’s financial and social situation will dictate more decisions.
- Patient overall satisfaction will be emphasized and paramount because satisfied patients are more likely to comply with their regimens.
Global capitation with the proper checks and balances will refocus care on what’s best for the patient. This is long overdue.