Patient-Centered Virtual HMO
Patient-Center Virtual HMO
Patient-Centered Virtual HMO
Advances in medical science and technology have made healthcare increasingly complex, specialized, and fragmented. As this segment of the American economy expands, healthcare plans and providers are consolidating to establish market dominance and to enhance their negotiating power. As specialization and consolidation increase, so do economic and organizational imperatives that supplant patients’ needs and their caregivers’ professional judgments. Unfortunately, current reimbursement systems exacerbate this problem by ignoring the complex evolution of individual patients’ needs, and by penalizing, instead of rewarding, providers of coordinated, cost-effective care. In doing so, current reimbursement systems inadvertently stifle competition, misuse costly resources, and subject patients to unnecessary medical risk.
Current arrangements for reimbursing healthcare fall into three general categories. Each has clear advantages as well as unintended but important adverse consequences. Payments for individual services (fee-for-service) allow for unanticipated changes in clinical requirements. However, they encourage unnecessary services and absolve providers from financial responsibility for suboptimal clinical outcomes. Payments for comprehensive packages of care (capitation) shift financial responsibility to providers but confine patients to a single healthcare organization, even when their healthcare needs evolve. Bundled payments for discrete episodes of care avoid many problems inherent in these two approaches. However, its applicability is severely limited by analysts’ inability to address the totality of each patient’s healthcare needs while apportioning payments fairly and consistently when different providers manage coexisting episodes (e.g., when a patient has chronic kidney disease and decompensated heart failure).
MJP has developed a new method of aligning financial incentives and clinical performance that rewards individual providers for sound clinical decisions, technical excellence, and good economic stewardship. It apportions payments to managing providers in proportion to their individual contributions to each patient’s clinical outcomes. With the aid of Information technology, patients can customize virtual health maintenance organizations (HMOs) in which caregivers are linked by information intermediaries instead of being organized into formal networks of providers. This approach eliminates many of the problems associated with combining fee-for-service payments and bonuses that currently rely on crude performance measures in common use today.
MJP’s comprehensive, episode-based infrastructure can facilitate the creation of customized, patient-centered, virtual health maintenance organizations. Unlike traditional HMOs, virtual HMOs make information and payment incentives available to all qualified providers without requiring membership in a formal network. They (1) permit patients to select managing providers for discrete episodes of care; (2) allow providers to establish a fully transparent price for each episode, based on reference prices for evidence-based required services and a single risk-adjusted reference price for individualized services; (3) hold managing providers financially responsible for the excess cost of suboptimal clinical quality and poor economic stewardship; (4) reward managing providers for judicious use of diagnostic procedures and successful therapeutic interventions; (5) foster cooperation among managing providers; and (6) hold payers financially liable only for unavoidable variations in each consumers’ health.