The Senate Finance Committee is meeting behind closed doors today to consider a series of health care delivery reforms that could potentially improve health care quality and lower costs. Yesterday, Sens. Max Baucus (D-MT) and Chuck Grassley (R-IA) released ‘Description of Policy Options: Transforming the Health Care Delivery System – Proposals to Improve Patient Care and Reduce Health Care Costs,’ a compilation of recommendations for how to reform the way Medicare and Medicaid reimburse providers:

– Paying for health outcomes: Currently, the system pays hospitals and providers for reporting data on quality, the Senate Finance Committee (SFC) is proposing to pay for actual improved outcomes. That means paying hospitals that meet certain quality performance standards and lowering preventable hospital readmission by reducing payments to hospitals with high preventable readmission rations.

– Encouraging care coordination through payment reform: SFC is proposing developing payment innovations that encourage independent health care providers to work cooperatively for the benefit of the patient. They would bundle hospital stays with post-acute care services, allow groups of providers who voluntarily meet quality thresholds to share in the cost-savings they achieve for the Medicare program, and pay for a health care professional to help patients transition out of the hospital.

– Expanding electronic health records: Electronic health records lower medical errors, improve care quality and reduce health care spending, but many providers are reluctant to invest in a system with limited national standardization and slow financial return. Nationally, less than 25 percent of hospitals, and less than 20 percent of doctor’s offices, employ health information technology systems (HIT). The stimulus provided $19 billion to encourage providers to implement electronic health records and SFC is looking to expedite health care’s push into the 21st century by “exploring the possibility of expanding eligibility” for electronic health records by offering incentive payments not just to doctors but also to nurse practitioners, physician assistants and other providers.

– Improving comparative effectiveness research: The stimulus bill already includes $1.1 billion for research that compares the effectiveness of different treatments and procedures. SFC would establish “a private, non-profit corporation that would generate and synthesize evidence on what works in health care.” The institute would remain independent and diverse “so that no stakeholder interest dominates” and would “establish a national agenda for research priorities.” To ensure patient safety, Medicare “could be allowed to use the findings only in circumstances where the process by which it uses the information is transparent, relies on all available evidence, considers the potential effects on subpopulations of beneficiaries, and allows for public comment on any draft proposals that use the information.”

– Dealing with the shortage of primary care providers: Some studies have shown that “the trajectory of the supply of primary care physicians for adult patients is now falling behind the growth of the adult population” and HHS estimates that “by 2020 there will be a shortage of 66,000 primary care doctors nationwide.” Lower primary care salaries discourage medical students from practicing primary care and residency slots for primacy are physicians have decreased in recent years. SFC is proposing redistributing unused residency slots to encourage training in primary care and general surgery and establishing bonuses payments “for general surgeons practicing in newly defined rural general surgeon scarcity areas.” Primary care providers could also receive 10 percent bonus payments.

– Linking Medicare Advantage payments to quality: Currently, the federal government subsidizes private insurers to provide Medicare beneficiaries with some extra benefits and care in rural areas. But numerous studies have demonstrated that rather than using the extra federal dollars to provide better quality care (and coordinated care), insurers are pocketing the extra dough. SFC is promising to tie “some portion of payment” “to performance and quality measures,” modify payment to encourage plans to provide care more efficiently and play plans a bonus for chronic care management.

Individually these reforms seem small. For instance, the document places some restraints on the use of data obtains from comparative effectiveness research (for instance, considering effects on ‘subpopulations’ may very well prevent CMS from making serious reimbursement decisions) and does not call for the elimination of Medicare Advantage overpayments. But collectively, these reforms start the slow process of re-orienting the system from one that encourages providers to over-prescribe treatments, to one that rewards quality care and outcomes.

In an interview with The New York Times Magazine, President Obama suggests that comparative effectiveness research — that is, research that compares clinical outcomes of alternative therapies used to manage the same condition — leaves doctors, patients, and the government with some difficult choices:

So when Peter Orszag and I talk about the importance of using comparative-effectiveness studies as a way of reining in costs, that’s not an attempt to micromanage the doctor-patient relationship. It is an attempt to say to patients, you know what, we’ve looked at some objective studies out here, people who know about this stuff, concluding that the blue pill, which costs half as much as the red pill, is just as effective, and you might want to go ahead and get the blue one. And if a provider is pushing the red one on you, then you should at least ask some important questions. [...]

Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else’s aging grandparents or parents, a hip replacement when they’re terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn’t have a hip replacement and she had to lie there in misery in the waning days of her life — that would be pretty upsetting….So that’s where I think you just get into some very difficult moral issues. But that’s also a huge driver of cost, right? I mean, the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here. [...]

It is very difficult to imagine the country making those decisions just through the normal political channels. And that’s part of why you have to have some independent group that can give you guidance. It’s not determinative, but I think has to be able to give you some guidance. And that’s part of what I suspect you’ll see emerging out of the various health care conversations that are taking place on the Hill right now.

Obama highlights the anxiety surrounding comparative effectiveness research. We spend too much money on ineffective treatments, but designing a policy that lowers the use of unnecessary/unproven procedures and preserves access to experimental treatments or other unproven procedures is tricky; it’s a source of political concern and contention. Providing doctors with independent analysis about which drugs work and which don’t could save money and countless lives. But that’s the easy part. Almost everyone agrees that telling doctors that that drug X causes more harm than good would encourage providers to switch course and benefit the patient.

What’s more difficult is netting savings from unnecessary medical procedures and discouraging the system from over-treating patients. As the President points out, “the chronically ill and those toward the end of their lives are accounting for potentially 80 percent of the total health care bill out here” and it’s unclear that putting these patients through surgery during the last weeks or months of their lives is best for the patient. America’s medical culture and current payment structure dictates that you have to do everything in your power to extend a person’s life — by hours, days, or weeks — but the patient is rarely consulted. As Dr. Robert Martensen, author of “A Life Worth Living: A Doctor’s Reflections on Illness in a High-Tech Era” and the director of the museum and the office of history at the NIH, recently explained on NPR’s Fresh Air:

What’s different in American hospitals is that advanced technologies, aggressive interventions, keep getting applied to patients and literally applied right up until the body can no longer respond….Nobody stands back and says this patient is dying. Nobody says it to the family. Nobody says it to the patient if the patient is responsive. Things just keep getting done.

And the result is that, I think, we who are doing these treatments are causing great suffering. So there are structural problems in the system, and the result is that the patient who doesn’t want any more aggressive treatment, who just wants comfort care, can feel very frustrated.

This isn’t to say that the government should dictate a certain course of treatment. That should be left to the patient and her/his doctor (a conversation about different treatment options and choices can only improve patient satisfaction). But what the government can do is provide doctors with unbiased information about which treatments work and provide incentives for providers to focus on care quality and not care quantity (i.e. payment reform)

Today a doctor can spend hours talking to a patient like Obama’s grandmother about end-of-life decisions, discussing what matters to them, relevant medical history etc.. but in New York, Medicaid only pays $18 for that service. If however, a doctor is to recommend a complicated procedure, it would be well compensated.

A model that encourages providers to over-prescribe treatments of dubious quality and necessity is unsustainable and a cause of medical inflation. If we’re really serious about lowering health care costs, then the first step is comparative effectiveness research. But to really generate savings, “we will need legislation to provide incentives on penalties for following or not following where that information leads.” That isn’t health care rationing. It’s just smart medicine and good economic policy.