AHLAlerts: American Health Line’s Blog

Payment reform. The mere mention of the phrase strikes fear in providers and often lawmakers. In the face of rising budget deficits, providers fear their payments will be whittled down, while lawmakers fret over being saddled with accusations of cutting Medicare or limiting access to care.

Despite that trepidation, the issue of how to change the way this country handles its health care finances has been top of mind for stakeholders for decades, as evidenced by American Health Line‘s coverage. Most recently, it has come front and center as lawmakers in Massachusetts attempt to control costs in their state.

Perhaps because of the fear payment reform invokes, there is much confusion about how to best go about reforming the system and what has not worked. To provide clarity, AHL interviewed a pair of health policy experts focused on payment reform. Over the next two days, we’ll share their answers.

Up first is Suzanne Delbanco, the executive director of Catalyst for Payment Reform, an independent, not-for-profit corporation working on behalf of large health care purchasers to catalyze improvements to how we pay for health services and to promote better and higher value care in the U.S. CPR is housed at the Pacific Business Group on Health.

In addition to her duties at CPR, Delbanco is on the Coordinating Committee of the Measures Application Partnership for HHS. She recently joined HFMA’s Healthcare Leadership Council and the National Commission on Physician Payment Reform and serves on the boards of the Health Care Incentives Improvement Institute, the Anvita Health Advisory Council, and participates in the Healthcare Executives Leadership Network. Previously, Suzanne was the founding CEO of The Leapfrog Group. Delbanco holds a Ph.D. in Public Policy from the Goldman School of Public Policy and a M.P.H. from the School of Public Health at the University of California-Berkeley.

In your opinion, what have been the most successful payment reforms? Why?

Payment systems produce exactly what they are designed to produce. Our current payment system produces more and more expensive health care. A reform either needs to inspire better quality for the same cost or it needs to reduce cost; to be among the most successful it has to do both. And, it has to change the mind set from a volume orientation to one focused on value.

We don’t have a consistent and widespread approach to evaluating new payment methods and we are still in a period of experimentation and should not be irrationally exuberant about any one approach before we know what works where. There is no one-size-fits-all solution and the best payment reforms match the payment methods to the health care needs and conditions.

Given that we can’t change the entire payment system overnight, the growing interest in bundled payment, which has been shown to reduce costs and improve quality in some circumstances, is very appropriate. For example, Geisinger’s ProvenCare model has improved quality and reduced readmissions and resource use. The BCBSMA Alternative Quality Contract has also shown promise, using a per-patient global budget with performance incentives based on quality measures. Both of these approaches shift incentives toward care that is of higher-value per unit than under fee-for-service.

What reform efforts have not been as successful? Why not?

We learned a lot from capitation. It helped place more of the onus on the provider to manage resources carefully, but without a quality component to the payment there were no safeguards against underuse. There are also many situations in which we should only be placing providers at technical risk — for the aspects of care they can control — and not at insurance risk.

The pay-for-performance movement, which so far has only managed to tie 1% to 3% of payment to doctors and hospitals to performance, has now morphed into calls for bolder payment reform. Most of the P4P experiments were too wimpy to produce behavior change; often the cost of behavior change to the provider far outstripped the size of the bonus. If they become more sizable, we are more likely to see greater positive impact.

Payment changes without leadership, without agreement that the game has to be more than just volume-based, and without change management and organizational commitment, are unlikely to produce better quality or savings.

Is capping costs, like Massachusetts lawmakers have proposed, a good solution? What are the benefits? Detractors?

Most people in the health care industry are too afraid to talk about costs. Massachusetts lawmakers are to be commended for addressing it head on, but details matter. Constraints sharpen the mind and if done intelligently, caps on costs could lead to tremendous innovation. It’s hard work to live within a budget, like most of us try to do every day. Detractors will be found among institutions that like the fat in the system and don’t want to let it go.

What innovative payment reforms do you hope to see in the future?

I would like to see more payment reform that instantly cuts waste while improving quality. A great opportunity is in the area of maternity care. Today we pay more for unnecessary medical intervention in labor and delivery than we do when providers follow the evidence. It would be one thing if these interventions did not lead to harm, but elective, pre-term births, as an example, lead to poorer health outcomes for both mother and baby. What if we got rid of the bump in payment providers get when they intervene? This is an example where less is more.

Since I see through the lens of the consumer and health care purchaser, I would also like to see greater experimentation with payment arrangements in which providers share risk, particularly in [accountable care organization]-like settings. Shared-savings is a sensible first step. But it’s going to take both upside and downside risk, tied to quality standards, to motivate better quality and costs and real clinical integration instead of only financial. Otherwise, the ACO movement just becomes a license for further provider consolidation, which historically has led to higher costs and poorer quality.

Lastly, more holistic approaches to reform are likely to work best. Imagine pairing a Centers of Excellence approach where providers are selected for quality and reimbursed through a reference pricing program that reduces unwarranted payment variation and engages and educates consumers at the same time.

What will it take for Congress to pass successful payment reforms?

If the proper place for Congress to focus is on public programs, then the best reforms will also enhance alignment with the private sector. Too often policymakers miss the opportunity to create consistent signals across public and private health care purchasers. Instead, the noise sends providers mixed messages, missing the opportunity to strengthen incentives, and keeping the door open for business as usual.