System needs to include incentives to improve outcomes, lower costs

September 10, 2012

Medical Economics Editor-in-Chief Lois A. Bowers, MA, discusses with Charles J. Lockwood, MD, MHCM, the challenges facing the healthcare system, improving outcomes, and lowering costs.

Charles J. Lockwood, MD, MHCM, dean of the College of Medicine and vice president for health sciences at Ohio State University, recently shared his thoughts on the challenges and possible solutions to healthcare delivery with Editor-in-Chief Lois A. Bowers, MA.

Q: What are the major challenges facing the U.S. healthcare system?

I think that the fourth aspect to the healthcare cost crisis is discounted fee-for-service payments. We have an irrational system. The payers are neither the receivers of care nor the providers of care. As long as that crazy disconnect exists, we will create a lack of financial incentives to provide the best outcomes for the lowest cost, which is what value really is all about. We can't fix healthcare unless we remedy that.

Q: How can that issue be addressed?

A: There are two possible remedies. The very conservative one would be that patients buy insurance with very high copays and deductibles. So consumers of healthcare suddenly become price-aware and very thoughtful about every drug they take, what care they get, and so forth.The problem is, that kind of behavior will lead to self-rationing. Patients won't get preventive care. They'll delay treatment, and that behavior actually may exacerbate long-term costs. There's evidence of this effect in the literature, and it's been found in direct-to-consumer health plans.

The other, more liberal strategy to fix the problem, would be to move to health systems with capitation. There, the physician-providers are constrained by costs, because they're getting a global fee or they're getting capitated. So they now need to exert control over the cost of care. The risk there is that they may ration care, and I think the way to prevent that behavior is with public reporting of patient satisfaction and outcomes.

I suspect we'll ultimately move in the latter direction, with a very strong public reporting component. Either way, we can't continue along the current path, because we're going to bankrupt the federal government, and we're going to make American companies entirely noncompetitive.

Q: What about the current system should be maintained in any kind of reform efforts going forward?

A: If you have money and insurance, you can get the best care in the world, pretty quickly. That's important.

It's also important that we don't lose our commitment to primary and basic biomedical research funded by the federal government, or the robust and vibrant pharmaceutical and medical device industry that's coming up with better and better therapies. But we have to create the kind of competitive environment and markets that exist in other parts of the economy so that the latest devices and drugs improve outcomes and reduce costs in a vigorous way. That kind of productivity has been missing from healthcare in this country.

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