The U.S. Department of Health and Human Services’ recent announcement to move the Medicare program toward value-based payments is among the most promising recent developments in health care.
While changing the way we pay for care will not be easy, we believe that shifting away from fee-for-service to value-based payments could be a catalyst to a better, more affordable health care system in our country.
Three Benefits of Paying for Quality
There are numerous potential benefits to paying for quality rather than quantity, including the three we want to focus on today.
- We believe this payment shift has the potential to accelerate progress toward achieving the Triple Aim – defined as better individual care, better population care, and lower cost.
- We believe the payment shift by Medicare will accelerate the transition to value-based payments among commercial insurers – a major benefit to employers in terms of improved health for employees and greater affordability.
- We believe value-based payments have the potential to help slow – and possibly reverse – the epidemic of physician burnout in the United States, particularly among primary care doctors.
Payment Reform and the Triple Aim
The Triple Aim has become the Holy Grail for countless health care organizations throughout the country, yet fee-for-service payment systems militate against all three of the aims.
- Fee-for-service incents physicians to increase the volume of care for individual patients.
- It does not reward physicians for excellent population care – for keeping patients healthy. Fee-for-service does not pay for what people want most: health.
- It surely does not help drive down costs.
There is a widespread belief among health care stakeholders that fee-for-service is inherently wasteful; that by its very nature it expands the volume of care and can lead to unnecessary and inappropriate care.
Estimates of wasted funds range from 10 to 30 percent of health care spending in the United States. (During a recent Institute for Healthcare Improvement session, IHI president emeritus Don Berwick, MD, said it might be as high as 40 percent.) Clearly, waste of health care resources is antithetical to all three aims. (One indication of the waste calculus comes from a comparison between spending in the United States versus Switzerland, which has an excellent health care system. Between 1980 and 2010, the cumulative difference in health spending between the two countries was $15.5 trillion.*)
Payment reform and employers
Payment reform can also change the way employers think about health care. Under fee-for-service, employers spend huge sums of money for sick care for their employees. Under value-based payments, provider groups would have a financial incentive to keep employees as healthy as possible.
According to The National Business Coalition on Health, a nonprofit organization of “purchaser-led health care coalitions … dedicated to value-based purchasing of health care services through the collective action of public and private purchasers,” the impact would be significant. The coalition takes this position:
As the business community has learned over the past several decades, maintaining workforce health and preventing illness – particularly chronic conditions – improves productivity and competitiveness, and can lower health care costs over time.
Value-based purchasing can help shift the paradigm of why employers offer health benefits from seeing it as an employee recruitment and retention tool, to seeing it as a chance to improve population health and increase productivity, and ultimately the employer’s bottom line.
When employers shift to focus on maintaining workforce health and preventing illness, all parties benefit.
Payment Reform and Physician Morale
Widespread burnout among physicians in the United States, particularly primary care doctors, is well documented. Increasingly, physicians seek liberation from the constraints of fee-for-service in order to focus on the overall health of their patients. Value-based payments allow doctors to do exactly that.
Payment reform leads to a redistribution of work among the team of caregivers to leverage the training and licensure of every member, including nurses, behavioral health specialists, medical assistants, clinical pharmacists, and others. Physicians lead the team managing populations of patients. Physicians are also freed to focus on the particular challenges complex patients present; patients requiring the diagnostic skills only a physician can provide.
At Kaiser Permanente we have being working under a value-based payment model for 70 years, and it has enabled investment in tools, teams, and templates that are built and maintained by our physicians.
This may well be the tipping point in our nation’s complex, often difficult, health care journey. Our nation is benefitting from thoughtful, decisive leadership from Health and Human Services and the Centers for Medicare and Medicaid Services. Secretary Sylvia Matthews Burwell; Assistant Secretary for Health Karen DeSalvo, MD, head of the Office of Health Reform; Meena Seshamani, MD; and Patrick Conway, MD, CMS chief medical officer who leads the Centers for Medicare and Medicaid Innovation; are providing the kind of thoughtful vision and leadership our country needs at this time.
The new Learning and Action Network they are creating is an opportunity for many innovative health care organizations to come together to share innovative ideas and forge a path toward the Triple Aim. Our team at Kaiser Permanente is ready to help.
Jack Cochran is the President of the Permanente Foundation.