A few weeks ago, I had posted an entry discussing the contract impasse between my employer, Tufts Medical Center (TMC) and Blue Cross/Blue Shield (BC/BS), the largest health insurer in Massachusetts. I thought this would be of interest as it encapsulates a lot of what's broken about the health care system from a perspective that most people probably don't think about, the often contentious interactions between insurers and hospitals.

There can be a huge disparity of how hospitals are reimbursed particularly in cities saturated with multiple large medical centers. In the case of Boston, hospital reimbursement rates can vary by as much as 20-40% for treating the same condition with no difference in quality. TMC was on the low end in our last contract with BC/BS as we literally lost money for every BC/BS patient we treated. After the contract expired and negotiations stalled, as of the end of the month we would have stopped treating their members forcing them to either switch insurers or doctors. As of this week, TMC and BC/CS finally ironed out a new agreement. While it probably can be considered a win for TMC, I'm not so sure we should be popping the champagne just yet.

What settled the issue was TMC agreeing to enter an "alternative quality contract". Basically, instead of a negotiated fee-for-service model where the insurer pays a negotiated set price per hospital stay or procedure (e.g. $500 for an MRI, $2,000 per hospital day etc.), this instead has the insurer pay out a lump sum per patient or diagnosis, essentially being a form of capitation. Thus the hospital gets an incentive to provide "efficient care" (i.e. ordering fewer tests, discharging patients sooner) since any excess money not used to treat the patient becomes a bonus to the hospital. Conversely, providing "inefficient care" or having medical complications increases the costs incurred for that patient. The risk is then shifted onto the health care provider who could potentially face a loss while caring for the sickest patients leading to my main objection for this type of reimbursement model.

First of all, patients present with myriad different variables that affect their care and risk for complications for the same condition. Treating pneumonia in an otherwise healthy 60 year-old man is far different than treating pneumonia in 60 year-old man who smokes two packs per day and had a heart attack 3 months ago. This puts hospitals and physicians at higher financial risk for treating sicker patients. Also if our insurers follow suit, very sick patients could end up being "hot potatoes" passed around from hospital to hospital when their costs get too high (something which already happens with community hospitals) . It's quite possible that this contract may take these factors into account, though based on past examples of this type of reimbursement (like Medicare), I really doubt it. Food for thought for those hoping for a nationalized health care as this is the likely type of model that would be put in place.