Navigating Payment Reform – NEJM Catalyst

Harvard Business School and New England Journal of Medicine Catalyst group convened a webinar on “Navigating Payment Reform for Providers, Payers & Pharma” on November 2.

Presenters admirably fulfilled Dr. Dafny’s challenge as convener to be transparent about goals, attuned to new ideas, open to trade-offs, and unafraid of failure. From the perspective of General Systems Theory, they met this challenge by recognizing healthcare enterprises as systems to be engineered, not just as collections of revenue centers to be exploited.

But the group “inside the room” glossed over the Banana Principle, which was humorously articulated by a grade-school boy one day: “Today we learned how to spell banana, but we didn’t learn when to stop.” This is the law in General Systems Theory that says that a “heuristic system cannot define the limits of its own applicability.” In other words, a system cannot critique itself from inside. (See Weinberg, An Introduction to General Systems Thinking, 1971)

2017.11.02 Weinberg

Gerald M. Weinberg

The Catalyst presenters – to their credit – did try to grapple with the “outside” concept of value alongside the “inside” concepts of effectiveness, efficiency, coordination, alignment (of incentives), and so on. (And did so with wit, wisdom, insight, creativity and fearlessness.) Don’t get me wrong – these systems-conscious ideas are brilliantly innovative and, in fact, transformative. In particular, again to their credit, presenters did touch on, albeit briefly, the value-related concepts of cost-benefit ($150,000 valuation of quality-life-year, by willingness-to-pay model), wasteful care, and “subjective  value [to both consumers and case managers].”

But the benefits consultants (representing corporate payers), health business academics, health provider leaders, and insurers at the podium were otherwise almost completely ensconced in a health industry mindset*. Understandably so, since that’s their job. Also, in fairness, it was not the stated purpose of this conference to tackle broader social, political, and philosophical issues underlying payment reform, delivery reform, and ultimately system reform itself.

* A notable exception was Professor of Social Policy Amitabh Chandra’s thought experiment about the “value” (to society) of curative treatments when their price is exorbitant, a scenario that likely will emerge from new gene-editing technologies currently under development.

My Challenge to NEJM Catalyst Experts

But now I challenge the presenters to step outside that narrow worldview, interwoven by threads of clinical science, delivery system design, and finance incentives. I prompt them to contemplate value in a simpler, more intuitive form from the vantage of average citizens “outside the room” of the health industry.

Specifically, I invite Catalyst experts to look at how the citizens of Oregon in 1994 agreed on an operational definition of value (roughly as benefit-for-cost, with “common-sense” refinement via public input) and then implemented a purchasing approach through a transparent political process – the theme of this “Fixing U.S. Healthcare” blog. I believe that the “eureka” of insight from that vantage might widen the experts’ perspective, and could impel them to even more brilliant and creative ideas on healthcare system reform!

A Word about Payers’ Disengagement

Catalyst presenters despaired that big corporations have lost interest in healthcare reforms because they have experienced only 1 – 2% increases in their group health benefit expense line-items for the last 4 years.

Two comments: First, even if corporations are able to keep health benefit plan costs to 2% (presumably by passing along higher copays and deductibles to their employees), the rest of us have been seeing 6% increases year after year, consistently exceeding inflation. These relentless cost increases pose “opportunity costs” affecting education, infrastructure, overall national strength, which ultimately likely will degrade the long-term business climate. (See also Segment 6 – Why Cost Is A Problem) Thus, business should not be complacent about cost increases in the wider system, even though corporations have found a temporary work-around for themselves. (See also, for example, Fix It Healthcare at the Tipping Point)

Second, have corporations lost interest in healthcare reforms altogether, or have they simply lost confidence in the health system to lead itself, due to group-think combined with self-interest? That is, is Business looking for a “revolutionary” approach like the Oregon Health Plan?

See more discussion at blog post, Will These Ideas Fix U.S. Healthcare?

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