Building a High Performing Health Care System
Testing New Payment Models
There is growing recognition that expensive health care does not necessarily equate to better care and improved outcomes. Moreover, policy experts are also realizing that traditional payment systems rooted in fee-for-service arrangements could be inducing volume-driven care as opposed to higher quality care. Under fee-for-service, providers receive separate reimbursements for every service rendered. How do we realign cost and quality incentives so that we are paying for value and rewarding providers who deliver high quality care? As there is not a clear cut answer to this question, both the private and public sectors have decided to test new models of care that have the potential to lead to improvements in quality and lower costs. Through experimentation, we are rethinking how we not only pay for services but how we deliver those services. Aligning the payment and delivery system is critically important and in many ways is an indispensable component of building a high performing health care system.
Alternative payment and delivery system models are being tested in various settings and across the health services continuum. With respect to payment, some of the new models that are being tested in Medicare, Medicaid and the private health care system include:
Bundled episode payments. Under bundled payments, providers will receive a single payment that covers the range of services typically provided within an episode or time period. An example of a bundled payment initiative is the Centers for Medicare and Medicaid Innovation through the Centers for Medicare and Medicaid Services’ (CMS) Bundled Payments for Care Improvement Initiative. Through this program, selected providers will enter into an agreement with CMS to pursue one of four models beginning in January 2013. For the first three models, which are based around retrospective bundled payments, CMS and participating providers would set a target payment amount for a defined episode of care. At the end of the episode, the total payments, which are based on discounted Medicare fee-for-service rates, would be compared to the target amount to determine if any savings were generated. Under the fourth model, CMS would make a single, prospective bundled payment to a participating hospital that would encompass all inpatient and outpatient services furnished for a particular episode.
Population-based global payments. Under this model, a single all-encompassing payment will be made for the range of health care services delivered to a specific patient population within a given period of time. A good example of this is Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract (AQC). Regarded as one of the largest and striking payment reform efforts in the commercial market, the AQC uses a population-based global payment strategy combined with financial incentives based on performance on clinical measures and patient outcomes. Over three quarters of Blue Cross Blue Shield of Massachusetts’ primary care physicians and specialists in the provider network participate in the initiative.
A strong emphasis on quality measurement is also a cornerstone of these pilot programs. In most cases, the payment models being tested are generally combined with financial incentives based on patient outcomes or performance on quality metrics. In addition to testing whether these models result in lower costs, the imperative is to also test how these models can serve as a catalyst for enhancing care coordination, improving transitions of care, promoting health promotion and prevention, and integrating public health and social services with the delivery system.
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