Let's Keep the Payment Reform Momentum Going

Mar 31, 2015, 10:22 AM, Posted by Andrea Ducas

Recent advancements in payment reform have been massive and exciting. It's time to sustain the momentum and transform how we pay for and deliver care.

A hundred dollar bill. Modified image. Original photo by Ervins Strauhmanis.

When it comes to how health care providers are paid, change is in the air. I’m probably more excited than most people about trying to make sure our financial incentives are flowing the right way within the health care system. Here’s why.

First, as a bit of context: most doctors and hospitals in the United States are paid on what’s known as a “fee-for-service” basis. Historically, the health care payment system has been designed to reward the volume of services rather than the value of services that are provided to patients. Additionally, in traditional fee-for-service arrangements, doctors often lose money when they spend time doing things that might matter to a patient’s health but that they cannot bill for. For example, a patient might be having a hard time managing their diabetes because they have no way to store their insulin. A doctor might know the best way to address that patient’s true need is to help them procure a refrigerator or by connecting them to income support services. The time and effort associated with either of those activities, under our traditional payment system, would typically mean lost productivity, and a loss of income, to providers. In sum, the fee-for-service payment system can be constraining and lead to higher expenditures than necessary.

Lately, advancements in the field to reform the way we pay for and deliver care have been massive and exciting. The most prominent models, Accountable Care Organizations (ACOs), are designed to disrupt the traditional fee-for-service system by holding providers accountable for the costs and quality of care for whole populations of people, and by providing clinicians with more financial flexibility when it comes to how they treat patients. In four short years, we’ve moved from a nation with 50 Accountable Care Organizations to more than 700 operational ACOs across the country. According to Catalyst for Payment Reform, nearly 40% of all health care payments are now tied to value, or improved health outcomes and/or lower cost. In January, the Centers for Medicare and Medicaid Services (CMS) put a historic stake in the ground, announcing that by 2018, 50% of its Medicare payments would flow through alternative payment models. And the very next day, a private sector taskforce of commercial health care payers and their partners announced their own ambitious goal of placing 75% of their business into value-based payment arrangements by 2020. On top of those announcements, last year CMS launched an $840 million initiative designed to help health care providers prepare to operate under new payment models.  

It’s clear the time for investing in incremental change has passed. So what’s next? As my colleague Michael Bailit and I discussed a recent blog post, there remains a need for funders to continue addressing the very real on-the-ground challenges involved in working through reformed payment systems. To avoid losing momentum, we also need to rapidly share that experience with others to ensure the successful implementation and refinement of new models. It is also important and necessary to address challenges unique to safety net providers. The Robert Wood Johnson Foundation recognizes these critical needs—last month we released a call for proposals to create a technical assistance and resource center that could serve as that source of help and expertise.

For me, this new world raises a set of compelling questions.

  • What will all of these new changes mean for the practice culture that exists in doctors’ offices and in hospitals across the country?
  • How will our sense of who is accountable for what in health care change?
  • How will we determine where the money potentially saved from these new models goes?
  • Moreover, how will we ensure everyone has the information and data they need to be making different and better choices about delivering and receiving care? 

All of this will start to unfold in the near future—and we look forward to playing a role in answering these questions.

Andrea M. Ducas, MPH, is a program officer with the Robert Wood Johnson Foundation working with programs related to payment and delivery system reform, purchaser and consumer engagement, health care price transparency, community-driven health improvements, and strengthening health departments. Read her full bio.