Heads up: there are lessons for Canada in U.S. health care reform

If you could design a health care system from the bottom up, odds are that you would create one that would focus on the comprehensive health care needs of all citizens, from disease prevention to chronic disease management to palliative care. Innovation would be rewarded.

There would be fewer hospital and long-term care beds and more patient-centred medical homes. Doctors would be employed, and their pay tied to performance; nurses and other health care professionals would have advanced skills and new responsibilities. Team-based care would predominate, and would be tightly coordinated across sites to ensure seamless, safe patient transitions. Engaged patients would have ready access to their electronic health records and be able to interact with them. Quality-of-care would be front-of-mind, and hospitals would report publicly and regularly on standardized measures of both clinical performance and patient satisfaction. Finally, a rich menu of incentives would drive quality, efficiency and innovation while allowing providers to share in system savings.

Is it fanciful to contemplate such a health system? Not entirely. Much confusion remains regarding the manner in which all Americans will be assured of health care insurance coverage by 2014, but this will be sorted out. Meanwhile, the Patient Protection and Affordable Care Act (AKA Obamacare) and other initiatives may well result in an American health care system with many of the features described above.

For example, compare the scope of services that will be funded by Medicare (publicly- funded health care for senior citizens and the largest single health system payer in the U.S.) to those paid for by Canada’s publicly-funded system. Canada’s system pays for services provided by doctors and hospitals. Other services, now exceeding over 30% of all health care costs, are excluded. Benefits provided through Medicare will not be limited to physician and hospital services but will include health needs such as prescription drugs, mental health and substance abuse services, prevention and wellness programs, and elements of chronic disease management. This approach reflects the fact that the health care needs of the population have changed, and can now be served in different ways.

Consider also the concept of an Accountable Care Organization (ACO), an important Obamacare initiative. It started with Medicare, but is spreading rapidly to the private sector. It is now estimated that over 31 million Americans receive their health care through an ACO, and this number is accelerating. ACOs are founded on the principle that front-line health care providers should know best how to deliver high quality care while conserving costs, and are structured to devolve decision-making to these professionals. A related principle is that there should be incentives that reward excellent performance and that substandard performance should have financial consequences.

In an ACO, there is no fee-for-service medicine. A group of providers – which may consist of physicians, nurses, other health care professionals, hospitals and clinics – band together as an organization, and are paid a sum of money by Medicare, a private health insurer or an employer-funded health plan to provide care to a population of patients.  If high quality care is provided at reduced cost, the ACO gets to share in the savings. However, ACO participants may also choose to accept risk; if their outcomes are poor or costs high, their incomes will be adversely affected; if they succeed, their shared savings will be higher.

ACOs must meet three objectives: provision of highly coordinated, patient-centred care across the whole care continuum, enhanced quality-of-care, and reduced costs. Safeguards exist to ensure these objectives are met. For example, the resources and competencies necessary for an ACO to provide highly coordinated patient-centred care across the care continuum have been identified and ACOs seeking accreditation will need to provide evidence that they possess these and that patient care is benefiting from them.

On the quality front, Medicare has identified thirty-three quality-of-care indicators in four domains (patient/caregiver experience; care coordination/patient safety; preventive health; populations at risk) that ACOs must be track and report upon.

Cost reduction, the third ACO goal, will happen naturally as a consequence of system integration, physician alignment and increased quality, but efficiency efforts will also be driven by incentives such as being able to share in annual savings that are achieved.

There is no Canadian counterpart to ACOs. In Canada, it is rare for front-line workers to be given responsibility for initiating change, and it is equally rare for their compensation to be linked to such efforts. Unsurprisingly, the pace of health care innovation in Canada is slower than ideal. There should be much for Canada to learn from the ACO concept as it continues to expand and evolve.

