Diagnostics & Imaging Week Washington Editor

BOSTON – In an afternoon keynote on the second day of the Pay-For-Performance leadership summit, Arnold Milstein, MD, of Mercer Human Resources Consulting (New York), provided the payer perspective on P4P, bringing with him several years of experience as a member of the Medicare Payment Advisory Committee (MedPAC).

He said that the No. 1 problem with healthcare in the U.S. today is "rapidly spreading unaffordability," in large part driven by waste.

"There appears to be an opportunity" to save as much as 50% on the nation's healthcare tab "without reducing quality of care," Milstein said, basing his comments on a 2005 study by Rand Corporation (Santa Monica, California) that detailed a variety of metrics of healthcare in the U.S.

Another metric is the well-known numbers of America's uninsured.

"Most of us in this room are in the lucky half" of Americans who can afford fairly comprehensive healthcare coverage, he said. Those who cannot afford any coverage at all are in no enviable state, but that the "middle quintile of income" is feeling the greatest pressure for finding affordable care.

The MedPAC commissioner referenced a Dartmouth College (Hanover, New Hampshire) study indicating a "gap" in spending between the lowest-spending regions and all other regions in the U.S. He characterized the difference in spending for these equal outcomes on the order of 30%. He termed these equal outcomes as "quality-neutral."

Furthermore, he posited little difference in healthcare quality between the "lowest-spending providers and all other providers within the lowest-spending regions," to which he chalked up a cost differential of 15%, and a gap between the lowest-unit cost care delivery methods and all other methods, crunching out to a difference of 20% to 30%.

He said the quality-neutral outcomes didn't result from "lack of conscientiousness" in caring for patients, but rather "a medical miracle-powered shark" that devours resources disproportionately to the benefits delivered. Not only are these medical miracles more expensive, they often are more time-consuming to administer.

Thus, he showed numbers indicating that inflation of healthcare expenditures outstripped real GDP growth by 4% in 2003 and will likely outstrip GDP growth by 3% in 2006, the bulk attributable to the latest medical thing.

To stem the tide, society must "rapidly adopt" today's most cost-effective delivery methods and "perpetually gain efficiency to out-swim the medical miracle shark," he said. This would have to be accompanied by a transition from "making quality fairly reliable" to "making quality highly reliable."

"Your only chance of changing healthcare is to employ a few simple rules," he argued, in the process eschewing lots of arcane regulations and standards.

The first of these simpler approaches, he said, is transparency. "In the absence of that, nothing else will happen," Milstein said.

Much of the transparency he advocated relates to cost, noting that the difference in cost between U.S. and overseas providers has fueled a surge in medical tourism that has surfaced over the last few months.

Reinforcing this point, Milstein referenced a study published in Health Affairs in July 2005 showing that 35% of State of Wisconsin hospitals that made public the results of a review of their obstetrics services improved those services, whereas less than 5% of this group experienced a decline in obstetric services quality.

Of those hospitals whose reports were held in confidence, more than 20% showed significant improvement; nearly 15% showed some decline.

His second simple rule would be to design health plans that are sensitive to performance and to provider payments.

The third principle would be "faster discovery and uptake of care delivery innovations," all of which would be followed, hopefully, by "large annual gains in affordability and quality."

He quoted Robert Pearl, MD, CEO of Kaiser Permanente Medical Group (Oakland, California), as saying that "medicine . . . is a century behind in applying technology effectively." Assuming this is the case, adoption of technology will aid society's efforts to make healthcare more affordable.

And he offered the view that U.S. physicians will be leaders in this effort. "American doctors take pride in their work and once they're aware" of deficiencies, they will take action, assuming decent options are available. Public disclosure can add octane to that effect, he said.

But as with much of Milstein's commentary, the silver linings surrounded some rather large clouds.

For instance, he noted the many impediments to adopting a more-effective, less-wasteful approach to healthcare.

One of these, he said, is bilateral complacency, a mindset in which practitioners agree that there is waste, but that the individual who is asked about systemic waste will insist that the problem lies elsewhere. And patients do not see medical resources they require as wasteful, but that the problem results from the unnecessary procedures for others.

For the physician he noted a moral hazard – that if he or she does not experience waste there is no motivation to avoid it. This then supports the need for more transparency; the appropriate use of standards of care and concomitant disclosure of actual practices would make waste more apparent.

Milstein said that the biggest single impediment to the adoption of P4P is none of these. He said it is the providers who lose out on performance-based pay. These providers might then create distractions and leverage their resources to derail P4P.

He urged attendees not to let such a scenario rule the day.

"It's up to us to build a system that will capture that 2.5% savings" and keep healthcare affordable long into the future, Milstein said.