JANET DUNI has a tiny office and a wide reach. From her desk in the heart of Vanguard Medical Group in New Jersey she combs through data, helping to co-ordinate care for thousands of patients. She checks on those who have recently left hospital, for example, and tries to encourage best practice among the staff. Thomas McCarrick, a primary-care doctor and chief medical officer, is grateful for Ms Duni’s help. Working with her, he hopes to lower costs, see more patients and keep them well—the holy grail of American health care. But Ms Duni is not Vanguard’s employee. She works for an insurer.
Beneath the interminable squabbles over Barack Obama’s health law, a transformation is taking place. To date most doctors have been rewarded for providing more rather than better services. This is unsustainable. Health care gobbles nearly 18% of GDP. Now a myriad experiments are under way, as described in the newest issue of Health Affairs, the wonk’s Bible. Some programmes are prodded by Mr Obama’s reform. Others are independent of it. But they share a common goal: pushing doctors and hospitals to provide better, cheaper
This seems familiar. In the 1990s health maintenance organisations (HMOs) used primary-care doctors to co-ordinate patient services and try to lower spending. HMOs usually gave a fixed fee for each patient to groups of doctors and hospitals—if a patient got too expensive, the groups bore the cost. Many lost money. Patients complained that HMOs encouraged doctors to skimp on care (“drive-through deliveries”, with mothers ejected from hospital soon after birth, were particularly notorious). For some, the acronym “HMO” remains lodged in the pantheon of toxic terms, somewhere between “rationing” and “death panel”.
The 1990s are not being repeated, but some elements are. Vanguard is a “patient-centred medical home”, an absurd term for a promising idea. The “home” does not house patients; rather Vanguard is a hub, where a group of doctors oversee the health of patients. It is part of a broader experiment with Horizon Blue Cross Blue Shield of New Jersey, the insurer that employs Ms Duni. Horizon still pays for specific services from Dr McCarrick and 47 other primary-care practices. But Horizon also pays them fees and bonuses to co-ordinate care, keep patients well and limit unnecessary procedures.
Such patient-centred medical homes are sprouting across the country. Centres for Medicare and Medicaid Services (CMS), in charge of public-health programmes, is accelerating the change. Thanks to CMS, 37 of Horizon’s medical homes, including Vanguard, will extend their model to patients in Medicare, the health programme for the old.
CMS’s boldest new initiative, however, may be the new “accountable care organisations” (ACOs) authorised by Mr Obama’s health law. ACOs are groups of hospitals and doctors that are held responsible for a distinct set of Medicare patients. If an ACO meets goals for the quality of its care and pushes costs below a set level, it may receive a bonus. Other experiments introduced by CMS include paying a set price for a procedure and any medical complications that follow. The private sector is moving forward apace. UnitedHealth, the biggest insurer by revenue, is rolling out pay-for-performance contracts for hospitals, as well as testing its own medical homes and ACOs.
Bob Atlas of Avalere Health, a consultancy, offers a curt sketch of the ACO model: “HMO wannabe”. But he points to important differences. Unlike HMOs, the Medicare ACOs let patients see a range of doctors if they wish. And ACOs do not get one payment for each patient. The bonus complements regular fee-for-service.
Two other factors may make the new reforms succeed where others failed. First, the old systems had few incentives to offer patients good care. Second, they tried to co-ordinate services but had meagre tools to do so. This has changed, thanks not just to electronic health records but to software that analyses patients’ data and finds areas where care could be improved.
Still, the new experiments remain just that. New Jersey’s Horizon has yet to recoup its investment in medical homes. The new emphasis on quality and efficiency may encourage even more consolidation among hospitals—bigger hospitals can spread risk across patients, invest in information technology and create standardised procedures that can easily be replicated. Bigger hospitals may, in turn, use their market power to drive up prices. The main question, however, remains how to balance incentives for efficiency with incentives to skimp. “There are two ways it could fail,” suggests Austin Frakt of Boston University. “It’s too much like what happened in the 1990s… or it is not enough like the 1990s.”