Category: Symposium (Health Care Fragmentation)


Competition, Regulation, and Fragmentation

Anup Malani’s and Frank Pasquale’s after-the-jump colloquy on the role of markets versus regulation provides a nice introduction to Tim Greaney’s chapter on “Competition Policy and Organizational Fragmentation in Health Care.”  Greaney’s chapter engages that dichotomy, focusing on regulated markets, i.e., antitrust policy and its failure to reduce fragmentation.  Greaney opens by acknowledging the myriad market imperfections that impede health care delivery (I’d add to Frank’s cannon of literature on this topic, Kenneth Arrow’s classic 1963 essay, “Uncertainty and the Welfare Economics of Medical Care.”) and offers the perhaps counterintuitive suggestion that market forces, deregulation, and sensible antitrust enforcement could reduce fragmentation.  By design, managed care aimed to address some of the most notable flaws in health care markets, including agency issues, information deficits, and moral hazard.  Greaney observes that managed care was, for a time, moving promisingly in the direction of efficient, quality-enhancing consolidation.  Seemingly in support, regulators favored integration and generally rebuffed providers’ antitrust challenges to managed care companies, concluding that local health insurance markets were competitive and lacked significant barriers to entry.

But the managed care backlash, combined with regulators’ failure to appreciate unique conditions in health care markets, and the distorting effects of other, health care-specific regulations, halted the move toward integration.  On the first point, Greaney observes courts’ “consistent failure to adapt legal analysis to the peculiar economics of competition in the health care sector,” instead “adopting plain vanilla, Chicago school assumptions about markets,” with the result of courts defining extraordinarily large geographic markets, ignoring heterogeneity of demand, and failing to consider consumers’ differing preferences for travel.  (I am reminded of one of my favorite, for pure reading pleasure if not principled analysis, antitrust opinions, Marshfield Clinic, in which Judge Posner rebuffs the plaintiffs’ suggested “dizzying series of concentric circles,” sending the court on “a hunt for the snark of delusive exactness,” rather than simply relying on county borders to define the relevant geographic market.)   Adding to the problem, antitrust regulators, spurred, Greaney suggests, by providers’ and consumers’ growing unease with managed care practices,  began to question the very premise of managed care competition — that “vigorous bargaining” by managed care organizations would pressure providers to reorganize themselves and adopt more cost-efficient, integrated arrangements.  Finally, an overlay of other regulations, including the federal anti-kickback and Stark laws, state certificate of need laws, and remnants of the corporate practice of medicine doctrine, erected additional barriers to “efficiency-enhancing cooperation among rivals.”

I tend more toward the pro-market, rather than pro-regulatory side of the debate, which is why I’ve always been intrigued by the antitrust paradox (in the lower-case, non-strict Borkian sense) intriguing:   If the end is free market competition, how is more government regulation the means?  The idea is that the government’s regulatory hand guides and protects the competitive marketplace, unblocking clogs and correcting other flaws or failures in the stream of commerce.  If that is an accurate description of antitrust policy, and if we accept the premise that health care markets are inherently flawed, then we should expect antitrust regulation to be omnipresent in the area.  But, as Greaney carefully accounts, employing his wealth of knowledge and experience as an academic and prosecutor, health care antitrust policy has been inconsistent and misdirected, leaving unfulfilled the promise of sensibly regulated competition.

With the decline of managed care competition as a strategy to reduce fragmentation, what alternatives remain?  The prevailing market-oriented approach of consumer-directed health care (CDHC) offers little hope, Greaney concludes.  CDHC simply tosses health care consumers back into the admittedly flawed health care market.  While CDHC certainly addresses moral hazard by making patients more cognizant of their spending choices, it does little to address agency, information, and market power problems.  Greaney convincingly explains why CDHC will likely not reduce, and may even increase, fragmentation.  I had hoped for some rest-easy, promising end to the tale, suggesting how the guiding hand of sensible antitrust policy could enhance the current market and make it all better.  Alas, Lewis Carroll’s story did not end happily either, and we are left to hunt for the snark with thimbles, care, forks, and hope.


