Linking Payment With Tools

The healthcare industry has to coordinate the creation of new incentives to push the system away from fee-for-service, said Leah Binder. She used bundled payments as an example.

“Every other industry has figured out some way or another how to bundle services and offer the consumer one price,” Binder said. “We’ve got to do that in healthcare. Yes, it’s incredibly difficult. It’s got to be done.”

What occurs as a result of creating strong incentives to move away from volume-based payment is that entrepreneurs will solve issues that arise and create new industries, said Margaret E. O’Kane, MHA. However, she added that the short-term transition will be “awkward,” which always happens when there are big changes.

As for other innovative payments models, CalPERS is using reference pricing for a number of procedures, such as hip and knee replacement, colonoscopies, and other surgical procedures, said Austin Frakt, PhD. CalPERS finds quality providers that policy holders will have plenty of access to and sets the price for a procedure. CalPERS won’t pay more than that price, but the enrollees can go elsewhere to receive care and if it costs more, then they pay the difference out of pocket. This has been successful for CalPERS, but it won’t work everywhere.

“You can’t do this in markets where you don’t have enough providers to have the variety so people can make these kinds of decisions,” Dr Frakt explained. “You can’t do it in places where you don’t have the transparency on price and quality. So there are limitations.”