Saturday, November 21, 2015

REPOST: Fee-for-service medicine causes amputations

It is difficult to align the incentives of physicians (making money) with the goals of patients (low cost, high quality care) due to asymmetric information:  only the physician knows what the patient wants.

What distinguishes Medicare Advantage plans from traditional fee-for-service plans is the degree to which they use mechanisms designed to encourage the delivery of cost-effective quality care. Three critical mechanisms are financial incentives that are aligned with clinical best practices, a selective network of providers, and more active care management that emphasizes prevention to minimize expensive acute care.

Here is what happens:

  • Single-year mortality rates fell from 6.8 percent in the traditional fee-for-service sample to 1.8 percent 
  • Patients in the Medicare Advantage plans had shorter average stays in the hospital (about 19 percent shorter.)
  • Patients in the managed plans were more likely to receive preventive care ...For example, diabetic patients in the fee-for-service sample had an average of 11.5 amputations per 1,000 patients; those in HMO plans with global capitation had only 0.3. 

BOTTOM LINE:  Incentives matter
 “We've found that U.S. private insurers have created an operating model that can deliver better care at a lower cost and have a major role to play in the ongoing national efforts to improve health care quality,” said Stefan Larsson, a BCG senior partner and coauthor of the report. “Quite simply, we’ve found that the more aligned the care, the better the quality delivered.”


  1. I agree but can you assume that the patient population and the physician populations are identical?

  2. While U.S. private insurers have created an operating model that can deliver better care at a lower cost, this care is only coming at a lower cost to the health insurance companies. Patients are still covering exorbitant costs by way of rising premiums, deductibles, and copayments. The incentives provided for doctors who give better care seems to be financial. Patients who can pay may receive better care. This is only perpetuated by insurance companies, those who can pay higher premiums can get a better plan and better treatment. Focusing on emphasizes prevention to minimize expensive acute care may not always be in the best interest of the patient, but typically is in the best interest of the provider so they can continue to receive the incentive payment.