August | 2013—Moving Beyond "Widgets"
Wednesday, August 7, 2013
Payment Reform—The Linchpin of Health Care Reform

The way we pay for care impacts the way care is delivered. By paying for appropriate, preventive, and coordinated care, the health of Americans can improve. Everyone—consumers, providers, insurers, and employers—has a stake and role in helping shape a new system. 

Today's issue of AF4Q Spotlight features stories and products showcasing how AF4Q Alliances are changing the way health care is paid for, improving care quality, and making their community healthier.

Beyond "Paying for Widgets"

Overtreatment and overspending in health care in the United States can result in poorer health outcomes. Today, health care providers are usually paid based on the number of procedures they perform. This volume-driven approach means more procedures equal more payment. This “fee-for-service” approach is commonly derided within the field as “paying for widgets,” because it treats health care as a collection of commodities bought and sold rather than as an endeavor focused on improving the health of individuals and populations.

These existing volume-based payment mechanisms that are so dominant in U.S. health care discourage the very improvements in quality and cost we so desperately need. Reforming the health care reimbursement system so clinicians and organizations are rewarded not for providing a lot of care but for providing the right care will improve quality standards. Payment reform is not a distraction from health care reform. Payment reform is health reform. This brief discusses payment reform, possible models, and how communities can make a difference.

Bundled Payment Initiatives: Successes and Challenges

How we pay for health care in the United States has been widely (and deservedly) criticized. The “fee-for-service” structure pays doctors and hospitals for the number of services they perform rather than the quality of services or their necessity. Fee-for-service can lead to over-prescription of care, which in turn drives up the total cost of care. 

Fortunately, other payment structures are being explored across the country. One strategy, called bundled payment, assigns a fixed payment amount to cover a set of services, such as a surgery, over a defined time period. Bundled payments encourage providers to manage costs while meeting standards of high-quality care. Because of the fixed price, doctors and hospitals are given a financial incentive to keep variable costs down.

“Bundled payment is an attractive option under certain circumstances because it meets the ‘Triple Aim’ goals of improving the quality of care, improving the health of populations, and controlling spending,” says Robert Graham, MD, program director of the Aligning Forces for Quality (AF4Q) National Program Office.  Aligning Forces has made payment reform one of its quality improvement objectives.

Aligning Forces for Quality (AF4Q) is the Robert Wood Johnson Foundation’s (RWJF) signature effort to lift the overall quality of health care in targeted communities, reduce racial and ethnic disparities in health care and provide models for national reform. Alliance teams represent the people who get care, give care, and pay for care.
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