For too long, US health care has been a pass-the-buck system. The people at the front lines have had little incentive to control costs and seek value. Providers have been reimbursed for the number of services they performed — regardless of how much patients benefited from these activities. Patients themselves were only on the hook for small co-pays — regardless of the price tags of the products and services they consumed. In this fee-for-service world, the buck stopped with payers, who picked up the tab for the system’s profligacy.
Well, payers are shaking things up. Through numerous approaches — accountable care organizations, bundled payments, capitation and more — they are replacing the sometimes perverse incentives of fee-for-service regimes with models that give providers and patients more incentive to seek value and efficiency. Innovative hospitals have embraced value analysis committees and are now working closely with payers and pharma companies to pick products and determine prices. These are important first steps. Over time, I believe these collaborative efforts will go even further — creating the foundation by which we can define and measure actual health outcomes through pragmatic, real-world comparative effectiveness studies.
But these changes also pose challenges for actors across the system. As payers shift financial risk to providers, how should we construct incentives that adequately reward providers? How will pharma companies compete in this new landscape? How should we measure outcomes?
As someone who lived with the contradictions of fee-for-service incentives during my career as a practicing physician, I have a strong personal interest in these questions. I’m therefore delighted that I’ll be moderating a panel on March 11, 2013, including individuals uniquely qualified to explore these matters. This panel, part of the Real Endpoints/Ernst & Young “Disruptors” symposium, includes some true thought leaders:
- John Sprandio, the godfather of the oncology medical home
- Winston Wong, whose pioneering incentive structures have significantly lowered total oncology costs at CareFirst BlueCross BlueShield
- Peter Bach, Director of Memorial Sloan Kettering’s Center for Health Policy & Outcomes, who recently wrote an influential Health Affairs article on bundled payments
- Jack Bailey, SVP, Policy, Payers & Vaccines at GSK, who brings a pharma perspective and a penchant for bold thinking
We have intentionally chosen a provocative title for the panel: “Radicalizing health care payment: why fee-for-service will disappear.” I hope the discussion will be every bit as provocative. And I hope you’ll join the conversation. Sign up for the symposium. Suggest questions for the panelists. Spread the word.
Health care systems are undergoing tremendous change, but abandoning fee-for-service might well be the boldest shift yet. Exploring what lies ahead — and what it will take to get there — should make for a fascinating discussion.