David Nash M.D. sees the post-COVID U.S. health care system as teetering on the brink of ruin. But he also sees salvation as within reach.
A 1981 graduate of the University of Rochester School of Medicine and Dentistry, Nash is a longtime advocate of health care reform. He gave a talk to the UR Medical Center board late last month. The founding dean of Thomas Jefferson University’s Jefferson College of Population Health, Nash is now the Philadelphia school’s dean emeritus.
The discipline Nash teaches, population health, calls for physicians to apply public health principles to primary care practice. Rather than looking only at each of their patients in isolation, providers following the discipline’s principles also look at outcomes and patterns for their patients as a group. Information gained is supposed to promote cooperation among clinicians, health care institutions and community organizations. Nash is an early leader in the field.
Author of the recently published “How Covid Crashed the System, a Guide to Fixing American Health Care,” Nash believes the current health care system, a haphazardly assembled Frankenstein’s monster that “nobody controls (and) nobody likes,” could do with much improvement. The ills he sees are ubiquitous.
How easily or successfully the nostrums Nash recommends might be applied nationally or in Rochester remains to be seen.
In winking asides sprinkled throughout his well-honed one-hour talk, Nash repeatedly assured an audience made up largely of URMC board members and UR Medicine officials that the gaping holes in U.S. health care delivery he points to are evident “everywhere but the University of Rochester and Jefferson,” the 10-hospital Philadelphia health system run by Thomas Jefferson University.
His ironic point: No U.S. health care institution is free from the system’s flaws.
A stress test
In his book, Nash argues that COVID was a stress test for U.S. health care—and one on which the system did not score particularly well. The nation’s poor pandemic performance fell very far short of what one might reasonably expect from a country of our size, wealth and technological achievement, he writes in his book.
“For the United States, the novel coronavirus posed a deadly threat, but it should have been manageable,” Nash writes. “Other developed countries managed to come out of the pandemic’s worst assault with far fewer deaths and less strains on their systems than we did.”
New Zealand, an island nation of some 5 million, for example, suffered only 47 COVID deaths over the first two years of the pandemic. Australia, a larger island nation with 25.6 million people and close to Texas’ population of 29.5 million, saw 2,100 COVID deaths over two years, compared to Texas’ COVID death toll during the same time span of 75,000.
A March 2022 Infection Control Today article underscores Nash’s point.
While data cited in a study published by the British medical journal The Lancet did not show the U.S. to have the world’s worst COVID excess death rate, author Kevin Kavanaugh M.D. found it did show “that the United States is below average in the world and among the worst in the developed and high-income nations.”
Kavanaugh’s takeaway, like Nash’s, is that “the United States can and must do better.”
The features Nash sees as hobbling U.S. health care are not hard to describe. Fixing them could be harder. For Nash, even to call the wheels and levers that drive U.S. health care a system is a gross misnomer.
“The system emerged over time from disparate pieces to meet various needs and desires, but it grew in unplanned, unproductive ways,” Nash says in his book. The bad news is that “it is probably too fragile, intricate and deeply embedded with powerful interlocking forces for a total, top-down redesign.” Even so, he adds, though our “malformed system is sick … we can diagnose what ails it and prescribe thoughtful changes that work their way curatively through the entire system.”
Root of ills
Nash says the method most commonly used to pay doctors and hospitals, an essentially piecework scheme known as fee-for-service, lies at the root of the system’s ills.
For most Americans, access to care comes through employer-sponsored, privately based health insurance. Such insurance mostly pays doctors, hospitals and other care providers on a fee-for-service basis. The method primarily rewards quantity and leaves too little room for attention to quality, Nash says, a complaint I have heard echoed by Rochester doctors for decades.
Fee-for service creates a fundamental conflict, he says, layering a drive for financial profit over what should be health care providers’ unalloyed top concern, ensuring the health and well-being of their patients.
Profit, Nash told me in an interview after the URMC talk, “is what insurance is all about. The fundamental insurance model is based on actuarial science. The same applies to health insurance as car insurance or house insurance. I think it’s done us a disservice in health care because it’s not focused on what the core goal is, which is to improve health.”
