Intent on Transformation
Public purchasers are positioned to lead, having a hold on 33 percent of the insurance market
Together, state employees, schoolteachers, Oregon Health Plan members and local government officials comprise 33 percent of the insured population in Oregon, according to a recent analysis.
“We can have a major footprint,” said Speight, director of healthcare purchasing for the Oregon Health Authority.
Initially, he intends to focus on the two largest purchasing pools in the state – the Public Employees’ Benefit Board, which has 126,437 members (state employees and their dependents) and the Oregon Educators Benefit Board with 142,966 members (school teachers and dependents) – by focusing on pay for performance, patient-centered medical homes, evidence-based care practices and new payment methodologies.
“Our goal is to impact the transformation of the delivery system, but not through any pool consolidation,” he said. “Consolidating pools is incredibly political and people worry about this. If local governments find these standards attractive and useful, then they can adopt them.”
Transformation inevitably leads to bending the cost curve, and Speight is drawing on his expertise as a health insurance executive to engage the purchasing community. He intends to encourage hospitals, for example, to re-tailor their reimbursement system.
Instead of being paid for inpatient costs on a formula known as “discounts on billed charges,” he suggests that hospitals use a prospective payment system known as DRGs, which bundle charges. Such a payment system is widely used by Medicare and was once the mainstay by commercial insurers, particularly HMOs.
“This kind of payment streamlines and makes the payment of care more efficient,” he said. “By having a fixed price, there are more incentives to find new ways to be efficient and take some costs out.”
It’s also a more equitable way to pay for extremely high cost catastrophic cases, he said.
“What we need to do as a purchaser community, as a state, is have conversations with the major systems we contract with and sit down and talk – not about the price of care – but the payment methodology,” he said.
Speight also wants to take a serious look at outpatient hospital costs, which have grown quickly with technology advances, giving providers the ability to treat people in a single day. Medicare has grouped such procedures by resource intensity and affixed a price, which could be used by public purchasers. “But not by paying at Medicare rates,” Speight insisted.
Many external factors influence hospital pricing, he said. “Somehow we’re caught in this perfect storm of a bad economy, high unemployment and constricted employer-based insurance.”
Speight isn’t advocating a standard benefit design, or attempting to get better pricing by cost shifting on other purchasers.
His ultimate goal, he insisted, is to change the way providers and delivery systems are organized and reduce unnecessary variation, improve accountability and reward efficiency and quality.
“We need to be patient because the delivery system is incredibly complex and incredibly fraught with different perspectives,” he said. “Ultimately we need to change the delivery system and to change the way we pay, and reward efficiency rather than paying fee for service. Most of us want to pay for value and good care.”
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Comments
Lowest national hospital costs appear to be in Maryland, which regulates hospital prices. Prices (per hospital) are uniform for all payers (Medicare included). The hospitals continue to function.
State hospital rate regulation has a significant national history and represents one way to get serious about cost controls.
It's disappointing to see leadership use a"perfect storms" metaphor where we view ourselves as victims of economic forces beyond our powers as opposed to acknowledging our basic responsibility to assess practices that have consequences. We are our own "perfect storm."
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