Discussions About Health Care Payment Reform

Within the health care reform, the need for a new payment system is getting a lot of attention. The cost of health care has risen dramatically. In 2009, health care spending in the United States represented 17.6 percent of the country's gross domestic product. Health care spending now accounts for approximately 30 percent of total state budgets.

Typically, patients (or their insurance companies) pay for treatment when service is provided. Ironically this system makes being sick profitable at least for the providers. Patients have no idea what the true cost of the treatment is because there isn't a standard pricing. Providers must wait for payment as insurance companies sort through billings to determine how much the plan will cover. Insurance companies have larger payouts when patients have re-lapses or re-admissions. Critics of the current system believe there is a better way.

Across the country, groups are meeting to discuss health care payment reform options. One such meeting was held in Kansas City last November when the Kansas City Quality Improvement Consortium (KCQIC) hosted a conference with national expert in health care payment reform Harold Miller, Executive Director of the Center for Healthcare Quality and Payment Reform.

Miller talked about many ideas to improve our current system. One was to develop a system where consumers pay for health care that is more like buying a car or computer – the patient (consumer) pays a set price per episode (period of treatment for condition) and with that comes a warranty. To get to that point, he acknowledges there would need to be a significant amount of change by providers (medical professionals), payers (insurance companies) and consumers.

The goal of Miller's proposal is to reduce the cost of the health care while at the same time improve the quality. To get to a set price per episode, providers would need to agree upon standard pricing and make that information public. Warranties would help improve quality; to correct problems that might come up during treatment such as an infection. Since providers would not receive additional payment to treat resulting infections, theoretically they would take additional steps to prevent any (such as follow up home visits after dismissal).

Miller's proposal is one of many being discussed at meetings across the country. There isn't a one-size-fits-all solution to reform. Each region must look at what works best for them. Experts agree that patients, as consumers, voice their opinions when a new system is considered because in order for changes to be successful, consumers must see benefit.

Other information on this topic is available

From Volume to Value: Better Ways to Pay for Health Care
By Harold D. Miller

Providers would be better able to reduce costs and improve quality under episode-of-care and comprehensive care payment systems.

But what is even more troubling is that current payment systems often financially penalize health care providers for providing better quality services. Providers frequently lose revenues and profits if they keep people healthy, reduce errors and complications, and avoid unnecessary care. This not only leads to many of the problems in health care quality that exist today, but impedes efforts to improve quality by forcing a tradeoff between a health care provider’s financial well-being and the quality of their services.

Transitioning to Accountable Care

Center for Healthcare Quality and Payment Reform
There is clearly a need for "middle-ground" options - payment reforms that provide greater flexibility and accountability for the costs and quality of care than typical pay-for-performance, shared savings, and medical home programs, but which avoid forcing providers, particularly small physician practices, to take on more financial risk than they can manage or to take accountability for services they cannot effectively control (as traditional capitation systems or full episode-of-care payment systems can require).

Transitioning to Accountable Care: Incremental Payment Reforms to Support Higher Quality, More Affordable Health Care describes a range of transitional payment reforms that can enable primary care practices, specialists, and hospitals to deliver significant improvements in cost and quality for payers and patients as they build the capacity to transition to more comprehensive payment reforms. The report also discusses a series of important issues in the design of any new payment system, including pricing, establishing appropriate limits on risk, and ensuring quality. It also discusses the importance of alignment among multiple payers and ways to achieve that, including ways that the Medicare program can best support payment reform efforts.

Which Healthcare Payment System is Best?
There is broad agreement that significant reforms are needed to the Fee-for-Service Payment systems that are commonly used today. The two major healthcare payment systems being discussed as alternatives are Episode Payments and Comprehensive Care Payment (also called condition-adjusted capitation or risk-adjusted global fees).

Using Medical Homes to Reduce Readmissions
Many people are convinced that the only way to significantly reduce healthcare costs is by some type of rationing, i.e., limiting the kinds of services that Medicare or health insurance will pay for. But there are ways to significantly reduce healthcare spending without taking away anything that consumers want.
A perfect example is hospital readmissions. Research studies and quality-reporting initiatives around the country show that 15-25% of people who are discharged from the hospital will be readmitted to the hospital within 30 days or less, and that many of these readmissions are preventable.

 Charting a Path for Health Care Payment Reform
Robert Wood Johnson Foundation

Community. While improving health care is a national priority, health care is organized and delivered at a community level. Health care, itself, is an intensely local matter. Further, health care payment is, at its core, a transactional activity between or among interested parties paying for and providing services. Nevertheless, successful payment reform depends on more than national impetus and local transactional activity. The ability of each community and its local health care stakeholders to design and implement payment reforms will be critical to the success of those reforms. Payment reform is both a national issue, because of national payers such as Medicare, and a local issue, because negotiations at the local level reflect local market conditions. At a minimum, successful payment reform requires participation and collaboration of key stakeholders in local communities as well as conducive, supportive national leadership. Payment reform requires action at both the national and local levels.

Consumers. Reform efforts that are not informed by consumers’ perspectives are not likely to achieve the desired perspective of high value care for consumers. That point is particularly true if consumers feel they will lose flexibility or autonomy in where and from whom they seek care. In addition to payment changes, consumer benefit design must be adjusted to improve the alignment of consumer and payment incentives.

Healthcare Payment Reform: Creating Conditions for More Efficient Health Delivery

The Health Industry Forum
Most experts who examine America’s persistent healthcare cost and quality problems identify fee-for-service (FFS) reimbursement as an key contributor to the system’s chronic ills. Under FFS, doctors and hospitals are paid more for doing more, not for delivering better outcomes. The economic incentives under FFS actually discourage quality improvement because care that “gets it right the first time” frequently reduces revenues. Under FFS, providers also lack a business case for excelling at prevention, chronic care management, or efficient use of technology. Without other strong mechanisms for encouraging best practices, FFS has enabled significant geographic variation in health care spending across the U.S. with high cost regions often delivering lower quality care.

Geisinger Health System’s evidence-based case rates. Geisinger is an integrated health system that includes a hospital network, employed physician group, and health plan with 212,000 members. Geisinger has established global case rates under which the network accepts a single fee for all services provided 30 days before and 90 days following certain surgical procedures. The payment levels assume a 50% reduction in the historical complication rate for each procedure. Participating clinical departments have established strict criteria for proceeding with surgery and a uniform set of evidence-based clinical interventions that are tracked for each case. Initially launched for cardiac surgery, Geisenger now offers its “ProvenCare” approach for a range of procedures including angioplasty, cataract surgery, and hip replacement.

Blue Cross Blue Shield of Massachusetts’ (BCBSMA) alternative quality contract (AQC). The AQC is a health status adjusted global payment that includes a base per-member per month payment and a performance payment of up to 10 percent for meeting quality and safety goals. BCBSMA envisions this as a multi-year arrangement where base payments grow by inflation. Contracted delivery systems can improve margins through efficiency improvements that keep baseline expenditure growth below inflation and by earning performance payments for meeting quality benchmarks.

United Healthcare’s multi-faceted approach. United Healthcare (UHC) is the nation’s second largest health plan, though it has relatively limited share in most local markets. Through its large database UHC has identified significant variation in provider efficiency and quality. UHC encourages provider improvement, and steers patients towards high quality, efficient providers using centers of excellence networks for high cost, low volume services, provider performance transparency, a uniform physician recognition program with financial rewards, and patient engagement initiatives. Other initiatives include a medical home pilot program and development of new payment bundles.