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Why Are Health Care Providers Forced to Downsize Just When We Need Them Most?

Why Are Health Care Providers Forced to Downsize Just When We Need Them Most?

Risk-bearing contracts in health care are designed to move reimbursement away from traditional fee for service by providing a fixed payment per capita or for a population for a given period. The Covid-19 epidemic has exposed the ways these common arrangement threaten health care providers organizations, front line primary care clinicians, and, ultimately, patients.

 

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Editor’s Note (4/2): An earlier version of this article and its title stated that Atrius Health was furloughing doctors and nurses. They are not. They are furloughing administrative and medical staff. Doctors have been redeployed. Atrius Health is withholding a percentage of salaries from the higher paid half of its employees, including doctors. We apologize for the error.

I reacted with surprise the other day when Atrius Health, the largest multi-specialty practice group in Massachusetts, and my HMO provider under Medicare Advantage, announced major furloughs of many medical staff members, partial salary withholds for doctors, and a shutdown of a number of its primary care and multi-specialty locations. From a public health perspective, cutbacks and disruptions at an HMO like Atrius Health occur at precisely the wrong time.

How could it make sense for Atrius to do this during the worst public-health crisis since 1918? I believe that the answer can be found in the complicated, dysfunctional way we pay for health care services in this country.

I had read reports from the Atrius CEO saying that only a small portion of the HMO’s revenues come from a traditional fee for service (FFS) reimbursement system. Fully 80 percent of its revenue comes from insurers and government payers who provide a fixed payment per capita (or for a particular patient population) for a given period. This capitation approach (a type of risk-bearing contract) would seemingly ensure that an HMO would not run short of cash during a crisis, at least in the short term. So why, I wondered, would Atrius be facing a cash-flow crunch in the early stages of the Covid-19 epidemic? Its costs, after all, are lower than usual: the hospitals from which it purchases services have essentially eliminated elective surgeries. Even those ICU cases related to the virus are lower cost than much ICU care. Plus, many routine office visits have been postponed or replaced by telehealth. If the payers are paying an annual global fee, why should Atrius be caught short?

I posted that question on Twitter. In response, the company explained: “Right now the issue is cash flow. Revenue is paid FFS with a settlement at the end. And too hard to predict what total medical expenses will look like through the peak and recovery.”

It was news to me that the month-by-month payments to Atrius and others were still based on a fee-for-service model (volume of patients, severity of illness or number of diagnostic and treatment visits) and only “reconciled” with the global payment at the end of the year. What a hodgepodge of incentives and financial outlay! To say that it is neither fish nor fowl gives short shrift to both families in the animal kingdom.

I responded that this arrangement “puts you at risk well beyond the usual health care meaning, including risk of general economic conditions, natural disasters, etc.”

Atrius replied: “Our preference [is] clearly for advance payment but many of the payers, including Medicare, don’t pay that way yet.”

Atrius’s dilemma is just one piece of a much larger problem, of course. In a recent HBR article Sean Nicholson and David Asch noted the inadequacy of the current health care insurance framework in a situation like the Covid-19 epidemic, when overall health care revenues plummet. Arguing that health insurers should direct excess revenues to the front lines to ameliorate this health crisis, they noted:

“Health insurers manage our premium dollars. Private insurers collect premiums from employers, employees, and self-insured workers, and they use that money to pay care providers when they deliver services to us. Medicare and Medicaid likewise collect taxes which they use to pay providers for services delivered to the elderly, disabled, and lower-income individuals. Insurers are the stewards of our money. It isn’t their money.”

How much more so in this case? Who ends up being at risk in this form of risk-bearing contract when we consider a multi-specialty group like Atrius? As we now see, it is the doctors and nurses and allied health professionals. The form of these contracts as they were negotiated is a recipe for devastating financial insecurity for the entire multi-specialty practice. Among all the things that Covid-19 has taught is that the current risk-sharing arrangement is a perversion of finance and purpose, simply a way for payers to shift financial responsibility to those who can least afford it.

Paul F. Levy, former CEO of Beth Israel Deaconess Medical Center in Boston, is Senior Advisor at Lax Sebenius, LLC, a negotiation strategy and capability-building firm.

Why Are Health Care Providers Forced to Downsize Just When We Need Them Most?

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