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Slow Progress On Efforts To Pay Docs, Hospitals For ‘Value,’ Not Volume

For decades, reformers have sought to change how doctors and hospitals are paid to reward quality and efficiency – efforts that accelerated as a result of the health care overhaul. But surprisingly little progress has been made to date, a consortium of large employers reported today.

Only 10.9 percent of health care spending last year by employer-sponsored plans was based on “value,” as opposed to “volume,” or the number of services performed, according to the study by Catalyst for Payment Reform (CPR), a nonprofit group which represents 21 U.S. employers, including Verizon, Walmart, eBay and Boeing.

Slow Progress On Efforts To Pay Docs, Hospitals For 'Value,' Not Volume

“Nine of every ten dollars is paid into the health care system with no attention to whether the care provided was performed well or poorly, or whether it was appropriate in the first place,” said CPR Executive Director Suzanne Delbanco.

The other 89.1 percent was based largely on the traditional fee-for-service model that pays providers a fixed price for every service they deliver — in most cases with no limits on those services and without regard for results. This model rewards volume—more tests, more scans, more specialist examinations and more surgeries – an incentive that many experts blame for the unsustainable growth in U.S. health care spending.

What the business group is calling the National Scorecard on Payment Reform aims to “shine a light” on slow progress while prodding the health care industry to move faster.

“We need accountability on a national scale,” Delbanco said. “Otherwise, it’s easy to let anecdotes [about reform] make it feel like something is really happening.”

Employers teamed with health insurance companies, including the nation’s four largest — Aetna, Cigna, WellPoint, and UnitedHealthcare —  to analyze blinded payment data on 97 million commercially-insured individuals. The data represent 67% of all non-government health insurance payments.

The idea behind changing the payment system is to remove incentives for redundant and inappropriate care, now estimated to account for as much as a quarter of the nation’s $2.8 trillion in annual health spending, according to the Institutes of Medicine.

Cutting that waste has proven tough. Because the health care industry is regional and fragmented, it’s been difficult for buyers — even big employers — to have the clout to force change. CPR’s Delbanco said that publicizing the progress in payment reform — or lack thereof — can act as “a lever to get better value for every health care dollar.” To that end, she said her group would issue an annual report card on payments.

“Managed care” was the last major attempt at payment reform, back in the 1980s and early 1990s, when many providers got flat annual payments for each patient, known as capitation. Many consumers reacted negatively, perceiving a drop in quality, and the system gradually faded.

The dynamic may be different today, however, when more consumers are under pressure to consider prices because they are enrolled in high-deductible plans which require beneficiaries to pay more out of pocket before their coverage kicks in.

Steven Morgenstern, in charge of health plans for Dow Chemical Co., said that once-abstract notions of unsustainable health care costs are now reality as employees see wage gains eaten by health care inflation.

A lack of price transparency makes such shopping more difficult, however. CPR recently gave 29 states an “F” grade for a lack of laws that require health care systems to make their prices publicly available.

The lack of price information “is counterintuitive to any consumer,” said Robert Galvin. A former chief medical officer at General Electric, he now runs Equity Healthcare, which negotiates health plans for companies owned by private equity firms.

Today’s value-based payment schemes, many spurred by Medicare, come in different forms, including:

–bundled payments, where a hospital and doctors share a flat fee for an entire “episode of care”; –so-called “accountable care organizations,” which are encouraged by the health law, and which pay hospitals and doctors lump sums for covering a large group of individuals over a set period, sharing any savings;

— fee-for-service payments that offer incentives for meeting cost and quality targets.

Elizabeth Curran, head of national network strategy and program development at Aetna, says consumer participation is crucial to the success of these models. “Knowing that consumers may make choices based on whether or not you have transformed your practice” may spur providers to change.

Jill Hummell, vice president for payment innovation at health insurer WellPoint, said the pressure is unlikely to stop anytime soon.

“Paying for value is not …‘the new black,’” she said.

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Cost and Quality Health Industry Insurance