New payment models should reward quality

November 25, 2013

The author proposes a new way of paying for healthcare that keeps elements of the fee-for-service model but also takes outcomes into account.

The business side of healthcare, in its current iteration, is broken. There are so many stakeholders with competing economic interests that maintaining a cost/quality/access to care equilibrium is nearly impossible. Specifically, the current payer/provider dynamic is fundamentally flawed and unsustainable.

Beth Thomas Hertz’s September 25th article, “Sorting through the new reimbursement models,” highlights a variety of new and reinvented payment models while emphasizing some of the most pressing reimbursement issues. Hertz quotes Marci Nielsen for perspective on what should be the guiding principles of healthcare payment reform. Nielsen states, “The broadest goal is to incentivize the right care for the right cost. But it cannot only be cost-the quality has to be there.”

Nielsen succinctly sums up the need for appropriate and quality care for all patients, at an appropriate cost. Stripping away some of the unnecessary hurdles in the current payment structure can surely facilitate this goal if the stakeholders can agree on a mutually beneficial system.

Overlooked in Hertz’s review of payment types is a hybrid payment model incorporating both pay-for-performance and fee-for-service. There is an allusion to the underpinnings of a hybrid model in the article’s quote from Jill Rubin Hummel: “There are some very real barriers to fee-for-service going away entirely, but gradually more compensation will ultimately be value-based, not volume-based, where payments are based on outcomes, quality, and cost.”

This salient point acknowledges the economic flaw of the current compensation model, where high-volume patient loads are practically encouraged so as to maximize reimbursement. Unraveling the business interests in the current healthcare payer model requires a multi-modal approach. Healthcare, and its associated compensation models, are not one-size-fits-all propositions.

The current reimbursement structure contains many issues relating to the submission and payment of claims. Many providers feel they need to up-code to maximize revenue or down-code for fear of having a claim denied. Contradictory business goals have twisted this system into a payer versus provider tug-of-war, with patient care sometimes leveraged as a bargaining chip.

Instituting quality metrics is a must to ensure that the patient remains at the center of this equation. This hybrid reimbursement model might be the most viable option for easily modifying the existing payment system while integrating quality care metrics and reducing costs.

Modifying the existing fee-for-service infrastructure by incorporating a performance-based reimbursement metric could benefit all stakeholders. This hybrid reimbursement system would use a two-payment structure. For the first payment all claims would be paid at a rate of, hypothetically, 60% of the maximum allowable fee within 1 week of the date of submission.

The second payment, consisting of the remaining zero to 40% of the claim’s total maximum allowable fee, would be paid quarterly, with the payment amount based on the provider’s scores on metrics such as outcome measures, complication measures, patient satisfaction, and stewardship of healthcare resources. These performance metrics would be assessed by analyzing a statistically valid sample of the provider’s patient encounters taken from the provider’s electronic health records.

This hybrid system would remove unnecessary steps, such as payers rejecting claims and providers re-submitting claims, and would lower the operational and administrative costs of claims processing. These changes alone should drastically decrease many of healthcare’s operational costs. The second payment would drive quality and appropriateness of care, and measure the doctor’s stewardship of the healthcare dollar.

This hybrid model’s upfront 60% payment will naturally incentivize providers to be readily accessible for patient care and the subsequent payment would cultivate good stewardship of the healthcare dollar and raise the bar for quality of care. Any meaningful reform of healthcare reimbursement must focus on quality patient care first and foremost, then equitable reimbursement in a rational model.

Changes to the healthcare reimbursement system are needed to prevent financial interests from affecting patient care. Stakeholders on all sides would be well served by reminding themselves that at some point, we are all patients.

Lee is associate clinical professor of surgery at Yale University School of Medicine, New Haven, Connecticut.