HCI3 Update from the Field: Function as the Driver

Submitted by hci3-usr on Thursday, December 8, 2011 - 03:21

Newtown, CT – December 9, 2011

There's an important principle of organizational change that, to date, has been mostly ignored: Form follows function, and function follows incentives – so the key is really to focus on the function (e.g. delivering highly coordinated care to reduce avoidable complications) and then determine what set of incentives will cause that function to occur. The form of the organization best suited to deliver that function (or set of functions) will then follow organically. The "social engineers" have preferred to focus on the form (i.e. Medical Homes, ACOs), and to use the definition of the form as the driver for everything else. Put plainly, it's ass-backwards and, historically, has never worked. Similarly, if you start by debating incentives and their relative effectiveness, you risk losing sight of the purpose of the incentives – the function – and whether the incentive is appropriately designed to drive the function. In a recent blog post, Daniel Wolfson of the ABIM Foundation relates his takeaways from a meeting at which attendees debated whether physician-level assessments and recognitions are working. The entire discussion misses the central question of what the assessments and recognitions are expected to produce. When we started Bridges To Excellence we were asking physicians a simple question: How well are you clinically managing patients with certain chronic conditions? For the most part they simply didn't know (and still don't if they're not one of the few that has a clinical dashboard or going through MOC). The purpose of the program was to provide physicians with a feedback loop in the form of a clinical scorecard created with clinical data from their patients. The results generated are crystal clear and well reported. These feedback mechanisms are highly effective at getting physicians to improve clinical quality. But now we're asking a new and different question: How well are you clinically AND financially managing patients undergoing certain procedures or with certain chronic conditions?

What this means to you – in the fee-for-service payment world, there is no financial management of patients by providers. So the answer to the question would be: I don't know and don't really care. And it's that answer that we're trying to change. We need physicians and hospitals around the country to have clinical and financial dashboards that tell them specifically how close or far they are with respect to the estimated severity-adjusted budget established for the care of the patient, and the clinical measures that are relevant to that patient. In order for them to care about the financial results of the management of the patients, we need different payment mechanisms than FFS. We need payment mechanisms that impute financial risk – downside – if providers fail at appropriately managing resources. This has nothing to do with the esoteric (and somewhat useless) debate about intrinsic and extrinsic incentives. The lack of financial risk creates a very different cost/benefit tradeoff on use of resources than having financial risk. That's not a hypothesis, it's a fact. Just look at the literature on moral hazard, free rides and the ensuing tragedy of the commons. So if we want providers to be accountable for the dollars paid to care for a patient, they need to assume the financial risk of managing that patient. And the work that needs to be done by all is to clearly define what we are asking providers to be clinically and financially responsible for, and create clear and unambiguous boundaries around that financial risk and clinical outcomes. It's time to get the ass back in the caboose and focus first on getting the functions right driven by the right financial incentives.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org