In Canada’s health care system adroit use of incentives is rare. In fact, many of our systems’ incentives are actually ‘cross-incentives’, that influence system performance in negative ways. In the U.S., it is clear that health care reform will be propelled by incentives. Shared savings related to ACOs have been mentioned. In addition, hospitals receiving payments from Medicare will suffer financial penalties if too many of their patients with heart attacks, heart failure or pneumonia requires readmission within 30 days. The appropriateness of this particular incentive has been the topic of much debate; however hospitals and health systems are responding to this incentive by better managing patient transitions, improving patient follow-up and community-based care and employing enabling technology such as virtual care.

Another Obamacare provision establishes financial incentives for development and use of electronic health records with which patients will be able to interact, and a further one provides financial incentives to hospitals to improve both clinical quality and patient satisfaction; results of standardized assessments in these areas will be publicly reported, a further incentive.

America is renowned for its ability to problem-solve through innovation; health care reform may be the next great example of this. The process is just beginning, and great challenges remain. But health care delivery reforms currently underway – only some of which have been mentioned and none of which argue for privatization – already appear to be moving the system in the direction of the ideal.

Of course, health care reform is also underway in Canada. However, the Canadian system is highly politicized and radical change is difficult to achieve, so leaders must content themselves with incremental change achieved by working at the margins.  Ontario’s Excellent Care for All Act is one example. It does signal a commitment to greater system quality, accountability and transparency, but is unlikely to alter the glacial pace of fundamental change.

In Canada, we too often regard the American health care system with disdain. It’s time to wake up. In many important areas, the American health care system is poised to leap ahead of ours.

The comments section is closed.

  • Kathy Kilburn says:

    This is fascinating, and thank you so much for the article. A few questions:
    – patients (“beneficiaries”–interesting terminology) are assigned to an ACO, yes? So the ACOs can’t ‘cherry-pick’ the least demanding, lowest-intensity patients to serve?
    – patients however have no right to change their ACO? Do you know if there is any appeal or advocacy process for patients, in case of conflict with the ACO participant(s), and/or quality of care concerns (other than the data collected through satisfaction surveys)?
    – minimum size is 5000? Has there been discussion about the barriers this may pose to patients in rural and isolated areas?

    Again, thank you!

  • Jonah Frohlich says:

    Thank you for the well crafted article Dr. Bear. I would like to make one clarification regarding the Medicare ACO program. Under this model, hospitals and other providers entering into three year contracts with Medicare are still paid fee-for-service. At the end of each contract year the ACO is paid half of all savings that they incur (based on benchmarks that are determined largely on the expected costs of their assigned beneficiary population). ACO can be eligible to draw down more savings too, but in that “two-sided model” they then are at risk for costs and if Medicare finds that the expected costs have actually risen at the end of each year, the ACO must pay Medicare a portion of that extra cost back.

    A number of “commercial” ACO’s have emerged where providers contract with private health plans; in some of those models providers receive lump sum (“capitation”) payments and then may be eligible for shared savings if they save the health plans money.

    Very much appreciate the perspective, for an expat working in the US health care system these are very interesting times.

    • Robert Bear says:

      Thanks to Jonah Frohlich for his comments, and particularly for questioning my assertion that “in an Accountable Care Organization (ACO), there is no fee-for-service (FFS) medicine.”
      There appears to be some confusion on this. Japsen, in a New York Times article on ACOs (March 12, 2012) states that ACOs feature “a radical departure from FFS medicine.” In a helpful clarification, Gamble, writing in Becker’s Hospital News (August 14, 2012) describes five compensation options for physicians particpating in ACOs. They are: straight salary, equal shares, productivity-based compensation, incentive-based compensation and capitation. Some of these compensation schemes derive from pooled FFS revenue, but it does not appear that – in ACOs – individual physicians receive their individual FFS billings, which is my definition of FFS. This makes sense, as ACOs must provide compensation to all physician and non-physician providers working within the partnership to provide innovative, efficient and effective care – and collectively gain from potential “shared savings”.
      There is another complexity. A recent Forbes magazine article on ACOs (November 26, 2012) observed that the term ACO is now being used loosely by some “as a catch all term for providers participating in population-oriented, value-based (health care) delivery and reimbursement models”. In these, a variety of physician compensation models might exist, I imagine.
      Thanks again to Jonah Frohlich. These are indeed “interesting times” in health care on both sides of the border.

