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    Healthcare's Age of Uncertainty

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    CHARLES J. LOCKWOOD, MD, MHCM
    Physicians should be no strangers to change. In my professional lifetime, we have gone from an era where solo practitioners were common to the ascendancy of large group practices to employment of physicians by medical systems.1 Payment systems have likewise evolved from unrestrained fee-for-service, to preferred provider schemes with heavily discounted fees, to pay for performance/value-based purchasing, even though the latter have, thus far, failed to substantially reduce costs.2 We have also seen the rapid dissemination of electronic health records (EHRs). In 2009 only 1.5% of US hospitals had a comprehensive EHR,3 but by 2013 it is projected that two-thirds will achieve "meaningful use" EHR capability.4 Now we must confront the Affordable Care Act (ACA) whose consequences cannot be fully predicted.

    Cost has been and will remain the overwhelming impetus for all these changes. Healthcare costs will soon be one of the largest contributors to national debt.5 Even before the ACA's expected increase in Medicaid enrollees, most individual states were struggling to cover the program's expenses. Moreover, employee health insurance coverage is impeding US international industrial competitiveness.6 Far more fundamental healthcare changes are coming.

    From the Age of Uncertainty to the Age of Value

    So where do we go from here? Ultimately, healthcare delivery must and will evolve in conformity to basic economic principles. Harvard Business School's Michael Porter and colleagues have argued that healthcare delivery must be realigned to allow market forces to control cost and quality. They espouse the concept of value-based competition.7 Their definition of value is the quality of a patient's outcome for a given medical condition relative to dollars expended over a full cycle of care. For acute care (such as myocardial infarction or childbirth) this latter interval might cover the span from diagnosis and treatment to initial rehabilitation. For chronic conditions (such as diabetes or endometriosis) a cycle of care would be a specific time interval such as 6 months. Porter advocates creating highly efficient, disease-specific "focus factories" wherein care is organized around a given disease with dedicated specialists, facilities, and staff. Payments for services by insurers would be bundled. They also envision full public reporting of outcomes and costs for such care.

    The principle flaw in the Porter model is that medicine is not the same as fixing mufflers or making cell phones. Healthcare costs do not follow normal supply and demand curves because the payor is separated from both the consumer and the provider. In addition, healthcare costs are not normally distributed as in a consumer market, but fall in a highly asymmetrical pattern across the population. For example, in the United States, 1% of patients account for 22% of costs and 5% account for 50% of costs with almost all these patients having multiple comorbidities.8 In fact, nearly a quarter of adults under age 65 and three-quarters of older adults have multiple comorbidities that together account for two-thirds of US health spending.9 Thus, Porter's single-disease focus factories would poorly address patients who account for two-thirds of costs.

    Addressing this problem requires an acceptance that healthcare is a highly complex, nonlinear system and that potential remedies often have unanticipated and undesired effects.10 Currently, the highly discounted, fee-for-service payment system demonstrates this as it encourages unnecessary care and procedures for healthy patients to make up for discounts, while discouraging coordination of care for the very patients responsible for most of the cost. Ironically, complex systems follow rather simple rules. For example, Lipitz argues that simply changing our payment system to global fees would facilitate more effective interactions and the necessary self-organizing behavior among providers to reduce unnecessary care and increase coordination.10 So what would the ensuing care delivery paradigm look like?

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    Charles J. Lockwood, MD, MHCM
    Dr. Lockwood, Editor-in-Chief, is Dean of the Morsani College of Medicine and Senior Vice President of USF Health, University of South ...

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