Healthcare spending in the U.S. is expected to reach nearly $5 trillion, or 20 percent of gross domestic product (GDP) by 2021. The causes are complex and include an aging population and a rise in the incidence of chronic disease and Medicare expenditures. The enactment of healthcare reform is spurring rapid changes with the goal of lowering costs while improving the quality and value of healthcare. These changes require healthcare providers—hospitals, doctors and other medical services—to adapt to new regulations, technologies and market changes. One key area that will affect providers and their patients is payment reform.
There is now widespread agreement that the traditional “fee-for-service” payment method—where providers are paid individually for each service they deliver—contributes to the cost and quality problems with the nation’s healthcare.
This form of payment has encouraged the overuse of medical services since provider reimbursement is determined by the volume of care—the number of patients seen and the number of tests or procedures ordered—not the quality of care. Essentially, health professionals and organizations are paid to test and treat, not prevent disease, which contributes to rising costs.
In order to reduce spending and improve patient outcomes, healthcare providers are moving away from a “fee-for-service” to a “value-based” or “pay-for-performance” reimbursement method.
“Value-based” payment is ideally tied to relevant patient outcomes, such as the rate of recoveries, complications, hospital-acquired infections, and re-admissions. It creates financial incentives for hospitals and clinicians by rewarding or penalizing them according to their ability to achieve certain high quality and efficiency benchmarks. For example, hospitals can be financially penalized if too many of the patients they discharge have to be readmitted to a hospital within 30 days.
A growing trend in healthcare is the formation of Accountable Care Organizations (ACOs), groups of hospitals, doctors and other health care providers that form networks to coordinate the care of a population of Medicare patients. Members of the group share in the financial and medical responsibility and are accountable for the quality, cost and overall care of the designated patients.
For healthcare providers, value-based payment will incentivize a more team-based approach to care, to coordinate an entire episode of care. It also incentivizes providers to employ more evidence-based medicine and proven treatments and techniques that take into account a patients’ wishes and preferences. For patients, it could mean more appropriate, better coordinated and consistent care at a reasonable cost, plus a higher degree of satisfaction and a greater emphasis on prevention and wellness.
As our health system moves from care that is based on volume to value, it’s vitally important that we have the right tools to capture, measure and analyze that value. This requires the development and integration of more sophisticated analytics and information technologies.
One focus of health reform has been to measure the results of procedures and more closely track them over time to get a clear data-driven picture of what works. The benefit for any patient considering a procedure is being able to know ahead of time from their physician exactly what the procedure will cost and what the results will be.
The transition from a fee-for-service to a value-based system is not without its challenges and it will continue to evolve over time. For hospitals and clinicians, it presents a tremendous opportunity to provide patients with healthcare that’s even better and more efficient in the future. Keep your eyes out for future posts on the changing landscape of healthcare from a physician administrator’s point of view.
— Mary Beth Walsh, M.D.
Executive Medical Director/Chief Executive Officer, Burke Rehabilitation Hospital
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