qotd: Value-based pricing: another medical-industrial con job

The New York Times
December 29, 2015
Letter
Payment for Medical Care

To the Editor:

I take issue with the "value-based payment models" for medical care
promoted by John H. Noseworthy, the president of the Mayo Clinic, in his
letter to the editor ("Value in Medical Care," Dec. 22).

When he says, "It is essential to differentiate locally provided care
from complex specialty care best provided by destination medical
centers," is he suggesting that his destination medical center should be
paid more than local care providers for the same work?

It is my understanding that all doctors are being evaluated equally on
the accuracy of their diagnoses, the appropriateness of their treatments
and the quality of their results. They should be paid accordingly.

Value-based payment models are used by the pharmaceutical industry to
justify a drug price many times greater than the cost to bring it to
market and manufacture it. The drug company decides how much "value" its
drug provides to the patient who takes it.

Let's not allow major destination medical centers to follow the same
model. Better yet, let's reverse the trend entirely.

Robert D. Schrock Jr.

Chapel Hill, N.C.

The writer is a retired orthopedic surgeon.

http://www.nytimes.com/2015/12/29/opinion/payment-for-medical-care.html

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Comment by Don McCanne

It seems that the current policy fixation in health care reform is on
paying for value instead of volume. This really plays into the hands of
the medical-industrial complex.

Currently the pharmaceutical industry is leading the way. A prime
example is the new, outrageously priced drugs for hepatitis C. In
explaining why the prices are so high, representatives of the industry
indicated that the new standard for drug pricing should not be simply
the usual costs such as research and marketing, but rather they should
be priced on the value provided - the value of preserving quality of
life that would be lost with progression of disease, and the value in
preventing expensive care in the future, such as liver transplants.
These executives have to gall to claim that the monetary value of the
preservation of quality of life and the aborted potential future health
care costs should accrue to them and their shareholders.

By that same reasoning, many of the high priced cancer therapy drugs
should be repriced at pennies on the dollar since they have an almost
negligible benefit on the quality of life, and they actually increase
the cost of cancer care simply because of the very high prices of the
drugs themselves along with the costs of administering and monitoring
them. Of course, then instead of pricing based on value, they resort to
their fallback position of the high cost of drug research and other
corporate expenses, like executive compensation (plus an extra bonus
because this is CANCER, after all).

Of great concern, the pharmaceutical industry was successful in
including in the Trans-Pacific Partnership Agreement (TPP) this concept
that "value" be included as a legitimate basis for determining the price
of drugs - pocketing greater profits for this nebulous add-on to the
drug itself. This is one more reason that TPP should not be approved in
its current form.

Now the president and CEO of Mayo tells us that the complex specialty
care provided by "destination medical centers" implicitly is of higher
value and thus presumably should be rewarded more highly through
value-based payment models. If they offer unique specialty care that is
not offered at other centers, then payment based on costs plus a fair
margin would be appropriate. But care that duplicates quality care
available in the community should not command higher prices.

We cannot underestimate the uncanny ability of the medical-industrial
complex to innovate with policy concepts to further their own pecuniary
interests.

This concept of rewarding value instead of volume has led to the
implementation of numerous payment models that are backed by not much
more than "wish-it-would-work" concepts from the policy community; the
initial evidence of benefit is extremely limited. We know single payer
works. That's what we should be implementing instead.

If you wish more information, yesterday's message, "No more SGR, but…
here you go!," discusses some of these wish-it-would-work concepts such
as Merit-based Incentive Payment System (MIPS) and Alternative Payment
Models (APMs) supposedly rewarding value instead of volume:

http://www.pnhp.org/news/2015/december/no-more-sgr-but…-here-you-go