Behavioral Economics & Care Teams - A Winning Combination

 by Dr. Jerry Reeves Member since 2014

by Dr. Jerry Reeves
Member since 2014

Behavioral economics is the science of choices. The field explores the limits of human rationality and the effect of those limits on the decisions we make. Dan Ariely, author of Predictably Irrational: The Hidden Forces That Shape Our Decisions, theorizes that we are all “predictably irrational”. We make many poor choices. Daniel Kahneman, winner of the Nobel Prize in economics, reports in Thinking, Fast and Slow that most of those poor choices are fast, impulsive decisions -- eat the brownie. Occasionally, we make slow, deliberative decisions that are rational and beneficial -- should I eat the brownie? However, we can reduce inclinations to make poor choices by applying “nudges” that make it easier to make better decisions without giving up autonomy -- who took my brownies away?


Incentives drive behaviors. Our fee-for-service payment system pays competing health care providers to do more rather than do right. We sign contracts agreeing to keep payment rates and treatment outcomes secret. We do not pay to connect updated clinical information between providers serving patients. As a result, care patterns are expensive, uncoordinated, prone to errors, and well hidden. Patients also adapt to our system’s incentives. They go to the emergency department for care because it is convenient, heavily promoted, open 24 hours, and everything they might need is readily available. About 62 percent of emergency room (ER) visits are for convenience care, not emergencies. Each convenience visit averages about $1000 more per visit than a regular doctor office visit with no better outcomes. 


We need something better. We are getting too little for too much. In response to market demand, new models of care and coverage are emerging. Some plan sponsors offer members the option of enrolling in “health home benefit plans” with richer coverage and service at lower cost but also with specific member self-management responsibilities. Enrollees receive same-day access to acute care, rapid phone answers, less than 60-minute turnaround time for doctor visits and lower out-of-pocket expenses for health services. They also require participants to choose and stick with a personal care provider and his or her recommendations (see your doctor, get your tests, take your meds, and call your coach). Consequences ensue if expectations are not met. The narrow network of health home physicians serving these members receive global payments for office visits and opportunities for generous performance bonuses once they reduce predicted total costs, achieve 85 percent adherence to quality measures and achieve at least 85 percent satisfaction with customer service expectations. The plans pay for care team support (health coaches, clinical information connections, and reminder systems) to help members achieve their goals. These aligned incentives and care teams nudge patients and their doctors to make better decisions. After two years, total medical costs are 20 percent lower than the baseline year, mainly from fewer hospitalizations, ER visits, images and procedures. Quality metrics (disease control) and satisfaction measures are dramatically improved. All participating doctors received their performance bonuses.


Care and coverage with properly aligned incentives and supported care teams improve health and satisfaction and reduce costs.