The rising cost of health care in the United States has sparked a national debate, pitting politicians against one another while millions of Americans and small to mid-sized employers are struggling to pay for coverage. Successful health care reform that truly benefits payors, providers, and patients alike requires a focus on preventive medicine and a financial model that rewards and incentivizes clinical value versus utilization.

Few would argue that better-quality care offered at lower costs would improve the national well-being. But people respond to incentives, which are so misaligned in the current health care system that success is elusive.

The current fee-for-service reimbursement model has proven ineffective, promoting quantity over quality and decreasing patient access to their primary care physicians. The current system pays doctors a pre-negotiated rate for activities rendered, based on the type and volume of services performed – not the quality of care provided to patients.

Under current rules, physicians are generally only paid when they work with patients in a clinical setting. Simple questions that could otherwise be dealt with over the phone or through email – which would be more convenient for patients and less expensive to the overall health care system – result in more costly and more time-consuming office visits. But can we blame physicians for trying to see more patients than ever in just one day, often spending only a few minutes with each, when payment is so intimately tied to volume?

Meanwhile, patients often unintentionally drive up costs through their interaction with the health care system. An individual with a sore back may forgo a trip to the primary care office in favor of visiting the emergency room. While the average ER visit costs upwards of $600, the patient’s decision is often fueled by a lack of access to their primary care physician.

Similarly, health plans often restrict usage in order to curtail spending, requiring doctors to obtain authorization for specific services. Utilization management is costly to payors, insulting to a doctor’s medical expertise, and inconvenient to patients. Amid rising health care costs, we end up engaging in the ultimate form of micromanagement, diminishing the patient-doctor relationship and adding unnecessary resources to an already complex health care delivery process.

The key to successful health care reform is to align financial incentives such that doctors and payors, as well as patients and their employers, share in the rewards of meeting a triple mandate:

  1. Improved clinical outcomes
  2. Better patient experiences
  3. Lower costs

What is ‘successful reform’?

Effective health care reform requires the following:

  • Physicians must have the freedom to make medical decisions based on individual needs, not generalized guidelines. Any change to the system must recognize health care professionals for their medical knowledge and ability to make appropriate treatment decisions.
  • Patients should have better access to physicians. The current system makes it difficult for patients to receive timely care in the appropriate setting. Renewed emphasis on access will not only improve the patient experience, but lower the associated costs of treatment.
  • Health plans should pay for quality outcomes, and by extension not pay for poorly delivered care. The pay-for-outcomes model moves beyond the process-oriented payment schemes of today and compensates physicians for meeting clinically and financially meaningful benchmarks.

A new financial model based on these guidelines will reward physicians based on the quality of the care they provide, thus improving the overall experience for patients and curtailing wasteful spending for payors and employers.

Doctor compensation

As part of the primary care financing reform, doctors would receive a sizeable part of their compensation via a partially capitated comprehensive payment, guaranteeing financial rewards for services that a doctor is expected to provide. In this scenario, the capitated bundled payment would require risk adjustment, which takes into account the sicker patients within a doctor’s population.

Risk adjustment methodologies will allow physicians to receive payment based on the clinical and financial risk burden of their population, thus eliminating the incentive to select only the healthiest patients.

To further promote clinical value, physicians should also receive meaningful compensation in the form of outcomes payment, ensuring that doctors are rewarded for achieving good clinical results. Unlike pay-for-performance, the clinical outcomes tied to payment should be predicated upon successful care. For example, rewarding a primary care physician based on a low number of hospitalizations incurred across his entire patient population will motivate that physician to provide quality over quantity.

The bundled payment model puts physicians at the center of the health care delivery system by basing financial rewards on efficient care, without requiring authorization for any activities. Yet, it also recognizes that physicians may, at times, deliver care beyond what is typically expected, and therefore pays additional dollars for those services. It shifts partial risk to physicians, recognizing the control they have over the overall health and wellness of patients.

Improving our health care system requires a shift towards a financing model where physicians are paid for providing the right care, at the right time, and for the right price. More importantly, both the provider and payor should assume the proper levels of clinical and financial risk. A model focused on preventive medicine in conjunction with a financial primary care reform will revolutionize our current health care system by improving quality of care, increasing access for patients, and dramatically reducing spending for all.

Jordan Bazinsky is vice president of science and technology at Verisk Health. He can be reached at 781-693-2914 or jbazinsky@veriskhealth.com.