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Fee-for-Service Must Go, Says Ex-Vermont Governor Howard Dean

WASHINGTON — Discussing healthcare reform is pointless unless you decide to get rid of fee-for-service medicine, according to Howard Dean, MD.

Under the current system, “you only make money if people get really sick,” Dean, an internist and former Democratic governor of Vermont, said Thursday at an event sponsored by the American Bankruptcy Institute. “Every financial incentive we have in American healthcare is to spend as much as we possibly can.”

And putting in value-based reimbursement won’t help, said Dean, who was also a Democratic presidential candidate in 2004. “I think value-based reimbursement is BS; it’s a short-term solution so nobody has to do what really has to be done, which is get rid of fee-for-service medicine in its entirety.”

Dean mentioned a physician friend of his who is a delegate to the Maryland state legislature. “He works in an emergency room; I asked him, ‘What’s it like?’ He said, ‘The CEO visits us once a month.’ I said, ‘That must be great for morale.’ He said, ‘[The CEO] says, “Well, boys, we’ve got some empty beds in the ICU tonight — fill ’em up. Admit people.”‘ If that’s how [the system] is working, we’re in trouble.”

The hospital Dean works at “hired a cardiologist to boost the number of cardiac catheterizations we do,” Dean said. “That’s not a benign procedure … The hospital hired somebody to get more of them. The reason [for these efforts] is that you keep paying us by the procedure.”

Former Vermont governor and Democratic presidential candidate Howard Dean, MD, speaks at Georgetown University Law School. (Photo by Joyce Frieden)

“We’re not getting paid for keeping people healthy in our system,” he continued. “I don’t believe that doctors think it’s a wonderful idea to have people get sick. But incentives work in every system … and monetary incentives always work in human beings. If you keep the incentive system the way it is, you have a distorted system that works against good health.”

This problem can be fixed, “and the mechanism for fixing it is in the Affordable Care Act (ACA),” said Dean, who was referring to the law’s inclusion of accountable care organizations (ACOs). “[Members of Congress] put ACOs in the bill because it was thought — probably correctly in theory — that if you had one organization that was responsible for your care from clipping toenails to doing cardiac surgery, the [medical] record would be disseminated to anyone giving you any care at all. But what they didn’t realize is that the ACO is a potentially terrific cost-control mechanism.”

With an ACO, groups of providers work together to provide care for a particular group of patients, and they benefit financially from any cost savings they achieve. “Once you assign risk to providers, guess what? Instead of paying us for how sick you get, you pay us for how well we keep you,” he continued. “Are there problems with this? Yes, there are cheaters everywhere,” including in the medical profession. But overall it’s a better system, he said.

The spread of ACOs “is going to happen — not because government will do it, because I think they’re terrified — but the private sector will do it,” Dean said. “I think the private sector is going to start going to employees and saying, ‘I’ll set aside $10,000 a year for you for healthcare. You can spend it any way you want — you can buy a policy within an ACO, or add on to it and get as much healthcare as you want inside another system, but you’re paying the difference.'”

Healthcare systems will become more interested in social determinants of health as a way to save money, Dean said. For example, Columbia Presbyterian Medical Center in New York City has bought some housing because doctors there were seeing so many children that had contracted severe asthma due to their living conditions.

“They figured it would be cheaper to buy low-income housing in the neighborhood and [house] those families there,” where they will be able to make sure there’s no mold or other asthma triggers in the home, he told MedPage Today. “This is where medical executives can have an enormous influence.”

Although Dean likes the fact that the Canadian system provides universal care to everyone in that country, “it has the same problems we do [because it’s fee-for-service],” he said, noting that while their system used to be funded 50/50 by the provincial governments and Canada’s federal government, the federal government is now paying only 19% while the provinces are paying the other 81% “because the [federal government] wasn’t going to keep up with inflation.”

“If you poll Canadians on what they think of their system, they think it’s absolutely fabulous,” said Dean. “Why is that? Because most of them don’t use it … They’re so relieved that they don’t have to live like Americans do, until they get really sick and have to wait 5 years to get a coronary artery bypass graft … There is a different set of expectations there, but what we’re really measuring when we poll Canadians about healthcare is their sense of security, which we don’t have in the U.S.”

As for universal care in the U.S., “I’m not necessarily opposed to Medicare for All, but the problem is it’s a fee-for-service system so we’d have to fix that,” he added. “The only way you can really save money is with capitated care.”


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