Structural Fragmentation

First, I too will add to the chorus of thanks to Frank and Glenn for inviting me to participate.  Healthcare fragmentation is an important — and difficult — topic, and the new book, The Fragmentation of U.S. Health Care: Causes and Solutions, is an important contribution in tackling the issue.  I’m honored to be contributing to the discussion.

My goal here is to highlight a meta-problem in the American healthcare system that overlies many of the fragmentation issues identified in the book and in my colleagues’ blog posts so far:  structural fragmentation in the healthcare regulatory complex.  If we want a coherent system that operates coherently, we must have a simple answer to one simple question: Who’s in charge?  For healthcare, we have no answer.

The general problem is that the U.S. government is self-consciously layered with overlapping jurisdictions and competing regulatory bodies, intended to slow the growth of government and to check the rise of tyranny.  We’ve created a governmental system in which states compete with the national government, states compete with one another, courts compete with executive agencies, executive agencies compete with legislatures, and legislatures… are legislatures.  Some legal fields have smoothed this chaos in our regulatory structure, defining authority clearly among the competing institutions.  Healthcare?  Not so much.  I’ll list and elaborate a few discrete examples of this problem within two categories — federalism and separation of powers — but there are far too many examples to cover all of them in this short blog post.


One cause of structural fragmentation for healthcare regulation is in the federalist division of labor for various healthcare programs.  Here, the first thought is Medicaid.  The “cooperative” federalism structure for Medicaid is not cooperative at all; it’s barely coordinated.  The federal Medicaid Act, which started out with 22 requirements for state plans to qualify for federal funding, now lists literally hundreds of such statutory requirements, not including countless others in the Federal Register.  But very few of them are enforced.  Does this structure lead to a “race to the bottom” among the states in providing public health insurance to the poor?  Maybe, maybe not.  Either way, the program is a many-headed beast that functions poorly, due in part to fragmented regualtory authority.  A retort from within healthcare might be the State Children’s Health Insurance Program (SCHIP), which is also a “cooperative” federalist program that has had greater success.  Why?  In part because it uses block grants instead of entitlement grants — fewer federal strings attached — and in part because it’s still just very small.  Another federalism problem is the problem of Healthcare’s Federalization Snowball: The federal government pays for 40% of healthcare utilization in the United States, leaving any given state with something less than a full financial incentive to curb over-utilization of healthcare.  (Fragmentation in payment systems — even if single payer isn’t a panacea, it would at least solve this problem.)  Unfortunately, PPACA failed to resolve the existing federal fragmentation and added a few more instances of it:  The Exchanges in the final bill are strange beasts for federalism; the states are required to implement their own (50 fragmented exchanges instead of 1 cohesive one), but if any state fails to implement an exchange by 2014, the national government will create one for it.  (Who’s in charge??)  PPACA requires the exchanges to include some insurance plans that are sold nation-wide and imposes new federal requirements for all private plans, taking a first step in nationalizing the private market for health insurance, but it doesn’t get us all the way there.  Instead, it adds some national oversight authority in the Department of Health and Human Services (HHS) without abolishing state authority, creating further fragmentation and jurisdictional overlap.  And let’s not forget the Employment Retirement Income Security Act (ERISA), which still preempts a lot of state authority without creating a national regulatory regime in its place and which contributes significantly to fragmentation among insurance markets (creating a unique regulatory space for employer-sponsored large-group plans).  In short, the fragmented world of healthcare regulation is further fragmented by complicated and often incoherent divisions of labor between the state and national governments.

