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Payment to healthcare providers should be based on the value of their service, U-M doctors argue

Paying physicians and hospitals the same amount regardless of clinical benefits is a flawed model contributing to soaring healthcare costs, say U-M physicians in JAMA commentary

ANN ARBOR, Mich. - Should your doctor’s bill be based on how much you actually benefited from his or her care?

It’s the type of radical reform that would help control the cost crisis in health care, two University of Michigan Health System doctors argue in the Feb. 15 issue of Journal of the American Medical Association.

U-M Division of General Medicine Chief Laurence F. McMahon Jr., M.D., M.P.H and U-M assistant professor of Internal Medicine Vineet Chopra, M.D., F.A.C.P., F.H.M. propose a new model based on simple Economics 101: The more valuable the treatment is to patients, the more physicians and hospitals would get paid.

They argue that payment for tests and procedures should directly be linked to clinical value.

Rather than focusing on co-pays and deductibles that affect patients, payment reform would shift to the providers, they say.

“The risk has to be on the provider of the service, not on the patient,” says McMahon, a professor in the departments of Internal Medicine and Health Management and Policy at the U-M Medical School. “We can no longer afford to pay for things that don’t provide clinical value to our patients. We have to invest healthcare resources on evidence-based care.”

In their JAMA commentary “Health Care Cost and Value: The Way Forward,” McMahon and Chopra suggest a new a tiered-payment in which physicians would be compensated based on the demonstrated clinical value of the service they provide to specific patients.

In the case of colonoscopies for example, physicians who ordered the procedures and hospitals that performed them on patients with no risk factors earlier than recommended would be paid less for those services. This approach is based on clinical evidence showing that people with no history of colon problems and whose colonoscopies are clear of polyps and other irregularities don’t benefit from another colonoscopy for at least 10 years.

The JAMA commentary also mentions cardiac heart stents, while life-saving for patients suffering from acute heart attacks, haven’t been shown to prevent them. Under a tiered payment system, health care providers who recommended heart stents to stable patients without using a stress test to prove the stents would reduce heart pain would also be paid less for their care.

The current U.S. health care system that pays physicians and hospitals the same regardless of whether the services delivered are of high or low clinical value is a flawed model, McMahon says.

“Since medicine has struggled to eliminate care that provides little clinical value, a valuable step would be to at least pay less for marginal care,” McMahon says.

Attempts to moderate spiraling healthcare costs have so far relied on such mechanisms as flat “global payments” to networks of providers. But contrary to hopes that physicians, hospitals, pharmaceutical firms and payers would make decisions that enhanced care, they have often instead tried to “beat their competition,” McMahon says.

“We’ve tried other reforms and they’ve all failed,” McMahon says. “We as a society are approaching 20 percent of our country’s gross domestic product being devoted to health care. That is unsustainable. We have to be smarter about how we use resources so we can get the most value for our dollars.”

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