Weeding out waste: Policy workshop examines how the healthcare industry can finance a better model

• If the U.S. healthcare industry reduces wasteful spending, it would have an easier time funding some of the changes needed to support whole-person health.
• Scaling population health management is difficult because of the expense and expertise required for organizations to restructure their operations.
• One overlooked necessity is the establishment of a universal measure set.

As the U.S. healthcare industry makes an increasingly concerted effort to move to population health management, the key question is how to pay for such a transformation.

One prominent healthcare executive has an idea for where policymakers should start.

“[Healthcare] transactional costs are just extraordinary,” said Timothy Ferris, MD, who was CEO of the Massachusetts General Physicians Organization before taking a leadership position with England’s National Health Service this year.

“If we could pull those out and spend them on caring for people and improving their health — wow.”

Speaking at the National Academy of Medicine’s “Financing That Rewards Better Health and Well-Being” workshop, Ferris noted that frictional costs between insurers and healthcare providers amount to as much as $500 billion per year by some estimates.

If that money could be repurposed to help fund the infrastructure needed to support whole-person health across populations, the transition to true value-based payment would make significant strides.

An even more bountiful opportunity is available if policymakers and stakeholders can find the impetus to “not only pay explicitly for what we value, but to stop paying for other things that don’t align with those priorities,” said Mai Pham, MD, president and CEO of the Institute for Exceptional Care. “The fiscal opportunity there is tremendous, probably way more than the $500 billion in frictional costs.”

For that to happen, incentives need to change, said Len Nichols, PhD, nonresident Fellow of the Health Policy Center at the Urban Institute. He cited the example of Bon Secours Health System, based outside Baltimore, where community health metrics are included in the CEO’s compensation package.

“If CMS were allowed, with Congress’s help, to require that kind of stuff in the incentive and compensation packages, I guarantee stuff would change quickly,” Nichols said. “I promise you it’s doing so in Baltimore.”

Substantive change will be expensive

In a reimagined healthcare system with the provider organization at the hub of a population health network, the focus of operations would be on meeting patients where they are and less so on optimizing on-site care.

Especially in an era when many providers are operating on increasingly narrow margins, the notion of implementing such a vision can seem fanciful.

“We see over and over again that the kinds of changes we’re talking about really require capital,” said Dawn Alley, PhD, chief strategy officer at the Center for Medicare & Medicaid Innovation (CMMI). “It takes resources even for providers to do things like change workflows or hire community health workers. It certainly takes resources to build these partnerships with community-based organizations.”

As an example of the scope of the challenges, Alley pointed to CMMI’s ongoing Diabetes Prevention Program.

“We thought, ‘OK, we’re creating a new sustainability mechanism for community-based organizations that are going to be able to bill Medicare for these evidence-based services that they’re providing that generate cost savings.’ But so many could not get over the hump of even getting the billing systems in place,” she said.

Initial funding sources and applications

“A massive federal infusion of money into the healthcare system is the only thing that’s going to fix it, period,” said Benjamin Kligler, MD, national director of the Integrative Health Coordinating Center with the U.S. Department of Veterans Affairs.

As a potential start, President Joe Biden’s national infrastructure bill includes $400 billion for home- and community-based health services. If that funding gets allocated, the key would be to spend it in a way that genuinely boosts community and behavioral healthcare organizations, Alley said.

Such organizations “don’t have some of the basic building blocks of, for example, the data systems that would allow them to effectively engage in these partnerships as well as to really bring evidence so that those home- and community-based services are not just custodial services, which is so much of what they are today, but are actually about bringing them into value,” she said, noting the comment reflected her own views and not necessarily those of CMMI.

“There’s a tremendous opportunity to have them support the goals that we’re talking about, but it won’t happen unless it’s very explicit.”

Ensuring money is well-spent

“At the end of the day, you’ve got to pay for what you want,” Nichols said. “And we have to define what we want.”

The absence of a unified framework for measuring healthcare value illustrates the glaring lack of a national plan to guide an industrywide transformation, Ferris said.

If the industry seeks to implement a measure set that could serve as a blueprint for providing high-value care, Ferris said, a good place to start would be the risk-adjusted clinical data registries that have been developed over the years by various specialty societies.

Instead, healthcare policymakers have gone off in a patchwork of directions when seeking to measure outcomes.

“Huge numbers of our doctors in large centers are participating in [clinical registries] already,” Ferris said. “And yet every single state has different Medicaid requirements for what they measure. Every single insurer has different requirements for what they measure. Medicare has different requirements.”

Metrics on key drivers of outcomes “are already in use, but they’re not used for accountability. They’re not even publicly reported generally, except for the cardiac surgeons. … I would get rid of all other quality measurement, because it’s mostly noise, and really home in on the things that truly matter.”

Those things include mortality, morbidity and patient-reported outcomes, Ferris said, referencing a well-known value framework developed by Michael Porter, a longtime Harvard professor.

“If we got together around that as a country,” Ferris said, “it would help us integrate financing because we would be orienting the financing around the same set of outcomes, independent of where the source of funding is.”