How Do You Dial Back Health Costs And Keep Quality High?

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I think the first thing is you have to change the payment system, there's absolutely no question in my mind that the fee for service payment system for hospitals and doctors leads to over use. And some of that is wrong and some of that is people are sometimes doing things that they know in there hearts are wrong, but I think more of it is actually more subtle, more new ones than that, is that when there's a toss up decision when you're not sure what the right thing to do is, and a lot of health cares like that.

In a system where you're being paid to do more you do more. So I think we need a system where the incentives are flipped, where the doctors in the hospital are given essentially a fixed sum of money to manage a population of patients, and so they have an incentive to figure out how do we deliver the best care and achieve the best outcomes now at the lowest cost, not at the highest cost.

If you do that and don't put in quality protections you lead to skimping on care. And in fact that's what happened in the mid 90s when we had the managed care movement and HMOs at least appeared to be delivering care that was skimping on what patients really needed. So if if you're going to develop a system that's no longer paying people for peace work, but rather paying a fixed sum of money for population of patients, you also have to build in really robust quality, measurement quality, protections, it has to be that the winners of that game, the hospitals that win, the doctors that win health systems that win are the ones that figure out how do we deliver the best product at the lowest cost.

That's been a challenge for us in part because not only was the payment system upside down, but we really din't know how to measure the best product. When I go to Star Bucks in the morning I figure out whether a tolmach/g is worth $3.45 and if it is I buy one, if it's not I won't.

And the same thing is true of all American industry, healthcare's been uniquely insulated from value based decision making partly because the payment system was screwy, partly because the insurance system insulates both the doctors and the patients from the cause consequences, but partially because up until recently, we had really no idea whether I'm a good doctor or not, whether that's a good hospital or not, I think we are much closer to that than we used to be.

It's still not perfect, but the ultimate system has to be one in which the costs are somewhat fixed the players have an incentive to deliver the care under a relatively fixed budget and you have to demonstrate you're delivering high quality safe satisfying care and the folks that figured how to do that win the game.