Paying for Health Care: The Carrot, the Stick and the Muscle

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A blog post published on August 27, 2013 titled, “Wielding the Carrot and the Stick: How to Move the U.S. Health Care System Away from Fee-for-Service Payment” highlights, in simplistic terms, the most significant challenge before us when it comes to truly reforming our health care system: changing the way we pay for it.

We all understand that the current health care system is fraught with pitfalls which have been well documented. The main conundrum we face is how we finance or pay for it! The current “fee-for-service” payment model, in essence, pays health care providers per each visit, each test and each procedure. Every time! ”Wielding the Carrot and the Stick” raises the issue that fee-for-service fails to provide incentives to reward efficiency, quality or outcomes, encourages the provision and continuation of unnecessary care, endorses the status quo of “treatment as usual” and does not foster coordination of care across provider settings.

Suffice it to say, the traditional fee-for-service payment model values quantity of services over quality of healthcare delivery and patient outcomes.

Currently, we have a health care system built with disincentives to change! Providers want to provide high quality care to the patients they serve. Although many health care providers are testing and implementing new models of delivering coordinated and integrated services, health care providers are merely players in the game. Health care providers don’t set the rules for payment and reimbursement; health care payers do!

Everyone has been talking about health care reform, but it’s time to elevate the conversation to payment reform. If we are truly going to achieve the Triple Aim, we must face the fee-for-service “elephant in the room” and be bold and courageous in shifting the paradigm towards alternative approaches to financing health care.

The blog post highlights three key elements that will be critical to successfully changing how we pay for health care:

  • The carrot – To implement policies that incentivize high performance and promote structural changes within the organization and in the delivery of health care.
  • The stick – To reduce and eventually eliminate the fee-for-service payment system.
  • The muscle – To coordinate policies across local, state and federal public programs and private payers so that the policies are applied consistently and their impact is maximized.

Here’s the good news: many payment innovations are emerging. The Centers for Medicare and Medicaid Services has several innovative projects across the nation testing new payment and service delivery models. Sustaining Healthcare Across integrated Primary care Efforts (SHAPE) is a global approach with payments that are ‘risk adjusted’ to afford the provider the added time and focus  to serve patients with more complex conditions, promotes and supports better team-based care and collaboration, and provides incentives for quality improvement in patient health outcomes. SHAPE shows tremendous promise as a global payment approach and service delivery model, so much so that SHAPE is being expanded to Oregon.

Take time to read the “Wielding the Carrot and the Stick” and tell us what you think. Do you agree? Disagree? What will it take, besides political will, to achieve payment reform? Ask yourself: what happens if things stay the same? Can we continue to spend $2.9 trillion annually (ten times the $256 billion spent in 1980) on a fragmented and ineffective health care system?

There is a saying: “You can’t herd cats!” My response is: “Sure you can, just move the food.” It’s time to change the rules of the payment game and move the food. The cats will follow.

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