  • Robert Bear says:

    Thanks to R. Cunningham for his comments regarding surgical wait times in Canada, and how they might be improved.
    Again, a complex issue and one that has been discussed in previous HealthyDebate posts.

  • Robert Bear says:

    Thanks to Shawn Whatley for asking about wait times – and how they might be affected by U.S. health care reform.
    The issue of wait times in the U.S. is a complex one. In general, there is excess diagnostic and treatment capacity in the U.S. This is good and bad. For insured patients, it generally means wait times will be modest – and this is good. On the downside, there is a risk that idle revenue-generating diagnostic and treatment capacity may be used inappropriately, increasing costs and engendering unnecessary patient risk. This is a different issue, but one that should be noted.
    I do not have wait time data for uninsured patients, but intuitively, I would not be surprised if some wait times for this population are long. The issue of ensuring health insurance for all is an important one, as has been noted. This work is underway as part of the Obamacare initiative.
    Medicare is the single largest health insurer in the U.S. A number of Obamacare initiatives should improve wait times for Medicare patients. Some Medicare patients will be managed through an ‘Accountable Care Organization’. Thirty-three quality indicators help guide the activities of ACOs, and a number of these focus on the patient and caregiver experience. An organizational focus on these quality indicators should result in a helpful focus on wait-time management.
    An additional Obamacare initiative is that health care organizations will be assessed through the ‘Consumer Assesment of Healthcare Providers and Systems’ Program, and in 2013 it is estimated that over $850M will be paid to hospitals based on this pay-for-performance reimbursement model. Wait-time management is one component of this program, for example the wait-times for percutaneous coronary intervention in appropriate patients.
    As stated, a complex issue. However increasing the number of Americans with health insurance and performance-based pay programs should result in improved wait times in the U.S., where such improvements are necessary

  • R. Cunningham says:

    Patients wait because the government does not open new surgical centers or ORs, and have also prohibited physician-owned centers in most provinces.

    It’s not like we don’t have enough surgeons: many of them are unemployed and would love to work, but just can’t.

    Mr. Whatley, I recommend you petition the provincial and federal government regarding this egregious misallocation of resources. We need more ORs, or autonomy to open them independently.

  • Shawn Whatley says:

    Thank you, Dr. Bear, for an interesting post.

    Do you expect patients to wait more under a new american healthcare model? Less? It seems we love accountability for costs, but worry less about accountability for waits and service.

    Thanks again! I’ll definitely check out your blog.



  • Robert Bear says:

    Thanks to Robert Davey for gently noting that the issue of ensuring health care coverage for Americans under the Affordable Care Act is a complicated one, and that – under the best of circumstances – it will take several years for this important task to be accomplished. I agree. Undoubtedly, much progress will be achieved over the next year, but this issue will not be totally resolved by 2014. In this regard, allow me to emphasize that I am not an apologist for an American health care system that permits so many citizens to be uninsured. This issue must be solved, and solved in a timely way. The purpose of my blog post was to point out that in the U.S., a process of disruptive change is being applied to the health care system. There is much opposition and reform will be very much “a work in progress.” But there are kernels of hope, also; I believe some of the reform principles are positive; I believe the whole reform process is worth following closely, and that there are lessons to be learned.

  • robertedavey says:

    Dr Bear, you write ":Much confusion remains regarding the manner in which all Americans will be assured of health care insurance coverage by 2014". Alas, no one who is familiar with the provisions of the Affordable Care Act anticipates that all Americans will be covered by 2014. This issue is a complicated one, but if memory serves me, even if the ACA is fully implemented in 2014, there will still be tens of millions of uninsured Americans.


Robert Bear


Dr. Robert Bear is a former Professor of Medicine at the University of Toronto and the author of Sorrow’s Reward, a novel set in a dialysis unit.  He blogs on health care at sorrowsreward.com.

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