[00:00:03] Megan Hall: Welcome to Humans in Public Health. I'm Megan Hall.

In the past few years, the field of public health has become more visible than ever before, but it's always played a crucial role in our daily lives. Each month, we talk to someone who makes this work possible. Today,  Hayden Rooke-Ley.

Today on the show we're talking healthcare policy -- specifically, how doctors get paid. Increasingly, physicians get money, not just for the actual care they provide, but for the quality of that care. At least, that's the idea behind Medicare's Value Based Payment program.

But  Hayden Rooke-Ley and his colleagues at the  Center for Advancing Health Policy through Research say this approach isn't as good as it sounds. In fact, they say it increases the cost of health care instead of controlling it.

Hayden recently co-wrote an editorial  with Brown University professor Andrew Ryan in the Journal of the American Medicine Association, that proposes a revolution in how we pay doctors and control prices. We had him in the studio to tell us more.

[00:01:11] Megan Hall: Thank you so much for joining us, Hayden. Good to have you on the podcast.

[00:01:13] Hayden Rooke-Ley: Thanks so much for having me.

[00:01:15] Megan Hall: Before we talk about Hayden’s idea for rethinking the way we pay doctors, let’s take a quick step back to the way the US has tackled this problem in the past…

50 years ago the approach to paying health care providers was pretty simple- doctors got paid every time they did something.

[00:01:54] Hayden Rooke-Ley: So if you go in for an office visit, you get paid a set price for that office visit.

[00:01:59] Megan Hall: Almost as if you were going to a grocery store and buying your healthcare. It's like that's what the price is on the shelf. Same as with a doctor, if you come in for a physical, the doctor gets paid the same amount every time you come in for a physical. Is that right?

[00:02:15] Hayden Rooke-Ley: That's right.

[00:02:16] Megan Hall: But a lot of people didn't like this "fee for service" approach. They said it rewarded doctors for ordering more and more tests and procedures. And doing that was making health care more expensive. So, in the 80s, we tried a different approach.

[00:02:31] Hayden Rooke-Ley Policy makers were interested in having providers not just get paid on the basis of each service they delivered, but to assume this cost management or this quote unquote, risk function.

[00:02:43] Megan Hall: Under this "managed care" approach, your doctor and your health insurance company have to consider not just what treatments you need, but what treatments make the most financial sense. And some of those cost saving measures- like limiting your choices when it comes to picking a specialist or needing your insurer's approval for certain medical care- made patients angry.

[00:03:05] Hayden Rooke-Ley So there was a backlash to this movement in the 90s. But what was interesting, what was curious is that in our public programs, in Medicare and Medicaid, we actually doubled down on this philosophy.

[00:03:18] Megan Hall: People who paid for their own insurance didn't want to have anything to do with this managed care approach, but the government decided to stick with these techniques for Medicare and Medicaid. And eventually, these ideas evolved into a new spin on managed care, called Value Based Payments.

[00:03:35] Megan Hall: Will you explain how value-based payments are different from managed care? How is value-based payments the new approach to managing costs?

[00:03:46] Hayden Rooke-Ley Yeah, so instead of the fee for service system of just paying a price for a service that a hospital or a physician delivers, the Medicare program said we are going to increase or decrease those payments based on the provider's ability to manage total costs and to perform on a whole range of quality metrics.

[00:04:05] Megan Hall: So basically the idea was you would get paid more if you were a better physician or a better hospital based on their quality metrics. Like you would be incentivized to do a good job, not just a lot of something.

[00:04:19] Hayden Rooke-Ley: That's right. And not just quality metrics, but also total cost management, this financial risk component again.

[00:04:25] Megan Hall: What this means in reality is that health care providers have to show the government that they're meeting lots of different standards: hospitals have to make sure patients don't end up at the ER right after they get surgery, nursing homes have to prevent staffing turnover, and all providers have to show that they're being cost effective.

[00:04:42] Megan Hall: So you argue in this editorial in JAMA that value-based payments aren't the way to go. Will you explain why you think that's the case?