Our health care system arose as a result of unplanned measures, Nash explains in his book. Each development that led to today’s flawed system had its own unintended and ultimately unhelpful consequence.
The integration of private health insurance and U.S. health care delivery began with the American Hospital Association’s Depression-era establishment of the non-profit Blue Cross insurance company. The AHA started the proto-Blues insurance plan in 1929 as a way of ensuring steady revenue for hospitals at a time when many people were out of work and couldn’t afford to pay a hospital bill.
Doctors filed suit a year later, setting up Blue Shield to do the same for outpatient care. Not wanting to be left out, other insurance companies started offering health plans as early as the 1930s. Then, in an end run around wartime wage controls, employers started offering health insurance as a benefit in the 1940s, laying the groundwork for the now ubiquitous U.S. system of health care financing.
Today, some Blue Cross/Blue Shield plans remain nonprofit, as does the Rochester-based Excellus Blues plan. Others—like Anthem, a Blues plan that operates in 14 states—have morphed into publicly traded, for-profit companies. In the U.S., health insurance is very big business. Nash sees little functional difference between non-profit and for-profit insurers.
Excellus, the dominant Rochester-area health plan operating across much of Upstate New York, takes in more than $6 billion in revenues, with profits in the $100 million range. Anthem’s corporate parent, Elevance Health, last year had $156 billion in revenue and booked a $6 billion profit. The largest U.S. private for-profit insurer, United Health Group, took in revenues totaling $324.2 billion last year and booked $20 billion in profits.
Insurance companies’ comfortable, pandemic-era bottom lines sharply contrast with a generally gloomy 2022 financial picture for U.S. hospitals—which, according to a January Kaufman Hall report, as a group suffered “the worst financial year for hospitals and health systems since the start of the COVID-19 pandemic.”
In his book, Nash traces that disparity to a fundamental imbalance in the relationship between U.S. health care providers and payers. Over the last three years, many COVID-spooked patients foreswore regular non-COVID treatments, depressing revenues for health care providers. Insurance companies, meanwhile, kept collecting premiums while having to pay fewer claims to doctors and hospitals.
The main culprit behind that imbalance, Nash says, is the piecework approach of fee-for-service, which pays providers a set amount for each office visit, operation and medical scan, and pays hospitals similarly.
In 1965, when the U.S. government set up and started funding Medicare and Medicaid, it grafted the private insurance fee-for-service model on to the government insurance programs.
Nash says fee-for-service reimbursement worked well enough at the start because health care was a lot cheaper. But as technological innovations, new drugs and inflation dramatically added to costs, its flaws grew more and more glaring.
A personal illustration of medical inflation: In the late 1940s at the age of three or four, I had a tonsillectomy. The procedure then involved a full operating-room staff and required an overnight stay at Buffalo Children’s Hospital. A few years ago, while cleaning out my mother’s house, I came across the bill for my tonsillectomy. It came to $35, an amount that translates to some $460 in 2023 dollars. A comparable procedure today performed as same-day surgery requiring no hospital stay can cost as much as $1,500 to $2,000.
Under fee-for-service, Nash says, providers can stay financially afloat only by dispensing as many services as possible on a daily, weekly, monthly and yearly basis. By demanding volume, the system at best draws providers’ attention away from quality of care. At worst, it actively discourages attention to quality.
Under fee-for-service, the system’s incentives are “pernicious, upside down and backwards,” Nash says. The model creates a gap between insurers’ and providers’ incentives. COVID widened the gap to a yawning chasm. The misalignment of incentives creates a hard road for clinicians to travel.
A study in the peer-reviewed medical journal Mayo Clinic Proceedings last year found that clinician burnout across specialties had increased markedly over the course of the immediately preceding year.
Another report on clinician burnout from the National Academy of Medicine named conditions insurers impose on doctors as a factor in burnout. Payer requirements are not the only factor. It cites an overload of patient messages sent via electronic medical records systems, for example, among other factors.
In a recent interview, oncologist Tait Shanafeld M.D., a contributor to the National Academy of Medicine study, told the New York Times that a divide between what physicians care about and what the system requires of them is a significant contributor to burnout.
