Health System Program That Guarantees Doing Things Right the First Time, for Flat Fee, Pays Off

Kimberly Skelding, a physician at Geisinger Health System in Danville, Pa., jokes with Clark English, 75, a cardiac patient of hers who has had several stents.
Kimberly Skelding, a physician at Geisinger Health System in Danville, Pa., jokes with Clark English, 75, a cardiac patient of hers who has had several stents. (Ricky Carioti - The Washington Post)
By Ceci Connolly
Washington Post Staff Writer
Tuesday, March 31, 2009

DANVILLE, Pa. -- You could think of them as the Maytag repairmen of health care.

In an industry that makes its money by selling more -- more tests, more surgeries, more drugs -- Geisinger Health System officials gambled three years ago that they could succeed by doing less, but doing it better.

Mimicking the appliance company that advertised its products' reliability, the health system devised a 90-day warranty on elective heart surgery, promising to get it right the first time, for a flat fee. If complications arise or the patient returns to the hospital, Geisinger bears the additional cost.

The venture has paid off. Heart patients have fared measurably better, and the health system has cut its bypass surgery costs by 15 percent. Today, Geisinger has extended the program to half a dozen other procedures, and initiatives such as the counterintuitive experiment in Pennsylvania coal country are now at the heart of efforts in Washington to refashion how care is delivered across the United States.

Though not identified by name, the Geisinger model tracks closely with the policy goals of President Obama. A key target is to reduce expensive errors, duplication, and unnecessary procedures that do nothing to improve health and may actually result in worse outcomes.

Nearly 18 percent of hospitalized Medicare patients are readmitted within 30 days, an expense that experts argue can be reduced dramatically by doing things right the first time.

Geisinger, which runs the program through its own insurance unit, is "proving that reliability works," said Donald Berwick, president of the independent Institute for Healthcare Improvement.

But its success has been limited. Geisinger also treats patients who are insured by other companies, and those insurers are not convinced that the savings would be large enough to make it worthwhile for them to renegotiate contracts with the health system. Many still feel more comfortable with the traditional pay-per-procedure approach, even though they run the risk of having to pay thousands of dollars to fix surgeries that go wrong.

Most hospitals are also skeptical of Geisinger's innovation, saying they would lose money by being unable to bill for treatment of patients who must return.

"If they do the right thing and keep patients out of the hospital, it costs them," said Glenn Steele Jr., Geisinger's president and chief executive.

The budget Obama sent to Congress advances the Geisinger approach by taking direct aim at hospital readmissions. Administration officials estimate that "bundling" Medicare payments for certain procedures such as bypass surgery and imposing financial penalties on hospitals with high readmission rates will save taxpayers $26.2 billion over the next decade.

Geisinger, a comprehensive system of 41 clinics, three hospitals and 650 staff physicians, achieves those goals through standardization. Science-based protocols are "hard-wired" into the process, in much the same way that high-end manufacturing works, said Alfred S. Casale, Geisinger's associate chief medical officer and a driving force behind the program.

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