By Jonathon Ross, M.D.
Canadian Healthcare Network, Aug. 1, 2013
Many American physicians, myself included, support single-payer national health insurance, with global budgets for hospital care. A single, publicly accountable payer, coupled with global hospital budgets, are tools needed to assure cost control in health care systems.
But I was recently reminded by one of my Canadian colleagues that some American “reforms” are getting a hearing north of the border. One of these is that hospitals should be paid by case-based activity fees rather than global budgets.
In the U.S., we bundle clinically similar care into diagnosis related groups (DRGs), and the money follows the patient. We pay hospitals according to the fee assigned to each DRG. I would advise extreme caution and careful assessment of the implications for cost, quality, access, equity and efficiency before adopting this hospital funding model.
In Canada, I’m told you call this “activity-based funding” or ABF. Depending where you live, this method of funding may be called patient-focused funding, payment by results, volume-based funding, service-base funding, case-mix funding, or prospective payment system. But no matter what you call it, ABF has serious side effects.
One of the dangers is that ABF can be used to “game the system.” When you pay hospitals according to diagnosis, the incentive is to increase or otherwise modify your diagnosis so your hospital will make more money. And that’s exactly what happened when the United States implemented ABF for U.S. Medicare patients.
Here in the States, we have a small army of nurses reviewing every case in hospital to remind us to use special words just the right way so we can get more money for each case, regardless of whether we have done anything different in managing our patients.
For example, it is not enough to say that patient has lost weight and looks ill. Instead physicians must use the term “malnourished.” It’s even better if you order a blood test to prove the obvious, even if that test does not change the diet ordered for the patient, or your case management.
The incentive is to list all of the diagnoses you can possibly list for every patient, as some of these will increase the payment even if it does not change your management one bit. These are “complicating conditions” and can increase payment even if they change none of your orders or tests.
All day, every day, nurses are caring for charts rather than for patients at every U.S. hospital. This is what activity-based funding will buy you.
Of course, there will also be pressure to discharge patients sicker and quicker in order to create more cases. You can expect that you will need added extended care rehabilitation beds. There will be demand for added bricks and mortar to build rehab facilities for patients who could more efficiently spend another few days in a hospital bed getting rehabilitation before going straight home. This transfer makes no sense at all unless you already happen to have excess empty rehab beds in a community. It also diverts the patient to a facility where the patient’s physician team does not regularly visit. If physician care is still needed during the rehab stay, the access to those physicians will be impaired, disrupting continuity of care.
Your length of hospital stay will decrease, but the added costly days will just happen in a different costly building, with another costly set of therapists, working under another costly set of administrators.
If the hospitals game the codes upward, then you need another army of regulators to catch them and code them back down. This version of the popular video arcade game, “Whack-a-Mole,” continues in U.S. hospitals to this day. There is now a large hospital bureaucracy whose job it is to up-code the severity of illness of Medicare patients and another large Medicare bureaucracy trying to figure out how to stop the hospitals from gaming the system.
The game of up-coding has been getting significant attention in the U.S. press, where the extreme disparities in hospital costs and insurance payments are making headlines. Surely, Canadians wouldn’t want this administrative nightmare in their own health care system.
If you want to use financial incentives to change behavior in health care, you need to be clear about what you want. How about rewarding staying within budget without patients feeling a loss of access to needed care or reduced quality? How about rewarding providers for reducing the number of premature deaths related to treatable illness? Canadians should ask themselves what they want before implementing activity-based funding.
Winston Churchill is rumored to have said, “You can always count on the Americans to do the right thing … after they have exhausted all the other possibilities.” I would beware of American consultants bearing gifts such as case-based payments for hospitals as a cost-saving idea. Count your blessings, Canadians, and get to work improving the effective system that you have!
Dr. Johnathon Ross is past-president of Physicians for a National Health Program, a U.S. physician organization that supports Medicare for all. He teaches and practices primary care internal medicine at a 500-bed teaching hospital in Toledo, Ohio.
http://www.canadianhealthcarenetwork.ca/healthcaremanagers/discussions/opinion/beware-of-americans-bearing-activity-based-funding-19897