“We cared about quality of patients’ experience, building relationships with them, and then there were all these things we got paid for,” Shanafeld said.
Nash’s preferred payment model is called capitation, in which providers are allotted a set amount, usually so much per patient, per month.
“The behavior of clinicians in a capitated system is so different than in (a fee-for-service) system,” he says.
Capitation is far from a new approach. It has been tried before in various settings and is being used now. Asked to comment on U.S. health care’s decades-long experience with capitation, Nash readily conceded that it has been “mostly unsuccessfully” as applied.
Still, Nash, a self-described optimist, insists doctors would change their behavior for the better once freed from the tyranny of the fee-for-service “hamster wheel.”
As U.S. health systems consolidate into ever-larger behemoths like UR Medicine and Rochester Regional Health, they will be able to start their own insurance plans, and thus capture some of the premium revenue now lost to insurance companies, Nash says. He and other backers of that approach call such hybrids “payviders.”
Nash points to two U.S. health systems that have already successfully employed the strategy: Pennsylvania’s 13-hospital Geisinger Health and the massive Kaiser Permanente system, which extends to nine U.S. states and regions including California, Hawaii, Washington State, Maryland, Virginia and Washington, D.C.
At a reception following Nash’s URMC board presentation, I buttonholed URMC CEO and UR medical school dean Mark Taubman M.D. to ask if he saw the payvider model as an approach UR Medicine might employ.
No, Taubman said. URMC had in fact investigated such an approach in the 1990s, setting up a nonprofit called Strong Health Partners that never got off the ground.
As recently as 2015, URMC filed an Internal Revenue Service statement for a nonprofit called Strong Partners Health System Inc. The form lists a slate of directors, including URMC chief operating officer Peter Robinson. The 2015 Strong Partners statement and three earlier similar filings show no revenues or expenditures and indicate no activities dating back to 2008.
Taubman said URMC might consider other alternatives to capture dollars that are going to insurance premiums, but he had no specifics to share.
Nash suggests that health systems that cannot set up their own insurance plans might achieve the same results by striking deals with insurance companies that switch payments from fee-for-service to managed care, employing value-based capitated reimbursements.
UR Medicine and Rochester Regional Health began inking value-based contracts with Excellus more than a decade ago. However, Excellus’ Accountable Cost and Quality Agreements pay mainly on a fee-for-service basis, making value-based payments only as an add-on.
Excellus’ ACQA contracts pay providers using a mix of methods including fee-for service as well capitated and bundled payments, which pay a fixed amount to hospitals for various categories of treatments.
Asked how much of a role fee-for-service typically pays in ACQA contracts, “given the variety of factors involved in each provider payment, it would be hard to pinpoint the percentage of the overall payment that is fee-for-service,” Excellus spokeswoman Joy Auch said.
Nationally, the payvider model is not widely used. In his book, Nash concedes that, despite its success as a payvider, even Kaiser Permanente “remains a niche provider,” covering only 8 percent of U.S. patients.
Kaiser’s payvider status has not ensured its financial security.
Like many non-payvider systems, Kaiser last year faced strong economic headwinds, posting a $1.3 billion operating loss and a $4.5 billion net loss. The 39-hospital system named inflation, staff shortages and rising staffing costs among factors that led to the 2022 red ink.
“Rather than pull back amid financial pressures, we made the decision to continue our long-term and strategic investments in care and service improvements while carefully managing resources,” Kaiser CEO Greg Adams said in a statement.
Geisinger fared better, booking $361.1 million in excess revenue on $6.4 billion in revenue last year. Premiums on its health plan contributed $3.2 million.
Past non-payvider applications of the capitated, managed-care model Nash recommends saw mixed success.
Fifty years ago, Congress passed the 1973 Health Maintenance Organization Act. The act created HMOs, insurance organizations meant to hold down costs by paying doctors on a capitated basis. HMOs made primary care physicians so-called gatekeepers who were supposed to help prevent unnecessary care by riding herd on their patients on specialist visits, procedures and tests.
