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Journal Article


Achieving the Vision: Payment Reform

The Issue

The current fee-for-service payment system fosters fragmentation and promotes financial incentives that encourage adverse behavior and impede performance improvement. In a chapter for Partners in Health: How Physicians and Hospitals Can Be Accountable Together (Jossey-Bass, 2010), Stuart Guterman, The Commonwealth Fund's vice president for payment and system reform, and Anthony Shih, chief quality officer for the health care consultancy IPRO, outline their vision for health care payment reform.

What the Authors Found

Guterman and Shih review the evolution of provider payment in the United States, including the ballooning of health care spending in the 1970s and 1980s and the push toward, and subsequent retreat from, managed care in the 1990s. They then review payment methodologies that could align hospitals' and physicians' incentives with the best interests of patients, such as pay-for-performance, shared savings, blended payment for primary care, episode-based payment strategies, and global payment. The authors suggest that payers adopt a flexible approach that encompasses a range of models offering quality and efficiency incentives and matched to each organization's existing structures. Smaller practices, for example, could be offered a blended fee-for-service and care management payment model to encourage medical home adoption, while more organized systems could be reimbursed using a global payment approach.


"[P]ayment, organizational structure, and health care delivery are closely linked and . . . must be considered simultaneously. If the health care system is to deliver high-quality, efficient care, not only should the payment system reward quality and efficiency but it should also stimulate the organizational structures that allow the delivery of high-quality, efficient care."

Publication Details



S. Guterman and A. Shih, "Achieving the Vision: Payment Reform," in Partners in Health: How Physicians and Hospitals Can Be Accountable Together, F. J. Crosson and L. A. Tollen, eds. (San Francisco: Jossey-Bass, 2010).