[00:04:52] Hayden Rooke-Ley: So underlying the theory of value-based payment and of managed care, is really a thesis that if we had better incentives for healthcare providers and physicians, if they could make more money if they contain healthcare costs, that they're gonna keep them more healthy and then they're gonna use the healthcare system less, that they're gonna have the economic incentives to keep them out of the hospital and therefore they are going to do it. And there are a number of issues we think with this approach, but perhaps the biggest one is the reality that the US healthcare system doesn't particularly have a utilization problem.

Fundamentally, what drives this intractable issue that we spend so much on healthcare is that the prices we pay for healthcare are simply way more than our peer nations. And we also have staggering levels of private sector administrative waste. And the value-based payment and the managed care movement really doesn't have a lot to say about those issues. It really doesn't attack those core issues directly.

[00:05:54] Megan Hall: So basically you're saying even if a doctor was purely motivated to keep people healthy and they got all the money they could want to like make the right decision for them, healthcare would still be expensive because the prices are expensive and that's what we really need to address.

[00:06:10] Hayden Rooke-Ley: That's right. And I think it's worth noting here that the value-based payment in the managed care movement really emphasizes this idea that primary care physicians are gonna be the gatekeepers here. That they, right now, don't have the right incentives to keep patients out of the hospital or to practice preventive medicine or to keep their patients healthy. And that if we gave them the right economic incentives, that suddenly they would do that and manage total healthcare costs. I would question those premises, that they're not practicing good enough medicine because they don't have the right economic incentives. I actually don't think that's the case. And then even if primary care physicians were motivated to manage total costs, they really are constrained in their ability to do so, as you say, because the prices for services are really what's going to drive long-term spending growth.

[00:07:00] Megan Hall: And you're saying also that costs are going up because, to run this whole system of managed care, to run this whole system of value-based payment, it requires all of this administrative cost. All these other people behind the scenes measuring quality metrics and keeping track of who's doing what.

[00:07:19] Hayden Rooke-Ley: That's right. So on the provider side, it's immensely difficult for an independent, for example, primary care provider to keep up with these burdens. Think about what we're asking them. We're asking them not just to deliver care and get paid for it, but instead to take on the function of a small little insurance company essentially.

So a primary care office, uh, might make more of a margin if they're somehow able to manage the total cost of their patients, but they also might lose money. And they also have to comply with a whole range of quality metrics and measurements to try to assess whether they're being a quote unquote good doctor.

And you might imagine that this makes it quite difficult for an independent provider to operate with that level of administrative burden and state-imposed financial risk.

[00:08:07] Megan Hall: And it makes it easier for venture capital firms to sweep in and take over practices, I imagine. If these small groups are overwhelmed and then this venture capital firm says, ‘Oh, I can, I can make money off of this. I'll come buy up all of these practices,’ but maybe I'm not really thinking about patient health. I'm just thinking about making money.

[00:08:25] Hayden Rooke-Ley: That's right. So again, if we are thinking about whether a community health center or a clinician led practice down the street, a mom and pop shop, can function when we impose these sorts of difficulties on them, they need capital and administrative support. So I don't think it's a coincidence that we've seen various forms of private capital flood in to essentially help these practices try to operate in these programs, whether it's venture or private equity backed conveners or consultants or other sorts of corporate entities that assist practices and take some sort of a fee for it, or whether it's larger corporate entities like hospitals or insurance companies just acquiring the practices.

[00:09:09] Megan Hall: So, instead of asking health care providers to keep track of all of this data and take on the financial risk of caring for their patients, Hayden and his colleagues argue that the government should do something simpler-- reduce how much it pays for medical care.

[00:09:22] Hayden Rooke-Ley:We need a much more updated and revolutionized approach to correctly pricing services to ensure that we are managing the healthcare system efficiently and we're paying the correct amount for every service that is delivered.

[00:09:38] Megan Hall: Okay, so, how do we get to that place? You're saying that the government should be more involved in controlling prices. How does that happen in this political landscape?

