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Experts Urge New Health Care Payment Methods

By John Reichard, CQ HealthBeat Editor

November 4, 2008 -- No matter which party fares best in Tuesday's presidential and congressional elections, there's bipartisan agreement that changes in health care payment are an important and perhaps underrated piece of the puzzle over how to overhaul the U.S. health care system. A new survey from The Commonwealth Fund and Modern Healthcare magazine, a hospital industry trade publication, finds varying levels of support among experts for payment alternatives but also widespread agreement that the current "fee-for-service" system must be changed.

The survey by Harris Interactive of some 222 health care experts from the worlds of business, insurance, labor, academia, government, and advocacy found that 69 percent think the current fee-for-service system is not effective at encouraging high-quality and efficient care.

The study defined fee-for-service as a system that reimburses individual services such as doctor visits, medical procedures, and tests "rather than paying for the most appropriate care over an episode of an illness or a year-long period. This system creates incentives to provide the maximum number of complex services, even when there may be better, simpler, and lower-cost ways to treat a condition."

"Support for fundamental reform was strong across all sectors," the study found.

Enthusiasm for payment alternatives waxes and wanes, with "fee-for-service" a hardy survivor. "Capitation" for example, was in vogue in the mid-1990s as the key to greater efficiency but never became dominant. The payment method—involving prepaid, fixed sums of money for health care over given periods of time, with providers left holding the bag if they ran up above-budget treatment costs—was identified with tighter control by managed care plans of access to treatments and providers. Those tighter controls inspired public resistance to the rise of managed care.

But the search for alternatives to straight fee-for-service has become more pressing as health care costs consume an ever-growing share of the nation's Gross Domestic Product.

The survey found that "majorities cited bonus payments for high-quality providers (55 percent) and public reporting of information on provider quality and efficiency (53 percent) as effective or very effective policy strategies in improving health system performance."

"Fifty-one percent felt bundled per-patient payment—defined as a single payment for all services provided to the patient during the year, with bonuses based on quality—would be effective or very effective." Support for the bundled approach grew if it was combined with what the pollsters called a modified form of fee-for-service payment; a combination of bundled and modified fee-for-service payment drew the support of 62 percent of the experts surveyed.

Fifty-seven percent of respondents said "shared accountability for resource use" would be effective or very effective in improving efficiency. Shared accountability entails holding providers accountable for the level of resources they use in providing care of their patients over time and sharing any savings with them.

Finally, 85 percent of those surveyed favored increased payments for primary care and 74 percent backed giving doctors payments to have their practices serve as a "medical home" for patients to improve coordination of their care including preventive treatment. Seventy-seven percent of respondents voiced support for payments for "transitional care" services, such as phone calls to high-risk patients following discharge from the hospital. Almost three-quarters said Medicare should negotiate pharmaceutical prices and engage in competitive bidding for durable medical equipment and 56 percent backed creation of a "Medicare health board" that would allow Medicare to innovate in payment and benefits policy within guidelines established by Congress.

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