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Defining the health care product to ensure quality and manage costs.

There are many reasons to reform the U.S. health care system, specifically finding ways to utilize the existing resources of well-trained physicians and excellent hospitals. For the past 40 years, physicians have not been encouraged to deliver health care on the basis of what is necessary and appropriate for individual patients; they have been manipulated by the benefit packages of third-party payers.

The Clinton Administration is now strongly advocating two core components for health system reform: managed competition and a global budget. Unless physicians participate in the definition of managed competition, a new entitlement program may consist of a basic benefits package controlled by a global budget.

The futility of attempting to control either cost or quality through a basic benefit plan can be illustrated by contrasting the effects of health insurance with those of other types of insurance. The sale of life insurance does not cause the death rate to go up; the sale of automobile insurance does not cause the accident rate to go up; but the sale of health insurance does cause utilization of health care services to go up. You cannot insure an entitlement. Entitlements create unbridled demand in an environment where no specifications or standards of quality exist. For this reason, efforts to control costs through manipulating benefit plans and the subsequent risk and cost shifting have failed and will continue to fail.

Variations in physician practice styles are common, which demonstrates the influence of benefit plans on physician and patient behavior. Benefit plan design is the primary method used to control health care costs, but contracts typically do not specify the health care product and physicians have, for the most part, been left out of the discussion. The Clinton Administration's proposal for national health care reform and universal access creates a golden opportunity for physicians to participate in reform. Physicians must contribute to the definition and specification of the health care product on the basis of medical necessity and medical appropriateness. The goal is to develop a health plan, not an illness benefit, and to eliminate or minimize unnecessary care.

Medical necessity can be defined as health care intervention needed to improve or preserve health. Medical interventions can be either diagnostic, educational, preventive, or therapeutic. With hard data, rigid standards for evaluating quality and the criteria for care can be established. Care becomes necessary when it can be proven that the patient will either worsen or fail to improve unless a specific intervention takes place. The necessity for screening tests and therapeutic interventions can be documented on the basis of individual or population data.

Where adequate studies do not exist, the system should allow provision of care until appropriate studies demonstrate efficiency and effectiveness. If medical necessity is determined, an alternative for the best care for the individual can be discussed. Obviously, with a multiplicity of diagnoses, there are many alternatives for care. Outcome studies may be necessary to determine the alternative of greatest value. In addition, nonintervention may be in the best interests of the patient when certain diseases have progressed beyond cure. Medical professionals should be responsible for openly discussing the futility of further treatment for certain diagnoses--especially in oncology.

Unnecessary care, whether diagnostic or therapeutic, can create a cascade of subsequent activity that would never take place without the initial action. This is likely to occur in an entitlement-based system noted for unbridled demand. This cascade effect is well known in clinical medicine.[1] The gaming of reimbursement and pricing services deserves mention. The "UCR boondoggle" is a case in point.[2] New physicians can set fees above more experienced practitioners with established fee profiles and extract excessive benefit compensation.

Physicians should be held responsible for establishing the clinical thresholds for diagnostic or therapeutic intervention and for reasonable fee schedules. An appropriate per-unit price for health care, coupled with standards of care and guidelines for practice, will minimize unnecessary utilization of health care, manage costs, and contribute to the quality of health care.

Eventually, rationing will have to be discussed. Denial of needed care should never occur in a physician-managed system if rationing and health care needs are defined. Haydorn and Brook[3] define rationing, health care needs, and basic benefit plans as follows:

* Rationing is societal toleration of inequitable access to health services acknowledged to be necessary by reference to necessary care guidelines.

* Health care needs are desires for services that have been reasonable well-demonstrated to provide significant net benefit for patients with specified clinical conditions.

* Basic benefit plans are insurance packages that provide for all acknowledged health care needs, again by reference to appropriate clinical guidelines.

An organizational structure for providing health care should be devised with the proposed legislation in mind. The following illustration (see figure below) is based on the health care reform proposal of Representative Jim Cooper (D-Tenn.), which, like the Clinton Administration's proposal, establishes a National Health Board. Cooper's proposal also calls for health purchasing groups throughout the country and accountable health plans (AHP) to provide managed competition. These accountable health partnerships would be groups of physicians and hospitals that provide a total care product for a premium or capitation.

In the Cooper program, the individual or family purchaser buys access to all necessary and appropriate care from the accountable health partnership. Once the product is defined, the demographics of the population determines the actuarial value of the plan according to individual health status and risk. Physicians within the AHP group determine the health care product on the basis of necessity and appropriateness. The health product specifications include immunization and screening, education, and health care interventions, as well as management of chronic disease. All specifications reflect practice guidelines and standards. Capitation, premiums, or fees based on a specific product provide funding for the AHPs and can handle variations without placing physicians at financial risk as long as they confine their practice to necessary and appropriate care.

Physicians who are willing to join an organized system of care and take responsibility for practice standards and guidelines can thrive in an environment of managed competition. Within these accountable health plans, opportunity exists for increasing the efficiency of health care delivery and measuring the effectiveness of alternatives. If the principles of continuous quality improvement are applied, the system will minimize unnecessary care and increase quality.

New technology can exist in this system after the clinical thresholds of necessity are established. In the new system, it would be insufficient to simply define the ability of a new imaging system to provide three-dimensional color images of anatomy. It would be necessary to establish clinical thresholds that prove the need of the technology for optimal patient health. Academic interest and diagnostic curiosity have no place in a quality-based system.

If the medical community defines the health care product, thereby avoiding benefit entitlement without standards of care, we can restore the practicing physician to the center of patient care. Equally important is the requirement that the individual or business purchaser be educated as to medical necessity and appropriateness, the proper use of the health care system, and the need to comply to the treatment plans. In addition, significant financial consequences of inappropriate behavior and noncompliance must be build into the system. The medical profession cannot be held responsible for establishing standards of care and then be penalized when patients do not comply.

Only by defining the health care product on the basis of what should be done can we ever begin to ensure quality and manage costs, and the definition of the product requires the expertise of the physician executive. 11


[1.] Mold, J., and Stein, H. "The Cascade Effect in the Clinical Care of Patients." New England Journal of Medicine 314(8):512-4, Feb. 20, 1986. [2.] Roe, B. "Sounding Board. The UCR Boondoggle: A Death Knell for Private Practice?" New England Journal of Medicine 305(l):41-5, July 2, 1981. [3.] Hadorn, D., and Brook, R. "The Health Care Resource Allocation Debate. Defining Our Terms." JAMA 266(23):3328-31, Dec. 18., 1991.
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Author:Burns, John
Publication:Physician Executive
Date:Feb 1, 1994
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