Three Ways to Pay Physicians

This week I find my self reminiscing.  It was 1969 when the Harvard co op was formed to provide health care for Harvard employees and the employees of Harvard affiliates.  That became the Harvard Community Health Plan (HCHP) which was considered to be among the best staff model health plans in the country.  The plan paid physicians salaries and was run by physician managers who focused on quality of care and based care on the best information from medical knowledge.  Unfortunately, the wonderful care that the Harvard physicians were giving did not give consumers what they wanted.  During that golden era, a small voice in the guise of an article in the Journal of the American Medical Association appeared (1993) found that the public preferred solo and small group practices to HMOs!  How unenlightened of the public!  A larger voice, which was the Boston area marketplace, prevented HCHP from achieving market success and the plan was forced to merge with the then, Pilgrim Health Plan to become Harvard Pilgrim.  The salaried doctors were now joined to the private doctors.  That too did not last long as Harvard Pilgrim was soon forced to spin off the physician group as Harvard Vanguard after shrinking the salaried group.  That group now survives by contracting with all health plans.  It still gives excellent care and is still loved by some and shunned by others who perceive it as clinic medicine.

Back to the Future

We now return to the present day and find that the concepts underlying the HCHP model are alive and well and now being presented as a new option.  In this week’s New England Journal of Medicine (NEJM), Dr. Arnold Relman, one of the giants of medicine and a professor at Harvard Medical School for many years, advocates for accountable care organizations, run by physicians in which the physicians are paid salaries.  In Dr. Relman’s proposed model, there is competition between groups on the basis of service and quality but only one payer with each group being paid the same by government (or some other single payer entity).  The question is whether this is the HCHP without the messiness of having to compete.  If the only competition is other salaried groups of physicians run by physicians, is that really competition?  It just seems as though we are returning to the group model plan of salaried physicians that was rejected in the marketplace, except this time we are not allowing anyone to reject it.

Value in Health Care

In a different article. also from the NEJM , Dr. Denise Cortese of the Mayo Clinic collaborates with Jeffery Korsmo, to argue for measuring the value of health care and making these value measurements widely available on the Internet.  They define value as quality divided by cost. To quote the authors, “In this equation, quality includes clinical outcomes, safety, and patient-reported satisfaction, and cost encompasses the cost of care over time.”  The authors also make a good case for moving towards value based payment to health care organizations and even physicians as well.  They also prefer paying physicians salaries however they do modify it with a value equation.  To further quote the authors (quoting the philosopher Seneca), “The philosopher Seneca said, “We most often go astray on a well trodden and much frequented road.” There is a clear path to higher-quality, more affordable health care, if we are willing to veer from the familiar route. We must define value, publicly display understandable value scores, and pay for value.”

The Three Ways

There are generally believed to be three ways to pay physicians, fee for service with is our current system, capitation which pays physicians a set fee per person they care for as an enrollee in their panel, or salary.   One can think of these options as paying doctors to do more (fee for service), paying doctors to do less (capitation) or paying doctors to leave at five o’clock (salary).  Both articles are taking on payment reform which appears to be missing from the current iterations of the health reform package and should be the most important piece of any legislation.  Systems that pay for value and that make measurement widely available to the public are the most likely to be successful.   It is less important whether those value payments are as bonuses over a salary or are a modified fee for service system.  Perhaps this is the fourth way to pay physicians and one that will combine some of the best parts of our current approach.