There is widespread agreement that the health care system today does not provide good value, where "value" is defined as the combination of both quality and cost. A variety of studies have demonstrated that there are serious problems with the quality of health care, ranging from failure of many patients to receive services of proven value, to unacceptably high rates of medical errors, adverse events, iatrogenic illness, etc. At the same time, the cost of health care has reached unaffordable levels, which is a major cause of high rates of uninsurance across the country.
One of the fundamental impediments to improving value in health care is that efforts to improve quality and reduce cost in health care are often perceived as being at odds with each other:
Yet in industries other than health care, consumers routinely reap the benefits of higher value from both improved quality and lower cost. In health care, there are easily identified examples where improvements in quality and cost are possible. For example,
The problematic incentives in current healthcare payment systems are increasingly recognized as one of the major barriers to addressing these kinds of problems. Under current payment systems, physicians, hospitals, and other healthcare providers gain increased revenues and profits by delivering more services to more people, which in turn fuels inflation in healthcare costs. Research has shown that more services and higher spending do not result in better outcomes; indeed, it is often exactly the opposite. But what is even more troubling is that current payment systems often financially penalize healthcare providers for providing better quality services. Providers frequently lose revenues and profits if they keep people healthy, reduce errors and complications, and avoid unnecessary care. This not only leads to many of the problems in healthcare quality which exist today, but impedes efforts to improve quality, by forcing a tradeoff between a healthcare provider's financial well-being and the quality of their services. Although not all quality and cost problems are caused by payment systems, and not all quality and cost problems can be resolved by changes in payment systems, it is clear that in many cases, payment reform is at least a necessary element of efforts to increase the value provided by the nation's health care system.
Fortunately, many people now believe that there are better ways to pay for health care - ways that give healthcare providers more responsibility for increasing quality and controlling costs of services, without penalizing them financially for treating sicker patients. Systems called "episode-of-care payment" involve paying a single price (a "case rate") for all of the services needed by a patient for major acute episodes (such as a heart attack or a hip replacement), regardless of which providers are involved, instead of multiple fees for each specific service provided. Systems called "risk-adjusted global fees" and "condition-specific capitation" go a step further and pay healthcare providers a single fee for all of the outpatient care needed by their patients, particularly those with chronic diseases, in ways that reward the providers for keeping their patients healthy and for reducing duplicative and unnecessary healthcare services.
Implementing these kinds of improvements in payment systems holds significant promise for improving the quality and reducing the cost of health care. But there are a number of important issues that need to be addressed, and a variety of challenges which need to be overcome, in order to move them from concept to reality. In particular:
The Center for Healthcare Quality and Payment Reform is working to address these and other issues by: