3 key elements to moving beyond fee-for-service

August 28, 2013

An executive with the Commonwealth Fund believes that moving the U.S. healthcare system beyond fee-for-service payments requires three essential elements: the carrot, the stick and the muscle.

Healthcare's fee-for-service payment systems may have some powerful opponents, but most practicing physicians are reluctant to give it up.

That's likely because physicians are understandably nervous and uncertain about what sorts of payment models would replay fee-for-service, and what that would mean for their practices' finances.

Economist Stuart Guterman, PhD, a vice president with the Commonwealth Fund, holds less-nuanced feelings about fee-for-service. He believes fee-for-service contributes to fragmented care, and advocates for moving to alternative payment models in a recent article on the Commonwealth Fund's website.

"Not only does fee-for-service payment fail to provide incentives for efficiency, quality, or outcomes, it encourages the provision of unnecessary care and often discourages coordination of care and management of patients across providers and settings," he writes.

Guterman lays out the following three essential elements of moving beyond fee-for-service:

The carrot: It's all about doing away with paying for volume and intensity of services, and rewarding for quality of care. This is already happening to some extent with bundled payments, patient-centered medical homes (PCMHs), and accountable care organizations (ACOs). But getting there certainly won't be easy, as only about 11 percent of provider payments are currently value-based. One important element of "the carrot" that Guterman describes involves engaging doctors and other health providers in "developing and implementing more productive relationships with their patients." In other words, if physicians don't have some say in how these new practice and payment models are structured and feel that the changes are helping to improve doctor-patient relations, it's unlikely that they'll buy into them.

The stick: Leaving behind the status quo is almost always a challenge, so "the stick" involves diminishing the attractiveness of fee-for-service to providers, Guterman says. One means of achieving that could be by requiring providers to abandon fee-for-service in order to be eligible for future reimbursement increases. Aside from that one example, Guterman doesn't go into much detail about exactly how to apply "the stick," likely because that's by far the most difficult-to-implement aspect of his plan. Attempts to apply "the stick" won't do anything to allay most physicians' top concern - declining reimbursements - so if there's anything that's likely to derail the move away from fee-for-service, it's the implementation of these types of punitive "stick" measures.

The muscle: If a "tipping point" on fee-for-service is to be reached, both public and private payers must push for alternative payment models in a coordinated fashion. If just one of the two does so, we won't get there, Guterman writers. The alternative payment approaches need not be identical, but they must be consistent. That will require collaboration between private health insurers and the federal government.

 

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