Separation of Powers

Another important cause of structural fragmentation is in the odd divisions of labor among branches of government and even within single branches of government.  Most obviously, we’re still not sure whether we want courts or agencies to be in charge of healthcare regulation.  Medical malpractice is still primarily a matter for judicial (common law) regualtion, but CMS and private insurers (regulated by executive insurance commissioners and now exchanges) are getting more and more involved in quality control.  And the courts’ authority to review decision-making in Medicare and Medicaid is in flux as the Supreme Court grapples with the scope of Section 1983 and with the general rules for judicial deference to agency interpretations.  In short, authority has been migrating from courts to agencies (not just in healthcare), but for the moment, we’re in an uncomfortable position of “neither here nor there.”  Perhaps because of that uncomfortable position, the jurisdictional structure within the national executive is messy.  To give two examples:  (1) The Department of Labor, the Department of Health and Human Services, and the Treasury Department all have some degree of authority over Employer-Sponsored Insurance, and (2) the Food and Drug Administration and the Attorney General (not to mention the Patent and Trademark Office and CMS) have overlapping authority in regulating drugs and other controlled substances.  This is to say nothing of the multitudinous state agencies that share authority among themselves and with the national agencies in these regimes and others.  In addition to the well-known conflicts between courts and agencies, there are also conflicts between courts and legislatures, which are less frequently considered as separation of powers problems.  The general questions of statutory interpretation and judicial deference to agency delegations, however, is a separation of powers question that has been significant for healthcare regulation.

A Final Note

What are the most successful and most beloved healthcare programs in the United States?  The first answer that pops to mind is probably Medicare.  We could add to the list the Military Health System (MHS) (including VA healthcare and TRICARE for members on active duty) and the Federal Employees Health Benefits Plan (FEHBP).  What do these programs have in common, aside from being publicly funded insurance programs (which also describes the unsuccessul and unpopular Medicaid)?  I don’t want to oversell my thesis, but I find it telling that each of these programs has a single, well-defined head.  Not that they’re monolithic; Medicare contracts with private administrators to manage benefits and even to make variable local coverage determinations.  But authority over Medicare resides comfortably within HHS; authority over the MHS resides comfortably within the Department of Defense; and authority over FEHBP resides comfortably within the Office of Personnel Management. 

We need to defragment our regulatory structure.  In my opinion, that’s step one.


Defragmenting the Fragmentation Critique

I am grateful to Frank Pasquale and Glenn Cohen for the opportunity to comment on The Fragmentation of U.S. Health Care(Einer Elhauge ed., 2010). This book is the first of its kind, and I believe it will influence scholarly debate about the best way to organize, regulate, and fund health care for the next decade.

In Chapter One, Einer Elhauge provides the frame through which readers are to understand fragmentation. Fragmentation occurs as “multiple decision makers make a set of health care decisions that would be made better though unified decision making” (p. 1). The tension, as he views it, is between forms of desirable integration and undesirable disintegration (p. 2). He discusses a spectrum of fragmentation, moving from the narrowest conception—treating a patient for a particular illness (lack of coordinated care)—to treating a patient over time (breaks in access to health care at various life stages) (p. 1). He also considers patients in groups, from small patient groupings (also breaks in access to care), to patients within a broader population, such as the state or nation (p. 1). Elhauge acknowledges that the book focuses on fragmentation at the individual patient level because “probably it is less controversial that the care received by an individual patient should reflect some sort of coherent common plan” (p. 2). Elhauge argues that in order to best reform health care, policy– and law–makers will require first either “a theory about optimal integration of decision making . . . or evidence of the sort of bad results that must reflect excessive disintegration” (p. 3). The book focuses on identifying, and responding to, the latter, and it does so admirably.

My critique pertains to the narrow view of fragmentation. By framing the fragmentation discussion as a desirable integration–undesirable disintegration dichotomy, the problems of fragmentation cannot be seen to their fullest extent. The integration–disintegration dichotomy assumes that existing legal structures are appropriate and seeks to work within them. As a result, assumptions and beliefs upon which these structures are built are taken as sound. The most troubling assumption is that illness is viewed as exceptional, rather than as part of the human condition. We are all universally vulnerable to illness and the subsequent disadvantage it creates. Further, few people fall into a concrete “sick” or “well” category—most of us fall somewhere along a continuum of wellness.