[00:09:49] Hayden Rooke-Ley: Yeah, so just to be clear here, the government not only is very involved in setting prices right now through our public programs in both Medicaid and Medicare, but there's also a long history in the private sector of particularly state involvement in pricing policy. And we're actually seeing a revitalization of pricing policy at the state level. In the last few years, states ranging from Vermont and Oregon to Indiana are starting to say, ‘Hey, we've gotta get these prices under control. These markets are deformed, providers are exercising too much market power. We're gonna start to put caps on how much these Hospital systems and other providers can charge.’ And what we're calling for in this paper is not only a continuation of that, but a commitment to that through our Medicare program.

[00:10:41] Megan Hall: But as I learned when I was reporting on healthcare, you know, a cost for one person is a payment for someone else. You talk about negotiating prices, but then we also have hospitals here in Rhode Island that say they're losing money every year.

[00:12:07] Hayden Rooke-Ley: Yeah, so this, you know, this is the challenge of governing a healthcare system and one that I think we need to, at a federal level, embrace. Right now for example, there are distortions in our pricing system that really incentivize hospital consolidation and hospital payments. These are known as site differential payments, and there's broad agreement in the policy landscape that those payments are excessive.

So that's an example where if we focused on payment policy and pricing policy like that, certain hospitals would get less revenue. And that's what's gonna happen anytime you try to manage total healthcare costs, is that some sort of entity, whether it's a hospital system, or a provider, or in many times what we're arguing here, an insurance company, to which we're outsourcing so much money, is going to make less of that. And those are the decisions that we think that the Medicare program and Congress need to embrace and need to boldly make, rather than abdicating this responsibility to a private sector entity that's not doing it well and that we think won't end up doing it well.

[00:12:06] Megan Hall: Mm. So value-based payments are kind of like kicking the can down the road for the government. Like the government's like, ‘Uh, don't force us to make the hard decisions. Let's make providers and insurers make those hard decisions.’

[00:12:28] Hayden Rooke-Ley: That's right. And if we're really serious about efficiently operating our healthcare system and bringing some affordability to it and freeing up some government revenue to make the Medicare benefit in healthcare more generally accessible and affordable for people, we've gotta make these difficult decisions about where the money should go.

[00:12:39] Megan Hall: Hayden and his co-author Andrew Ryan have some ideas about what these difficult decisions could look like- things like rethinking how the government calculates the cost of surgeries, paying the same amount for care regardless of where it happens, and reducing the influence of medical lobbyists.

But they also say we should go back to where we started-- That old fee for service model, but with prices that make sense.

[00:13:02] Hayden Rooke-Ley: Our fundamental argument is that the fee for service system has been villainized. It is so commonplace to hear that the core problem of our healthcare system is that we have a fee for service system, and people then immediately launch into all these arguments we've discussed, that the fundamental issue is that providers have the wrong economic incentives, and therefore they are not delivering good healthcare that manages costs and keeps patients healthy, and that's because of the fee for service system. And the premise of our argument here is that that's actually not the case.

Most countries actually around the world have some version of fee for service. So this is not an uncommon mechanism of governing a healthcare system. In fact, it's the most common one. And the idea that we are gonna solve our problems by trying this managed care solution and value-based payment solution, where we sort of have these private sector entities taking on this function of managing care and not doing fee for service, we find is highly implausible to actually solve this problem of spending too much in our system. And that for once getting the fee for service system right, actually committing to it, is a much more promising path to delivering the type of healthcare system we wanna see.

[00:14:12] Megan Hall: I hope so! Hayden Rooke-Ley, thanks for coming in.

[00:13:37] Hayden Rooke-Ley: Thanks so much for having me.

[00:14:19] Megan Hall: Hayden Rooke-Ley is a Senior Fellow of Health Services, Policy and Practice at the Brown University School of Public Health. He co-wrote "A New Medicare Agenda" with Professor Andrew Ryan, the Director of the Center for Advancing Health Policy through Research at the Brown School of Public Health. We'll link to their paper in the show notes.

Humans in Public Health is a monthly podcast brought to you by Brown University School of Public Health. This episode was produced by Nat Hardy and recorded at the podcast studio at CIC Providence.

I'm Megan Hall. Talk to you next month!