A flurry of HMOs created in the 1970s held down U.S. health care cost increases for a time. But they eventually fell prey to rapidly rising costs and widespread public displeasure. Patients chafed under claim denials. By the 1990s, HMOs were reviled as corporate bean counters that put profit ahead of subscriber health.
Under HMOs, “Americans hated not being able to choose their own doctors,” Nash writes.
Despite HMOs’ failures, Nash says he still hopes the capitation reimbursement model can become an engine of positive change. That hope lies in capitated payments that are now applied and could be expanded by Medicare.
Established in 1965, Medicare provides health insurance for all Americans 65 and older. It is federally funded. In the traditional program, the federal Center for Medicare and Medicaid Services directly pays clinicians and hospitals using a fee-for-service model.
Nash sees potential for a game-changing revolution in the federal Medicare Advantage program, which parcels Medicare coverage out to private insurance companies that get capitated payments from CMS to cover Advantage enrollees.
Launched in 1997, Medicare Advantage offers plans that look and function much like commercial, employer-sponsored plans. Many charge no monthly premium above a basic premium paid by Advantage and traditional Medicare enrollees alike. Some Advantage plans also offer dental and vision benefits not available to traditional Medicare enrollees.
Medicare premiums currently stand at $164.90 a month. Called Part B premiums, they are deducted by the government from traditional and Advantage-plan enrollees’ monthly Social Security payments. For traditional Medicare enrollees, Part B covers 80 percent of any health care costs. The remaining 20 percent is enrollees’ responsibility.
To pay those balances, which can be sizeable, most enrollees pay private insurers additional monthly premiums for so-called Medigap coverage, which picks up most of the 20 percent Medicare doesn’t pay. If traditional Medicare enrollees don’t want to pay full cost for pharmaceuticals, they must separately pay for a Part D prescription drug plan. Advantage plans include drug coverage.
Medigap premiums currently average $128 a month. Part D coverage averages $43 a month, bringing a typical traditional Medicare enrollee’s total monthly premium cost to $335.90.
Many Medicare Advantage plans, including those sold locally by Excellus and MVP, charge no monthly premiums. Advantage plans typically also include co-pays and deductibles, which, depending on what medical services an enrollee needs, can add amounts ranging from hundreds to several thousand dollars a year.
Medicare Advantage plans have proved popular. They cover 45 percent of eligible seniors, and their share is predicted to grow to 50 percent by 2025.
Unlike commercial-HMO-delivered managed care, “Medicare Advantage seems to have proved the superiority of a well-designed managed care program,” Nash states in his book. Data on the program’s success, though limited, appears to show that Medicare Advantage subscribers have had better health outcomes than traditional Medicare, he adds.
“Medicare Advantage costs less, delivers better results and is rapidly winning in competition with the traditional program,” Nash writes.
To Nash, giant national health insurance companies like Humana, Cigna and United, which run Medicare Advantage programs covering many millions of Americans are, in their Medicare Advantage offerings, functioning as “population health companies focused on improving health.” Such companies “are the only ones with an aligned economic incentive to improve health,” he says.
Coordinating with the ever-larger health systems that have come to dominate many U.S. communities, including Rochester, such insurers could achieve significant improvements in American health care, he maintains.
How easily such improvements might be achieved locally is hard to say. The health insurance market is overwhelmingly controlled by Excellus, and to a lesser extent by MVP. Other insurers with Medicare Advantage plans hold scant market share.
According to an American Medical Association survey, Excellus, identified in the survey under the name of its corporate parent Lifetime Healthcare Inc., in 2021 controlled 73 percent of the Rochester market. The next largest local competitor, MVP, controlled 10 percent. The survey does not detail the share held by payers in the remaining 17 percent.
Since he has never seen published work by the dominant Rochester insurers on Medicare Advantage performance, Nash says it is impossible for him to say whether results achieved by United and other national players in wider markets could be achieved here.
Medicare Advantage serves only a small fraction of Americans—28.4 million out of some 58 million Medicare-eligible residents. That computes to 8.4 percent of the country’s approximately 332 million residents, about the same percentage of Americans who have no insurance at all.
