July 10, 2007
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The article, "Redesigning Care Delivery in Response to a High-Performance Network: The Virginia Mason Medical Center," takes an in-depth look at Virginia Masons efforts to improve care and lower costs for four common conditions: uncomplicated lower back pain; gastroesophageal reflux disease (GERD); migraine headaches; and cardiac arrhythmias.
Faced with exclusion of several physician specialties from Aetnas high-performance network, Virginia Mason Medical Center (VMMC) officials worked with the insurer and four large Seattle employersCostco, Starbucks, King County and Nordstromto redesign care delivery for the four conditions. Adapting aspects of the Toyota Production System to a health care setting, VMMC mapped out how to improve efficiency per episode of care for each of the conditions, according to the article.
"The good news is that Virginia Mason identified ways to streamline and improve care; the bad news is that the medical centers bottom line may take a significant financial hit as a result," said Hoangmai H. Pham, M.D., M.P.H., an HSC senior health researcher and lead author of the study funded by the California HealthCare Foundation (CHCF).
In an accompanying HSC Issue Brief, "Distorted Payment System Undermines Business Case for Health Quality and Efficiency Gains," also funded by the CHCF, Paul Ginsburg, Ph.D., HSC president, points out that "most efforts to improve efficiency for a specific medical condition usually reduce the number of services per patient that can be billed, posing financial challenges for providers. These challenges are often magnified by the current fee-for-service payment structure, where some services are highly profitable and others are unprofitable."
Although Aetna and the participating self-insured employers agreed to pay higher rates for certain unprofitable services if VMMC could achieve reductions in highly profitable services, VMMC still faces a financial challenge from applying more efficient care practices to patients covered by other insurers, which account for more than 90 percent of VMMCs revenues.
And most other medical groups would find it very challenging to do what VMMC did. "Their experience may be the best-case scenario," Pham said, "because they at least had a large group of salaried physicians to work with, who might not be as sensitive to the loss of revenues from profitable services as physicians in most practice settings, and who had the resources to define the problems and coordinate a plan of action."
The Health Affairs article concludes on a cautionary note, stating,
"Aetna, employers, and [Virginia Mason] used an ostensible business case
to motivate [Virginia Mason] to improve efficiency, only to confront the possibility
of that business case turning on its head. It is an example of a provider organization
attempting to do what purchasers, including the Medicare program, all exhort-improve
care delivery while reducing costs It also stands as a cautionary example of how fee-for-service payment and uncoordinated payers present stubborn barriers to sustaining cost control."
The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nations changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.
Celebrating its tenth year, the California HealthCare Foundation (CHCF),
based in Oakland, is an independent philanthropy committed to improving Californias
health care delivery and financing systems. For more information, visit