SUSTAINABILITY OF THE FEE-FOR-SERVICE MODEL (OR NOT)
David Gruber MD, MBAMay 16, 2014
U.S. HEALTHCARE IS INEFFICIENT AND INEFFECTIVE
Cost ($B)
Unnecessary services $210
Inefficiently delivered services 130
Excess administrative costs 190
Prices that are too high 105
Missed prevention opportunities 55
Fraud 75
Total $765
Source: The Healthcare Imperative: Lowering Costs and Improving Outcomes, 2010 Table S-1. Adopted by National Academy of Sciences from IOM Workshop Summary.
• Misaligned financial incentives• System focus on acute intervention rather than the continuum of care• Inadequate, if any consumer (patient) and caregiver engagement• Limited price (oligopolistic) competition
LIMITATIONS OF FEE FOR SERVICE REIMBURSEMENT
– Focus on volume not value– Fosters fragmentation not collaboration on the full continuum of care– Hospital-centricity driving physician acquisitions (i.e., not site-neutral)– Procedural bias of the Resource Based Relative Value Scale– Cognitive services devalued– Administrative complexity and waste– Subject to industry lobbying
FEE-FOR-SERVICE DOES NOT REWARD PREVENTION
1995 2000 2005 2010 2015 2020 2025 2030100
120
140
160
180
118
125
133
141
149
157
164
171Chart Title
Number of People With Chronic Conditions (in millions)
84%
16%
Chronic condi-tionsNo chronic conditions
Healthcare Spending by Patients With Chronic Conditions
Sources: Medical Expenditure Panel Survey, 2006; Wu, Shin-Yi and Green, Anthony. Projection of Chronic Illness Prevalence and Cost Inflation. RAND Corporation, October 2000.
Chronic respiratory infections
Asthma
Eye disorders
Diabetes mellitus
Diseases of the heart
Non-traumatic joint disorders
Other upper respiratory disease
Disorders of lipid metabolism
Hypertension
0% 5% 10% 15% 20% 25% 30% 35%
10.0%
10.1%
11.2%
12.6%
13.5%
16.5%
19.2%
22.3%
33.3%
Percentage of People With Specific Chronic Conditions
1 2 3 4 5+0%
5%
10%
15%
20%
25%22.3%
11.8%
7.1%
3.9%4.8%
Number of Chronic Conditions
% of People with Multiple Chronic Conditions
FEE-FOR-SERVICE DOES NOT REWARD CONSUMER (PATIENT) ENGAGEMENT
30%
40%
15%
5%
10%
Genetic predispositionBehavioral patternsSocial circumstancesEnvironmental factorsHealth
Proportional Contribution to Premature Death
Source: Schroeder. We Can Do Better. NEJM 2007;357:1221-1228, Figure 1 adapted from McGinnis, et al. The Case for More Active Health Policy Attention to Health Promotion. Health Affairs 2002; 21:78-93; and CDC, National Health and Nutrition Examination Surveys (NHANES)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1960 1970 1980 1990 2000 2010
Obesity Smoking
% Adult Population
FEE FOR SERVICE DOES NOT RESULT IN VALUE CREATION
Low value
Limited ROI
Minimal quality
standard
High value
High
Cost
Low
QualityLow High
EMERGING TECHNOLOGY MUST ASSUME A RISK-BASED ECOSYSTEM
Telemedicine
Internet/Mobile ApplicationsAdvanced Analytics
Remote Monitoring
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