Framing the fragmentation debate in terms of existing legal structures has two significant consequences. First, it deeply entrenches a fallacy within current laws (and many of the reforms addressed in the book) that individuals are fully-functioning over a life-time, capable of laboring for wages (which may provide health care), and able to form and order certain preferences that allow them to participate actively and efficiently in the market. Dominant legal, political, and economic theories embrace a concept of the “liberal subject” that assumes that individuals are able to enter society and participate on equal ground. This view does not appreciate and respond to our universal vulnerability to illness, particularly to catastrophic illness.

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Will Physicians and Hospitals Ever Get Along? Prospects for Defragmentation in a Post Health Care Reform World

Elizabeth Weeks’ earlier post considers  how payment systems serve as a source of fragmentation, discussing the excellent example of how under Medicare reimbursement rules  physicians and other outpatient providers have little incentive to coordinate care with and consider the costs faced by hospitals.  Indeed, the misalignment between hospitals and physicians runs across many of the book chapters.   This is not surprising as the modern hospital is the epitome of fragmentation problems.  For example, Einer Elhauge (Introduction) notes how hospital-based services evidence team production problems. David Hyman (Chapter 2) observes that under the current reimbursement rules “providing integrated care doesn’t pay better than fragmented care – and in some instances, it pays worse.” Kristin Madison (chapter 5) discusses regulatory contributors to hospital-physician fragmentation, such as the corporate practice of medicine prohibition and health care fraud and abuse laws that may, counterproductively, impede even beneficial integration efforts. James Blumstein (Chapter 7) and Alain Enthoven (Chapter 4) call for greater regulatory flexibility to support integrated delivery systems. Also, Frank Pasquale (Chapter 11) thoughtfully discusses the hospital-physician battles over physician-led specialty hospitals.  A common theme is that at many medical centers physicians and hospital management work disconnected from each other or have relationships strained and full of discord.

The interesting question moving forward is whether health care reform will respond to these concerns and collapse the hospital-physician divide, a goal that has eluded reform attempts in the past? I’m hoping for the best but remain somewhat dubious.

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Getting Mental Health Coverage Wrong

Thanks to Frank for inviting me to review Barak Richman, Daniel Grossman, and Frank Sloan’s chapter,  Fragmentation in Mental Health Benefits and Services, in Our Fragmented Health Care System: Causes and Solutions (Einer Elhauge, ed. 2010).  The book is important and provocative.  The chapter on the fragmentation of mental health care couldn’t address a more timely issue.

People with serious mental illness, more than most other patients, struggle with health system fragmentation. As the Institute of Medicine described it,

Mental and substance-use (M/SU) problems and illnesses seldom occur in isolation. They frequently accompany each other, as well as a substantial number of general medical illnesses such as heart disease, cancers, diabetes, and neurological illnesses. *** Improving the quality of M/SU health care—and general health care—depends upon the effective collaboration of all mental, substance-use, general health care, and other human service providers in coordinating the care of their patients. *** However, these diverse providers often fail to detect and treat (or refer to other providers to treat) these co-occurring problems and also fail to collaborate in the care of these multiple health conditions—placing their patients’ health and recovery in jeopardy.

By some estimates, formerly institutionalized people with serious mental illness experience about 25 fewer years of life, mostly due to the effects of treatable physical illnesses such as cardiovascular, pulmonary and infectious diseases.  The effects of this health system fragmentation are experienced notwithstanding parity legislation, and they are felt also by people in the community with less serious mental illness, often because their primary care providers can’t find mental health providers to whom they can refer.

In Fragmentation in Mental Health Benefits and Services, the authors approach mental health system fragmentation by telling a story of the relationship between health insurance structure and income redistribution. The authors address the interrelationship between insurance “carve-outs” for mental health care and the growth of mental health parity laws. They assert that the carve out of behavioral health coverage from medical insurance provokes states to pass mental health parity laws. According to the authors, these parity laws fail to help their “intended” beneficiaries, and instead serve to redistribute resources away from low income and non-White employees.

