Minnesota offers model for cost-effective health care

Sep 4 2009

In the second of two reports, NPR examines how Minnesota provides lessons on how to create a more cost-effective health care delivery system. "Many agree that the [fee-for-service] system for doctors and hospitals doesn't work ... and is a major driver in rising health care costs. The health care bills before Congress may do little to change that. But on the state level, Minnesota may have found its own way to move doctors off of the fee-for-service treadmill."

The unique relationship between David Tilford, the president and CEO of Minnesota's second-biggest health insurer Medica, and Mark Eustis, the head of Fairview Health Services, helped bring about change. NPR reports: "Eustis and Tilford struck a deal. The insurance company agreed to provide an undisclosed amount of money to help Fairview — Minnesota's second-largest health care provider — move from fee-for-service billing to a system based on fixed payments. Tilford says it was by no means a gift to Fairview. ... Eustis, for his part, says Medica took a carrot-and-stick approach with Fairview. ... The idea, says Eustis, was to keep patients well — by spending more on them when they're healthy, with the aim of reducing costly illness" (Welna, 9/3).

Related KHN story: Highly Praised Health Systems Say Medicare Payment Practices Need Overhaul (Galewitz, 7/13).