Episode 2- The Impacts of Policies on Health Care- featuring Zirui Song

Lauren Jett: You’re listening to “Leading Voices in Health Care Policy”, a podcast brought to you by the department of health care policy at Harvard Medical School. I’m Lauren Jett. Today we’re speaking with Dr. Zirui Song, an assistant professor of health care policy and medicine at Harvard Medical School and an internal medicine physician at Massachusetts General Hospital. Thank you, Dr. Song, for speaking with us today.

Zirui Song: Thank you for having me.

LJ: So, your research focuses on policies that aim to improve the value of health care, especially policies that aim to slow spending or improve quality. As part of this work, you look at the impact of such policies on physician behavior. Can you give us a brief overview of your research?

ZS: Sure. A helpful overview would be to think about health care spending in two ways. The first is that health care spending is the product of the prices of care times the quantities of care. And second, health care spending is the sum of the payer share or the insurer share and the patient share. When we think about health acer spending in this very simple fundamental framework of these two dimensions, we see before us the possible policy levers that payers and governments and employers can use to try to influence health care spending. These are changing the prices of care, changing the quantities of care, changing the insurer or payer share, changing the incentives that patients face to influence the patient or enrollee share, and finally, affecting total health care spending in the form of a bundle or a budget.

LJ: How might policies affect the prices of health care services?

ZS: Well this is a great question. Typically, we think of policies affecting the prices of services through one of two ways: either through competition or regulation. In fact, in general health care prices can only be changed through these two avenues. Either policies will promote or potentially decrease the level of competition in the market, and in this sense competition between providers, but also we can think of it as competition among insurers since prices are generally determined through an insurer and provider negotiation. Second, policies can affect prices directly through regulation. For example, in Medicare the prices of services are set by the federal government at the beginning of each year. Thus, in this way, regulation is a legislative avenue through which the prices of care can be affected. So, in general, again, prices can only be changed in one of two ways, through competition or regulation, and in health care, both of these are potential targets of policy.

LJ: How might policies affect the quantities or volume of health care services?

ZS: In terms of the volume of services, policies have effectively more avenues through which they can work. One is what we classically think of as managed care, or policies that try to effect the provision of services through utilization review or prior authorization or various versions of gatekeeping that have been studied since the 1990s. However, there are more avenues through which policies can affect quantities than just through managed care techniques. They include changes in eligibility, which can be thought of as the share of the population that is eligible to receive a certain set of services. They also include changes in capacity, which can be thought of as what doctors in hospitals are available to provide care, such as through policies in terms of the physician workforce or the number of hospitals we have, or the number of scanners or laboratories we have in our health care system. And finally, public health policies or wellness initiatives in the workplace or elsewhere can aim to directly change the health of the population in a way that tries to address the quantities of care needed in a more inherent fashion.

LJ: Your research also looks at the impact of these policies on physician behavior? Do changes in Medicare payment policies, for example, have an effect on how physicians deliver care?

ZS: They do, and this has been studied by numerous scholars in the last several decades. What we’ve generally learned is that changes in Medicare payment policies affect physician behavior through changes in quantity, meaning the amount of care that physicians provide, and changes in the intensity of coding. In other words, how healthy or sick a physician reflects his or her patient to be.  However, in recent years, and in projects I’ve been involved in, we’ve also learned that changes in Medicare payment policies can affect physician behavior through additional avenues or additional mechanism. Those include the site of care in which physicians provide their services, their treatment choice among substitutable choices in given clinical situations, as well as patient selection.

LJ: What’s the largest change in policy that you’ve seen since you’ve started this research and do you believe it was a step in the right direction?

ZS: This is a great question. The largest change in policy in general that I’ve witnessed probably has to be the movement from fee to service payment towards various types of prospective payment in recent years. Prospective payment includes bundled payment contracts, global budget contracts, and what we generally think of as accountable care organization types of payment models. In these alternative payment models, the total amount of spending for a defined population of patients generally assigned to a defined provider organization is estimated in future years and budgeted for prospectively. In this way, incentives are provided to physicians and hospitals to work with each other and across specialties to try to slow the growth of health care spending while improving quality for a defined population because no longer will spending rise at an unknowable rate, but rather eventual health care spending growth is pre-determined and budgeted for. Many colleagues in our department have done wonderful and insightful work in this general area of alternative payment models and accountable care organization types of payment models and I believe that this is indeed, in terms of our broader health care system, one of the most influential areas of policy change and one in which research has played a meaningful role.

LJ: So as you work on your research, what’s your suggestion for moving forward in health care spending policies? 

ZS: There are many areas in which I believe that research can further contribute to our understanding and future policymaking. Probably one of the most important is how physicians and hospitals respond to changes in their incentives and understanding all of the nuances in terms of the downstream effects both for providers and facilities and institutions as well as for ultimately, and most importantly, the patient populations that we serve. Currently, we still do not have a very deep understanding in changes of physician behavior after changes in incentives. We generally understand the areas in which we should look to learn about physician responses, but I do not believe we’ve come to fully understand the depth or breadth of those physician responses when federal payment policies take place, especially because private insurers tend to adopt federal payment changes and extend the impact of those payment changes across multiple payer populations.

LJ: Thank you so much, Dr. Song, for joining us today and discussing the policies that affect the spending and quality of our health care.

ZS: Thank you for giving me the opportunity to talk with you today.

LJ: You can read more about Dr. Song’s research on the department of health care policy’s website at hcp.med.harvard.edu. That’s all for this episode of Leading Voices in Health Care Policy. From the department of health care policy at Harvard Medical School, I’m Lauren Jett.  For more of the top news and updates on health care policy, be sure to follow us on twitter at HMSHCP.