To make their case, they mine a database of claims data for privately insured North Carolina patients. These claims data allow them to track employees’ (and, presumably, their dependents’) use of mental health services. Along the way, they raise several important issues. For example, they suggest that care provided by mental health providers may not be particularly efficacious. (299) Few would disagree that in most areas of health care – including mental health care – comparative effectiveness research is essential.   In addition, they suggest that access to and benefit from covered services varies by income and race. (298-99) It is undoubtedly true that there are class-based and race-based disparities in access to health care; this is so much discussed, in fact, that it somewhat puzzling that the authors would characterize as a “regularly overlooked question” the fact that “equal insurance and access does not translate into equitable consumption.” (279)

On some points, the authors seem to go a bit beyond their data. First, the authors assert (without citation) that mental health parity is “often” pursued “to benefit low-income and traditionally vulnerable populations.” (284) Many advocates (myself included) have argued for parity as a civil rights matter: as people with physical illness have access to insurance coverage, so should people with mental illness.  Certainly, insurance coverage is most valuable for those without the means to pay for care out of pocket, but that is as true for cardiac care as for mental health care. From this perspective, parity legislation seems no more a redistributive move than any other form of health insurance.

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Why “House” is the True American Health Care Hero, And What To Do About It

After reading their article “The U.S. Health Care System:   A Product of American History and Values,” it struck me that David W. Johnson and Nancy Kane described exactly why the devious, unethical, but brilliant physician “House” would be the perfect depiction of a health care hero to  many Americans.  Johnson and Kane explain how the  American health care non-system is a product of the value Americans place on self-reliance.  This has created an individualistic culture and a view that health care is an individual, rather than a collective responsibility.  Couple this with the American preference for markets rather than governments to solve problems, and you get the fragmentation we have now.

In America, physicians are recognized and rewarded for being “the best” (i.e., the most specialized, or the most “brilliant”) rather for collaborating to achieve the best  outcomes.   Couple this with a health care finance and delivery system that is the product of years of crisis management, rather than any cohesive  forward-thinking planning.  You put all of these things together, and you get – – – House.

The irony of this is that the actor who plays House on the series, Hugh Laurie, is British.  The British health care system was established shortly after World War II with an eye towards ongoing health management of an entire population.  A system like Britain’s would not reward or idolize House for his anti-social, egocentric behavior; it would reward him for good patient outcomes (which would make for boring TV, but good medicine).  If  House spent less time performing his egocentric, lone-ranger-like antics and more time coordinating  patient care with his far-more-dedicated-than-him team of doctors, his (and the team’s) rewards would be much greater.

This is not to say that there are no egotistic, self-important health care providers in countries with centralized health care systems.  Nevertheless, if the incentives don’t reward that kind of behavior, and the society does not place high value on individualism above outcomes, at least it wouldn’t be encouraged.    As Johnson and Kane conclude, the current recession, coupled with increased globalization,  have given us a unique opportunity to redefine our core values and align our health care system with those values.  We can use models from other countries, but maintain a uniquely American perspective, reflecting the best of American creativity.  Economist Richard Florida, in his recent book “The Great Reset,” posits that times of great economic upheaval are also opportunities for innovation.  This is as true in health care as it is true in technology or any other field.  If we want world-class health care for all, we cannot remain prisoners of the accidents of history that shaped our current health care system.


Waldo’s Optimal Fragmentation

Thank you Frank, Glenn, and Concurring Opinions for inviting me to participate in the online Fragmentation book review symposium.  As serendipity would have it, your timing could not have been better, for two reasons.

First, just last week in my Health Care Finance class here at the University of Georgia, we began the chapter on “The Structure of the Health Care Enterprise,” which opens, as those familiar with the Furrow, Greaney, et al. Health Law casebook know, with a classic fragmentation scenario:  Our 35-year-old patient, Waldo, a recurring character throughout the casebook, must navigate the late 1970s health care system and all of its poorly coordinated care, minimal attention to quality, self-interested referrals, fee-for-service payment, and balance-billing flaws.  Students are urged to observe the deficiencies and incentives driving the U.S. health care “system” — or lack thereof — and prepare, in future chapters, to compare Waldo’s treatment under, first, 1980s managed care and, later, contemporary consumer-driven health care.  Preparing for this Symposium primed me for discussing the Waldo example with my students.

