Improving Value in Health Care

Progress in raising the value of health care — combinations of higher quality outcomes and lower costs — has been frustratingly slow in the United States. The problem is understood: Too many providers are paid on the basis of volume of services provided (“fee for service”), and too few are paid on the basis of the quality of the health outcome. As a corollary, too much care is provided in a disjointed fashion, and too often the care of multiple providers for multiple conditions is not coordinated. Why has change been so slow?

One reason, Ken Thorpe and I argue in a recent op-ed, is that not all of the policies are pulling in the same direction. Some of the biggest obstacles have been the so-called Stark and anti-kickback provisions. These made sense in a fee-for-service world because doctors should not have a financial incentive, for example, to refer patients to a surgery center they own (“Stark”) or to receive payments when a patient uses a particular treatment (“kickback”). Those decisions should be made on a purely medical basis. But these laws must be modernized to support the volume-to-value transition while preserving their original intent.

Here is an example. Recall that patients were suffering infections because of the devices used in their colonoscopies. In a fee-for-service world, device manufacturers sell endoscopes, period. Any further transactions of money from the manufacturer to the provider would be a kickback — evidence of market manipulation. In a value-based world, the device manufacturer could bundle the endoscope with services to help ensure best practices and an outcome warranty where the manufacturer would cover the cost of any resulting infection. The incentive would be for best-practice colonoscopies, but on paper it would would look like a payment from the manufacturer (the warranty payment) for a particular device — violating anti-kickback laws.

Similarly, when a patient has multiple illnesses — and especially if one is a chronic disease — the primary physician/care coordinator should oversee the treatment plan. Without care coordination, health risks can arise, including duplication of tests, the implementation of contradictory treatment plans, the wrong treatment, and the prescribing of drugs with dangerous interactions. To accomplish this level of coordination requires that entities communicate and contract with one another, best practices be adopted and implemented, and the relationships between health organizations, physicians, nurses, hospitals, and device and drug manufacturers be strong. But that also means directing the patient to particular hospitals, doctors, and care.

Both laws complicate the ability of insurers, hospitals, device and drug manufacturers, physicians, and others to do exactly these things, and thus engage in value-based contracts. The good news is that the Department of Health and Human Services has begun a systematic examination of the Stark and anti-kickback laws by issuing a series of requests for information asking for comment on barriers to coordinated care. But Congress should act to ensure these relationships and activities continue to develop by modernizing the Stark and anti-kickback laws.