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Fee-for-service medicine on the way out?

Fee-for-service medical practice is dying, even if the Supreme Court strikes down the entire federal health law, an increasing number of health-business analysts say.

The current system – rewarding doctors who run the most tests and operate on the most patients  --  is inherently inflationary and increases risks to patients, they say.

Future rewards will go to doctors who spend their time listening to patients, keeping them healthy and quarterbacking a team of allied health professionals, they predict.

“Ten years from now, fee-for-service is going to be a thing of the past,” said Stephen Siegel of Broad & Cassel’s Health Law Practice Group.

If so, the effects in Florida will be sweeping, said Linda McMullen, chief strategy officer of the Florida Medical Association. Most Florida doctors still practice on their own or in small groups of four or fewer, she said.

"They're going to have to collaborate to contain costs and improve quality," she said. "That's going to change the way they do business."

Whether that's a change for the better or worse depends on "who is setting the benchmarks," she said.
Fee-for-service is being replaced by “fee-for-value,” said Mark Dubow of The Camden Group, a national consulting company to hospitals.

“It almost doesn’t matter what the court decides” about the Affordable Care Act, Dubow said Friday at the annual summit of the South Florida Hospital and Healthcare Association in Fort Lauderdale.  “The nature of change that is coming – that is already here…is increasingly focused on value.”

That means providing the right care in the right place at the right time, Dubow said. It means doctors and hospitals making more money when patients stay healthy.  And when illness or injury strikes, it means a bundled-payment system that offers financial rewards to keep costs under control.

“We’re all striving for the same goals: improved care at lower costs,” said Philipp Ludwig, vice president for operations for Baptist Health Medical Group in Miami. “It should be fairly simple. It’s not.”

The last time the industry tried to rein in overspending by putting doctors and hospitals on a budget – the switch to managed care that ramped up in the 1990s – backfired. Patients complained they were denied care they needed because of strong financial incentives for cost-cutting.

While consumer groups still harbor some suspicions of managed care, the landscape looks different now, given that electronic health records make it easier to detect attempts to short-change patients.

Also, costs for coverage are now so high that more than 50 million Americans are uninsured, according to the Centers for Disease Control. The Patient Protection and Affordable Care Act, signed into law two years ago, would cover about 32 million of those.

Florida is leading more than two dozen other states in contesting the law’s constitutionality. A Supreme Court ruling is expected any day.

The law uses the considerable buying power of Medicare to encourage the change in the payment system, rewarding collaboration that leads toward "accountable care" and clinically-integrated networks. Even if the law is struck down, private payers have climbed on board.

Hospital executives who attended the Fort Lauderdale health summit on Friday said they have their fingers crossed that the court will uphold the law  because so many of their patients lack insurance.

If it is struck down, they will still be required  be required to take all comers, insured or not, while staggered by budget cuts.

The Florida Legislature has cut Medicaid pay to hospitals each of the last two sessions. Their Medicare pay will take a hit if Congress doesn't act to forestall automatic cuts at the end of the year.

"We're in for a roller-coaster ride," said University of Miami President Donna Shalala.

Shalala, who served as health secretary in the Clinton Administration, said she thinks the law will be upheld when the court issues its ruling later this month.

"Most people think the worst that can happen is the mandate will be thrown out," she said, referring to the requirement that all Americans buy health insurance.

Odds are against the mandate, said a legal expert who attended the Supreme Court arguments in March on behalf of the American Hospital Association.

Dominic Perella of Hogan and Lovells, the firm that wrote the AHA amicus brief supporting the law, told the summit audience he thinks it's about 60 percent likely that the court will strike the mandate.

It's less likely that the whole law will go away, he said: "The Supreme Court has never struck down a law this big and sprawling."

The insurance industry is worried that only the mandate will disappear, leaving them with a requirement to accept all applicants. Without the mandate, insurers worry that only the sick will apply.

But Shalala said the law's subsidies for insurance policies will bring in a lot of healthy people to balance it out.

--Health News Florida is an independent online publication dedicated to journalism in the public interest. Contact Editor Carol Gentry at  727-410-3266  or by e-mail.


Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.