Second, over the weekend I presented at the Midwestern Law and Economics Association conference, where I had the good fortune to see my friend and mentor, David Hyman.  Thanks again to the upcoming Symposium, I had just read David’s chapter on my flight to Denver and could engage his thoughts on the Fragmentation book.  As I commented to David, what I find so refreshing and valuable about this book is that it does not start from the well-worn and, to me, uninteresting, suggestion made whenever one is asked to talk about what’s wrong with the United States health care system:  “Well, really, don’t we just need universal health care, a single-payor system?  If Canada can do it, why can’t we?”  (I mean no disparagement to Vickie Williams’s excellent post earlier today on this point, for those who are less jaded than I.)  Instead, the book accepts the system we have — an admittedly disjointed amalgam of government programs and regulations, along with competitive markets and incentives — and asks how it might be improved.

David’s chapter focuses on payment systems as a source of fragmentation and provides some nice examples even within particular health care programs or payors.  For example, Medicare A (hospitalization) providers have no incentive to consider Part B (outpatient and physician services) providers’ costs because the Parts operates as “payment silos,” under distinct reimbursement methodologies, with no need to coordinate care or service delivery.  With dually eligible beneficiaries, the fragmentation is even worse:  Medicare faces higher costs if poor quality care in Medicaid-covered long-term care settings precipitates an acute hospitalization, while Medicaid faces higher long-term care costs if Medicare prescription drug coverage fails to treat beneficiaries’ chronic conditions.  The chapter suggests some payment reform strategies, such as medical homes, pay-for-performance, and bundled payments, which have been debated and adopted to varying degrees by government and private payors, including in the recent Patient Protection and Affordable Care Act.

The end of the chapter was the most provocative.  In David’s characteristically contrarian, and, to me, always entertaining way, he concludes by begging the question:   Before we get all worked up about fragmentation and how to fix it, we should step back and consider that, at least in some cases, we seem to (and, he would suggest, at least sometimes, should) prefer fragmented health care delivery.  He points to the popularity of Wal-Mart retail clinics, medical tourism, and specialty hospitals.  And I would add the decline of managed care, rise of concierge medicine, and popularity of $4 prescription drugs.  Of course, as David acknowledges, those trends reveal other, deeper flaws in our health care delivery “system.”  But before jumping on the de-fragmentation bandwagon, Waldos should consider carefully what they may have to give up.


Where’s the Public Health?

Greetings. Thanks first to Frank Pasquale and Glenn Cohen for extending the invitation to comment on this terrific, provocative book and the important issue of fragmentation in the health care system. I enjoyed the book a great deal. The impressive list of contributors make a compelling case of how fragmentation runs across and unduly complicates many dimensions of the health care system. As a descriptive project alone, the book is immensely useful to scholars and policy-makers. It produces extensive evidence of fragmentation, demonstrating how lack of integration, misaligned incentives, too many decision-makers, unclear obligations and responsibilities of multiple actors in a complicated system, etc. generally result in underpowered, less effective medical care.

Because the book does such a great job of documenting and providing a typology of fragmentation problems and possible causes, I am hesitant to quibble about things that might have also been included but were not. Nonetheless, here is my quibble: where’s the public health?

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Changing Payment Policy to Improve Quality & Reduce Fragmentation: The Medical Home Concept

I begin by thanking Concurring Opinion for hosting this symposium to review a book that discusses the need for health care reform through the lens of fragmentation.  The existence of fragmentation in the US health care delivery system is not a new concept; indeed it is a well established problem.  The novelty of this book is that it not only forces the reader to think more deeply about the fragmentation problem, but also how the law might be encouraging this fragmentation, how changes in the law might decrease fragmentation, and how non-legal factors might impact reformation of health care laws.