Expansion of Medicare Advantage or traditional Medicare to a wider swath of Americans seems unlikely. Proposals discussed in Congress over the last several years to create a national Medicare-for-all government-run system met with stiff opposition and went nowhere. A proposal to extend Medicare eligibility by 10 years to Americans 55 and older met similar resistance.
The federal government, meanwhile, has questioned whether taxpayers are getting their money’s worth from Medicare Advantage.
With more than 4 million subscribers, United is the largest purveyor of Medicare Advantage plans. In 2011, a United Healthcare executive named Benjamin Poehling filed a federal whistleblower complaint alleging that United was systematically overcharging the Center for Medicare and Medicaid Service on Medicare Advantage claims. Poehling at the time was finance director of the company’s Medicare program.
“I would not have done this if this were a ten-million-dollar issue or a five-million-dollar issue, or if it were just limited to one part of the company.” But that wasn’t the case, Poehling told a New Yorker writer in 2017. “This was potentially a multibillion-dollar issue. The scale of it was huge. And this was known for many years at the highest levels at the largest health-care company in this country.”
In a statement to the New Yorker, United denied that it had done anything wrong, maintaining that in submitting claims, it followed Medicare rules.
Still, in 2017, the U.S. Department of Justice took over the case, which is still being fought in a California federal court. Some charges against United were dropped, but the government continues to try to claw back amounts it says United overcharged.
I sent Nash a copy of the New Yorker article along with a copy of Poehling’s original whistleblower complaint, asking what he thought.
“Sadly, nothing about UHC surprises me, even today!” he replied in an email.
The specific mechanism that Poehling alleges United uses to overbill on Medicare Advantage claims is called risk adjustment. In simple terms, risk adjustment involves upgrading claims from a lower to a higher payment to cover expenses involved to treat a more complex condition than a doctor initially diagnosed.
Poehling’s court complaint, which is now being pursued by the Department of Justice, alleges United abused Medicare Advantage’s risk-adjustment feature by systematically making fake claims for services that had not been delivered, falsely “upcoding” legitimate claims to a higher and more costly diagnosis, and refusing to pay the government back for the falsely risk-adjusted and wrongly upcoded claims government auditors did uncover.
The Poehling complaint was not the first to allege risk-adjustment irregularities with the Medicare Advantage plan, nor are such complaints confined to United.
A 2014 Center for Public Integrity investigation claimed to have identified nearly $70 billion in risk-adjustment “errors” by a wide swath of Medicare Advantage plans between 2008 and 2013.
Among alleged overcharges CPI named were $41 million paid to Excellus. According to CPI, Excellus ultimately returned only $157,777 of the alleged overcharges.
In 2017, Sen. Charles Grassley, R-Iowa, then chair of the Senate Judiciary Committee, asked CMS to investigate risk-adjustment overcharges, noting in a letter to then CMS chief Seema Verma that alarms Grassley had raised in 2015 over Medicare Advantage risk-adjustment irregularities had gone unheeded.
In January, the Biden administration unveiled a package of Medicare and Medicaid reforms, including risk-adjustment auditing changes that the administration says would save taxpayers some $4.5 billion over 10 years. The proposed changes do not do away with risk-adjustments but would seek to recover overpayments going back to 2018.
The health care insurance industry trade group Americas Health Insurance Plans is opposing the risk-adjustment changes, portraying them as a cut that would reduce benefits and raise premiums for enrollees.
In the meantime, says Nash, most doctors and hospitals are fruitlessly running on the fee-for-service hamster wheel, turning health care into a commodity. Doctors are forced to up productivity by cramming in more patient visits and procedures in an often vain attempt to achieve financial stability. In search of profits, health systems ceaselessly expand and build facilities in hopes of increasing market share.
If a health system or hospital thinks greater productivity will solve its financial problems, Nash asserts, it is mistaken. The wheel turns, but the hamster goes nowhere.
“Health care doesn’t follow any kind of market forces. (Health systems) think: ‘I’ll open another urgent care center or a bariatric surgery center and that will lower costs because it’s competition.’ That’s wrong. It’s never true.”
Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].