We must change how we pay for healthcare

Is it possible to change how we pay for healthcare?

At the center of almost all efforts of healthcare redesign is the need to simultaneously change how we pay for healthcare services while changing how we deliver those services.

The two can often not be separated.

Why is this a problem? From a recent Center for American Progress report on “Alternatives to Fee-For-Service Payments in Healthcare“:

“Our nation’s health care system is high cost and high volume, but it is certainly not high value. This year, we will spend more than $8,000 per person on health care, which is more than twice the average of $3,400 per person in other developed nations. But spending more on health care has not made us healthier. Even within the United States, different areas of the country spend very different amounts on health care, again with no correlation to better outcomes.”

The report continues:

“One of the key reasons for the high level of health care spending and its rate of growth is the predominance of the fee-for-service payment system, which rewards quantity over quality, especially for high-cost, high-margin services. Under this system, health care insurers, including Medicare and Medicaid, pay doctors, hospitals, and other health care providers separately for different items and services furnished to a patient. As of 2008, 78 percent of employer-sponsored health insurance was fee-for-service.”

It’s not surprising that we are all looking for a “magic bullet” for changing how we pay for healthcare. The current healthcare system is fraught with challenges for providers who are attempting to deliver good care but are often inhibited by how they are paid (or what they are paid for). The predominate model of payment in healthcare is “Fee-for-service” or FFS. We have tackled FFS here on OH before.

We are all looking for the answer of how to change how we pay for healthcare.

A recent theme issue of Health Affairs attempted to tackle various models of financing healthcare and payment reform. The title of the theme issue was “Payment reform to Achieve Better Healthcare” and has many articles that are fascinating to read on novel strategies to change how we pay for healthcare.

One Health Affairs blogger commented on the theme issue:

“Yet, as readers recognize, health is remarkably complex, and we continue to develop a system of health care finance that is no less so.  So it came as no surprise that health reform produced a scattershot of proposals to reform how we pay for care – yet each appears about as likely as a single shot pellet to slay the immense beast of unsustainable spending.”

The problem, as some have pointed out is:

“Interest in payment reform is likely to intensify as new models of care delivery are tested and refined. Additional demonstrations and evaluations of the various models are needed to fully understand their relative advantages, disadvantages, and operational feasibility. There is, however, no silver bullet among the options. No single payment model is appropriate for all types of care or applicable in all settings, practice types, and geographic locations.”

We must start testing different payment models for different populations in different locations. We know that FFS has its limitations for most aspects of healthcare, but that does not automatically mean that we know what does work.

As patients and providers, we must be aware of the limitations of our current healthcare system as it relates to payment. We must know what the various models are out there and the pros and cons of each model. For example, do you know the difference in a “bundled payment” vs. a “FFS” payment? Could you tell the difference in your care if you knew how your provider was being paid?

There are a few models of payment reform that appear promising but remain in need of testing.

Episode or bundled payments: Single payments for a group (or bundle) of services related to a treatment or condition that may involve multiple providers in multiple settings

Care coordination payments: A payment for specified care coordination services (usually paid to specific providers). In delivery models like the patient-centered medical home, this is a common payment model where the practice receives a monthly payment to help deliver care coordination services.

Pay for performance: This model consists of payment or financial incentive being directly connected to the provider (or practice) achieving a set of defined or measurable goals related to various healthcare factors (e.g. patient experience, outcomes).

Each of us should be knowledgeable of the inseparability of how we pay for healthcare and how healthcare is delivered. Which payment model will allow us to create the healthcare system we all deserve that allows the patient to be at the center of care? Which payment system will allow providers to do what is necessary to treat the patient without worry of “will this be paid for” or not?

These questions and more will be answered in the coming years. Each of us must continue to recognize the importance of payment reform in healthcare and push for change whenever possible.