Several chapters focus on how fragmentation of the U.S. health care system undermines the provision of quality care and increases costs. (See Ch. 2, 3, 5, & 9). In Chapter 9 – Value-based Purchasing Opportunities in Traditional Medicare:  A Proposal and Legal Evaluation, authors Timothy Jost and Lawrence Casalino provide an excellent overview of eight distinct changes that can be made to improve the quality of care provided in the Medicare program.  Several of the changes reflect recommendations similar to those made by MedPac in its annual “Report to the Congress.”  Some of the changes include (1) “make the conditions of participation in Medicare more stringent,” (2) “encourage beneficiaries to choose a medical home,” (3) “change payment methods to reward quality and efficiency,” and (4) provide the public with information on the quality of care provided by the Medicare providers. (pp. 202 – 207)  The chapter goes on to describe two distinct models of providing health care that will reduce fragmentation among providers and improve the quality of care provided by encouraging separate Medicare providers to work in a coordinated and integrated fashion:  the medical home and the accountable care organization.  The chapter concludes by discussing the legal challenges to implementation of the various value-based Medicare purchasing proposals.

My comments will focus on the Medical Home concept and its ability to reduce fragmentation and improve quality of care by improving communication and coordination of care among individual and institutional providers that treat a single patient.  The current physician reimbursement method under Medicare, the physician fee schedule, does not incentivize physician practices to provide the care envisioned in a medical home.  It does not compensate the primary care physician to coordinate care across providers, to continuously monitor the patient’s care, and to train the patient to take an active role in maintenance of his/her health. It also does not provide a framework or “model” for designing a primary care practice that is consistent with best practices.

According to Casalino, in a medical home a patient has a relationship with a personal physician that provides “first contact, continuous, and comprehensive care.” (p. 207) This type of care is consistent with the care provided by a primary care physician.  The primary care physician works with his/her team of providers to “take responsibility for coordinating a patient’s care among the physicians in the home practice and across all elements of the health care system (e.g., hospitals, specialist physicians outside the home practice, and rehabilitation facilities).” (p. 208)  The home will provide enhanced access to services by effective use of email and telephone services.  The home will also use registries and care management processes to provide a broad array of services including “screening, preventive, follow-up care,” and patient self-care training. (Id.)  Some specific quality mechanisms for medical homes that are a part of the Casalino proposal include (a) National Committee for Quality Assurance (NCQA) certification as a medical home, (b) NCQA random on-site audits, (c) patient satisfaction surveys, and (d) mandated on-site audits when patient complaints are received.  Under Casalino’s proposal, the reimbursement methodology would have two components.  The medical home physician would be paid on a revised fee schedule plus receive a patient satisfaction bonus.  The medical home practice would also receive a risk-adjusted monthly fee for each Medicare beneficiary that selects the practice as his/her medical home.  These quality and reimbursement proposals differ from the current fee- for-service physician reimbursement method under the Medicare fee schedule, and are designed to incentivize the provision of quality and efficient care.

The importance of the medical home concept is reflected in the fact that a demonstration project designed to test the concept in Medicare was enacted as part of the Tax Relief and Health Care Act of 2006, and was expanded in the Medicare Improvements for Patients and Providers Act of 2008.  Additionally, there are several provisions within the Patient Protection and Affordable Care Act of 2010 (PPACA) that support use of medical homes.  In my article, from Concierge Medicine to Patient-Centered Medical Homes:  International Lessons and the Search for a Better Way to Deliver Primary Health Care in the U.S., I discuss how the patient-centered medical home (PCMH) model is a tool that can be used to improve the provision of primary care in the U.S. based on lessons from international organizations that focus on health policy and an examination of the laws and policies of countries that rely more heavily on primary care.  Extensive use of primary care services as part of a health care system has long been advocated by the World Health Organization (WHO) as a way for health systems to provide efficient health care to all of its citizens.  This position is reflected in the WHO’s “Health For All” agenda and re-emphasized in the 2008 World Health Report.  Additionally, other countries, such as the United Kingdom, Netherlands, and Belgium rely more heavily on primary care, and have made concerted efforts to improve the quality of primary care.  Some of those initiatives are consistent with the features of the medical home model as reflected in the NCQA accreditation criteria.  Specifically, the UK, Netherlands, and Belgium require an external assessment of the performance of the medical home; require the use of evidenced-based guidelines in the provision of care; and require the use of technology to communicate with patients, and provide enhanced access to care.  Additionally, these governments have incentivized the provision of quality care through value based purchasing initiatives including quality improvement and care coordination.  In the UK for example, the government included terms within its General Medical Services Contract with physicians that provided financial rewards based on meeting clinical performance requirements, conducting patient surveys, and improving care in response to surveys.

