Newtown, CT – August 21, 2015
As States experiment with new payment models, one in particular stands out for its potential to fundamentally change the design of care – We've said many times before that form follows function and function follows financial incentives, and yet most of the payment and delivery system reform efforts take this equation backwards. They start with the form, and then assume functions will follow, and slap on a financial incentive they believe fits the form. It's really social engineering at its worst and the reason why these approaches almost always fail. Contrast that with an approach that starts by assigning an overall severity-adjusted budget for a population, but then goes further and defines specific cohorts within the population that have very different needs. For example, most moms having babies are relatively young and generally in good health. Lots of things can go wrong during the pregnancy, the delivery and the newborn's care. So it stands to reason that you could create a budget that covers the womb-to-home episode and encourage high quality and affordable care for that cohort. On the other side of that spectrum are patients with co-existing chronic, mental health and even substance abuse conditions. They need a highly specialized mix of care that is unlikely to be provided in a primary care physician's office. It therefore again stands to reason that you can create a severity-adjusted budget for that cohort, encouraging the provision of that specialized care. In the middle of the spectrum are other patient cohorts who have different needs, requiring different functions of the delivery system and, likely, different forms.
What this means to you – Somewhat below the national radar screen, New York State has engaged in a comprehensive Delivery System Reform Incentive Payment (DSRIP) program that does just what is described above. By starting with a global budget, the State is clear that all providers within a certain defined geographic zone need to stay below that zone because that's the average annual payment for the population and there will not be any overages. In other words, everyone is equally at risk. However, that means very little to the obstetricians and facilities managing young moms and their babies. And for others, it might send the wrong signal such as keeping mentally ill patients out of the hospital by any means. And so by defining and creating bundles for specific cohorts of patients with specific characteristics and needs, New York's DSRIP is helping to break down the often meaningless per-member-per-month total into something that makes sense to the line clinician. And now for the truly fascinating aspect, because form does follow function and function follows financial incentives. The nuanced and refined approach taken by New York is creating somewhat of a puzzle for those who have been conditioned to think about form first, and that's great news, because they should be puzzled. The nuanced approach means a fundamental shift to first understanding the population of patients in your area, how it's segmented, how the needs of the segments vary, and then to assemble the functions that will best meet those needs. And it's the assembly of those functions that will drive the ultimate form that emerges. Imagine that. Better yet, watch and learn.