Beginning in December 2004, a small group of experts and stakeholders from multiple disciplines and with diverse skill sets came together with one goal—to design an entirely different approach to paying for health care which would simultaneously improve quality, lower administrative burden and pay providers fairly for what science says should be brought to bear to treat a patient for a specific condition or constellation of conditions.

Undaunted by the fact that many others had struggled with this challenge, but none had yet succeeded, the group used an explicit process (Design for Six Sigma) to mediate the differences among the diverse perspectives participating in developing an actual payment model, rather than yet another series of reform principles.

The project, eventually named PROMETHEUS Payment®, received a significant boost starting in 2007 when the Robert Wood Johnson Foundation provided first a $374,000 planning grant followed by much larger $6.4 million grant. This funding has helped and will continue to help the design team refine the payment model and will support the implementation and testing of the PROMETHEUS Payment design in four pilot sites over three years.

The purpose of this paper is to explain in layperson terms:

• the principles behind the construction of rates
• the compromises the Design Team made to make the rates real
• the protections built into the approach because of the need to rely on claims data
• the analytical process used to construct the rates for two clinical conditions—diabetes and acute myocardial infarction
• how the mechanism has demonstrated that this model can improve quality, pay good providers more than they are getting today, and still save considerable money, for the system and employers who pay for the care.