The Real Fixers

Remember pulling your hair out as Republicans and Democrats squared off over so-called Obamacare? While that was happening, something unusual—and far more productive—was going on in another corner of Washington. Donald Berwick, administrator of the Centers for Medicare & Medicaid Services, was figuring out how to lower health-care costs and improve the quality of care for millions. Turns out the two can coexist.

The idea was simple: reward hospitals and doctors not for the number of procedures they do, but for how well their patients fare. Because we currently reward quantity over quality, the U.S. spends at least twice as much per person on health care annually ($7,960 in 2009) as Japan, Canada, Germany, and other developed countries. Yet whether measured by infant mortality or cancer survival, we are far back in the pack in terms of quality. “How much doctors and hospitals do has become more important than how well they do,” says Berwick.

In demonstration projects, Medicare’s program has been impressive enough that private insurers, including Blue Cross Blue Shield of Massachusetts, are beginning to follow suit. Those involved in the program are called “accountable-care organizations,” groups of primary-care doctors with connections to specialists and hospitals. By paying them part of the cost savings, they have an incentive to avoid useless tests and treatments.

In the next version, which Berwick hopes to roll out by year’s end, the providers will get paid not for every test and treatment, as in the current system, but receive a single payment per patient per year. If, for example, a patient earns $5,000 a year, the doctor is more likely to think twice before ordering a $2,000 MRI. That may trigger memories of 1980s-era HMOs, which tried to keep their costs below this fixed payment by denying care, but accountable-care groups are different: they’re run by doctors, not insurers, and they get bonuses for meeting quality measures. And since physicians are rewarded for, say, controlling the blood pressure of a patient with hypertension and thus preventing a stroke, they don’t skimp on care.

Last month Medicare/Medicaid announced that the 10 such physician practices in a five-year demonstration program reached at least 30 of the 32 quality benchmarks. This saved Medicare $36 million and netted the physicians $29 million in bonuses and cost savings this year—a net win for the federal budget, for the doctors who earned more than the standard Medicare rates, and for patients whose care got better.

—Sharon Begley

Editor’s Note: A headline on the print version of this story in Newsweek incorrectly referred to Donald Berwick as David Berwick.