Published October 28, 2010

MedPac Testimony: Reforming the Health Care Delivery System

On March 10, 2009, Glenn M. Hackbarth, J.D., Chairman of the independent Congressional agency known as MedPac, provided testimony to the U.S. House of Representatives and the Committee on Energy and Commerce entitled “Reforming the Health Care Delivery System.”  As part of such testimony, the Chairman stated that our current health care delivery system does not in fact operate as a true system.  In fact, he claims our current health care delivery includes four major flaws:

  • uncoordinated care;
  • preference and reward of specialist care over primary care;
  • poor quality; and,
  • high costs.

The Chairman’s testimony continues to provide insight into MedPac’s agenda, particularly as it relates to shaping the future of the Medicare program.  However, while such implications certainly exist related to the direction of Medicare, the breadth and influence of MedPac’s comments, findings, and recommendations suggests a larger healthcare reform agenda for our industry.  The following sections summarize the key aspects of this recent testimony.

Excerpts and Summary of Testimony

Speaking on behalf of MedPac, the Chairman stated that the flaws in our health care delivery system exist because the current fee for service (FFS) reimbursement model rewards both increased volume and complexity of care.  In addition, he contends that the effectiveness of patient outcomes are neither monitored nor mandated under this model.  Furthermore, MedPac believes FFS reimbursement discourages communication and coordination among medical providers by causing a “silo” effect via its compartmentalized payment distribution.  As a result of these factors, MedPac has concluded that fundamental change is necessary.

However, MedPac believes any fundamental change must address both quality of care and cost containment.  According to MedPac, the current FFS model not only rewards poor quality patient care, but it exerts no financial consequences when care is uncoordinated, inappropriate, re-current, or ineffective.  Additionally, the Chairman claims that costs must be addressed simply because of sustainability issues.  In particular, Medicare faces serious long-term financing challenges as projections are forecasting financial exhaustion by 2019 with the recent economic downturn shaving one to three years off this prediction.

The Chairman’s testimony identifies several barriers to improving value
(quality over cost):
Lack of Fiscal Pressure
Cost controls encourage efficiency and productivity, yet are non-existent in some medical environments
Price Distortion
Specialist care is rewarded above primary care
Lack of Accountability
The silo effect encourages unattended referrals and inconsistent discharge/follow-up care
Lack of Coordination
The silo effect discourages cross-medicine, causing duplication and excess treatment
Lack of Information
Quality and effectiveness feedback is non-existent and information is neither current nor electronically available
Recommendations from MedPac are aimed at increasing efficiency and quality:
Constrained Payment Updates
Payment increases should be curbed
Payment Accuracy Increased
Payments should include compensation for patient severity and primary care delivery
Link Payment to Quality
Incentives for quality care should be implemented
Resource Monitoring
Resource consumption should be monitored and measured against outcomes with feedback provided to medical providers
Public Reporting
Quality and treatment effectiveness/options should be publicly reported and discussed
Reduce Financial Demands
Medicare Advantage programs funding reduced

MedPac views the above recommendations as urgent responses to the immediate Medicare quality and cost challenges but is adamant in their position for complete overall health care delivery reform.  The following reform recommendations are called forth by MedPac:

  • Delivery System.   Dissolve the FFS payment model and encourage a transparency of scope and time.  Devise a system that rewards care coordination, successful outcomes, efficient delivery of resources, and complete patient disease management.
  • Medical Home Pilot Program.   Initiate a pilot program in order to test the success of complete patient disease management via one geographic location and financial purse.
  • Discourage Readmissions.   Create financial penalties for medical providers with high disease-specific readmissions.
  • Bundle Reimbursement.   Discourage the silo effect by weaving financial reimbursement  between medical providers.  To begin this process, hospital and physician reimbursement for one patient care episode would be delivered in a single financial package.

As organizations review such testimony, much thought is being given to its strategic implications – particularly in the area of greater hospital and physician alignment.  Notably, all of MedPac’s recommendations, regardless of the model(s) deployed to achieve such reform, will require greater collaboration between hospitals and their medical staff.

If you would like more information, please contact the experts listed below at (800) 270-9629.

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