Jost notes that a key legal barrier to use of the medical home model in Medicare is that the Medicare laws governing Part A (hospitals) and Part B (physicians) specify the methods of payment to such a detailed level that it would not be flexible enough to allow payment for medical home practices.  Jost recommends amendment of the Medicare statute to specifically authorize this Medicare proposal.  To date recommendations to resolve this potential legal problem have been generally followed.  Congress has mandated that the Secretary of HHS conduct a medical home demonstration project for Medicare beneficiaries with chronic conditions and provided for expanded use of the medical home model through specific provisions of PPACA.

In conclusion, in Chapter 9 of The Fragmentation of the U.S. Health Care System, Casalino and Jost provide an easy to understand and comprehensive outline of the bulk of the recommendations (and legal barriers thereto) that have been proposed or enacted to accomplish value-based purchasing in the Medicare Program with respect to hospitals and physicians. This chapter would serve as a valuable resource to a varied readership interested in health care reform generally, and delivery system reform in particular.


Integrated Delivery Systems as a Panacea

In “Curing Fragmentation with Integrated Delivery Systems,” Alain Enthoven, the father of “managed competition,” extols his creation as a cure for what ails America’s fragmented health system.  Indeed, many of Enthoven’s proposals for reducing fragmentation in our health care system, such as regional health insurance exchanges, were incorporated into the Patient Protection and Affordable Care Act (“PPACA”), the health care reform bill signed into law on March 23, 2010.

Although a proliferation of integrated delivery systems competing with each other for business may be a step in the right direction, it will do little or nothing to cut down on the enourmous amount of health care resources spent on compliance with ever-expanding numbers of billing rules.  Even Professor Enthoven acknowledges that a single-payer system could solve many of the same problems as his integrated delivery system proposal, but he believes that Americans do not have the political will to accept such a system.  Professor Enthoven also fails to consider that even less-radical changes to our health care system, such as adopting a system of encrypted medical records that a patient carries with her, like the French “carte vitale,” would greatly cut down on or eliminate poor medical outcomes that are attributable to fragmentation in the system.

A well-managed single-payer system could  satisfy the American appetite for market competition, and achieve more than the integrated delivery systems proposed by Professor Enthoven.  Competition could still take place at the insurer level, much like in Germany, or it could take place amongst providers, such as in Japan (whose system author T.R. Reid cleverly describes as “Bismarck on Rice” in his recent book The Healing of America (Penguin Press 2009)).

Professor Enthoven’s example of the “epitome of integrated delivery system[s]” is Kaiser Permanente (for which Enthoven is also a consultant, according to his Stanford University on-line biography).  His vision is for the American people to have a choice of many Kaiser Permanente-like organizations.  This presumes that people want choices when it comes to picking a health plan, a presumption shared by PPACA.  I believe that is incorrect.  What people want is choice of providers.  Nobody loves their payers; they love their doctors.  They want to make sure they don’t receive numerous bills for every little service they receive, but they don’t really care about who pays those bills.  Only the ultimate integrated delivery system, a single-payer one with a compensation system based on outcomes, not services, will achieve this.

It is true that many of the single-payer systems in use around the world are underfunded and under inflationary pressure.  A single-payer system in the United States would be no exception.  Despite our current economic woes, we remain the richest country in the world.  As Dr. Marcia Angell, former editor-in-chief of the New England Journal of Medicine stated in the 2000 PBS documentary “Healthcare Crisis:  Who’s at Risk?,” the amount of our GDP that we spend on health care is not really important.  What is important is that we get good outcomes and the customer satisfaction that we are paying for.  Managed competition and “integrated delivery systems” although a step in the right direction, will not solve our problems in the long run.