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Payment Reform and Why You Should Care

When I mention healthcare payment reform these days, I get one of two, maybe three responses. One is someone’s eyes light up. They’re fired up – this is a passionate topic for some folks. They can’t wait to tell me what’s wrong with our system and what ought to be done. More of the time, however, I either get eyes glazed over, or a deer in the headlights look. Admittedly, this was me until earlier this year, when I took a role at the ThedaCare Center for Healthcare Value, where my main focus would be – and is – payment initiatives. Now I understand the importance, and it’s my mission to do my part to be a change agent. I’m one of those ‘light in the eyes’ people, and I think everyone should have a vested interest in this topic. Our current prevailing approach is wrong, and has serious consequences. If you have a current or future need for healthcare in this country, or have an interest in the US economy, then you ought to as well.

Payment reform isn’t just about payment reform. Okay, that sounds a bit strange, but hear me out. When we, at the ThedaCare Center for Healthcare Value talk about payment reform, it’s to focus on pay for value vs. the current overarching system of pay for volume.  Do you pay every time you have labs redrawn? Had an X-ray done over? Had a longer stay in the hospital because being there actually made you sicker? Been re-admitted back into the hospital after just having gotten out?

Payment reform.

Every bill you’ve received with gargantuan “billed amount” and a much lesser “allowed amount?”

Payment reform.

All those extra tests your doctor ordered “just in case,” that end up costing you hundreds of dollars?

Payment reform.

According to the Commonwealth Fund, the U.S. expenditure for health care per capita is the highest in our peer group of industrialized nations. And guess what? Our quality ranks dead last in that same group – no pun intended. Pay the most to be the worst? It makes no sense until you look at our traditional payment model – the one referred to as “pay for volume” – otherwise known as fee-for-service. On the surface it makes sense – every time you utilize the healthcare system there is a charge. The charge is to you – or whoever is paying your insurance (in many cases an employer) – and these days often a combination of the two. More tests, more charges. More office visits, more charges. More rework, more charges. And on and on. Traditionally, those with employer-sponsored health insurance have paid little attention to types and quantity of tests, costs of procedures, and the like, because “insurance covers it.” There may have been a co-pay, or a deductible, but otherwise very little interest. As we now know, “insurance covers it,” has led to high expenditures per capita, as noted earlier, and without quality outcomes to go with those high costs. And these days, not only government, employers, and payers are paying for healthcare, many people have high deductible plans, or high co-pays, so it’s starting to hit the American public in the pocketbook. Which is one reason that everyone ought to be concerned with this thing we call payment reform. The money being spent on healthcare by everyone in the system could be directed elsewhere, toward much needed things such as education, housing, infrastructure, and job creation.

If systems drive behaviors (which they do) then our system has driven the bad behaviors that has led us to the place we are now. Physicians are rewarded for volume. Hospitals are rewarded for volume. Insurance companies want the best prices with providers. Employers want their healthcare costs to stop skyrocketing. And at the end of the day, all we really want is a healthier population, right? But our payment system gets in the way. As hospitals get better (i.e. stop getting patients sicker than they were) they are financially penalized. They get less money for providing better care. There is something fundamentally wrong with that! Don’t we want to prevent diseases, and not just get better at controlling them? Don’t we want to prevent obesity instead of treating the resulting diabetes, high blood pressure, and heart problems? If so, we need a different payment model that enables and rewards keeping people healthy.

There are some experiments going on around the country which are trying to address these issues. Medicare doesn’t pay for preventable readmissions, forcing hospitals to get Medicare patients well the first time. Bundled payments attempt to offer one lump sum for all the care related to an “episode,” such as a knee replacement, forcing care providers to collaborate with each other and to focus on better delivery methods (i.e. lean processes and systems). And, there are even global payment experiments where there is a payment to a group of providers/ healthcare system for each patient in a given “population” forcing a focus on overall health as well as patient responsibility and accountability for their part in the health equation.

But despite all the experimentation, there isn’t a clear direction for the future, which is why we, at the ThedaCare Center for Healthcare Value are attempting to inject lean thinking into the design of some experiments going on within the State of Wisconsin. Let’s gather some data, understand what’s working – and why – and what’s not working – and why – and see if we can find common ground, get different motivating factors out on the table, and figure out how we will measure the “success” of an experiment – all before actually designing and implementing! Yes, I’m talking about the scientific method, PDSA (Plan-Do-Study-Adjust), or A3 thinking.

There are a lot of very intelligent people working on this issue right now. Let’s focus on linking payment reform with the improvement of delivery of care and transparency of data to be able to make improvements where the work is happening, and we can change healthcare for the better.

Rachel Regan
Program Manager, Payment Initiatives
ThedaCare Center for Healthcare Value

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