August 2000 Bulletin

Specialties force delay in episodic pay

Insurer seeks to end variations in care; physicians don’t want to disincentivize appropriate care

By Sandra Lee Breisch

After three specialties rebuffed Highmark Blue Cross Blue Shield’s proposed switch from a fee-for-service reimbursement to a new capitated payment system for its SecurityBlue Medicare members, the western Pennsylvania insurer was forced to delay implementation to April 2001.

The new reimbursement system slated for cardiologists, ophthalmologists and orthopaedic surgeons is called episodic care. The plan would establish severity-adjusted physician reimbursement rates using a fixed pool of money to be allocated over discreet episodes of care based on patient diagnosis, predicted severity of illness, age, gender and place of service. Highmark wants to reduce wide variations among physicians in the use of diagnostic tests and medical/surgical procedures for patients with the same medical condition and predict with greater precision how much it will pay for medical services so it can more accurately set premiums for its health programs.

"We think it’s essential that we start addressing the issue of variations of practice," says Michael Weinstein, a spokesperson for Highmark. "There is data that indicates that in some parts of western Pennsylvania, the rates for total knee replacement can range anywhere from 10 percent to 55 percent above the statewide average. The Pennsylvania Health Care Cost Containment Council’s statistics indicate that total knee replacement rates in parts of western Pennsylvania are more than 50 percent above the statewide average."

Yet, without physician support and approval from the Health Care Financing Administration and the Pennsylvania Department of Health, the company cannot move forward with these changes–as planned last July. The company dominates 70 percent of the marketplace and serves 150,000 Medicare HMO enrollees.

To this end, the three specialties formed advisory boards last spring and have been meeting regularly with Highmark officials to discuss the new plan. "The specialty boards are in place to review the data performance, utilization and see where the variations of care exist in the community and to review the methodology to make sure it’s understood and working smoothly," says Weinstein.

"Basically, Highmark has been telling us, ‘this is the process,’ and asking us, ‘what do you think of it?’" says Michael P. Casey, MD, who is a member of the orthopaedic advisory committee. "Our presence doesn’t give us an actual vote in Highmark’s implementation of the new product. Highmark just asked us for our advice on a product that has never been used as an orthopaedic Medicare product before," says the president of the Greater Pittsburgh Orthopaedic Associates.

Gary S. Gruen, MD, secretary for the Pennsylvania Orthopaedic Society, says the membership is "wary" of Highmark’s vendor, Adesso Healthcare Technology Services, a San Jose, Calif.-based software company that designed the program. "Highmark decided they wanted to limit their financial risk and limit over-utilization in this area and thus contracted with Adesso to design a program for specialty reimbursements," he explains. "But capitated case rate reimbursement to a specialist is entirely different from that of a generalist’s. The family doctors have been doing this for a long time, but this is uniformly bad for orthopaedic surgeons and other specialists."

Additionally, Dr. Casey notes that Highmark’s viewpoint is that "they’re trying to deliver quality care, but decrease the variations of care. We don’t want variations of care. We want the best practice concept employed in the area–but at the same time, we don’t want to disincentivize appropriate care. The concern in the community is that this type of product can do that. Their product basically does not tend to reward physicians for operative care of the patient as compared to the present RBRVS Medicare system."

According to Weinstein, the company plans "to fund the specialty pools properly" based on their historical pool data. We’ve also guaranteed to all the specialists who will be affected that for the first year of the program if their practice pattern is within the community norm, they will be reimbursed at least the same level and perhaps even more than they receive now."

The health insurer, which has more than 20 million customers nationwide, also plans to invoke an all-products or nothing requirement. This means that those specialists who do not sign-on to the new contract would be eliminated from Highmark’s HMO business that represents 40 percent of the market.

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