Opinion: Reimagining healthcare payment models

The two not-for-profit organizations we lead represent hundreds of large employers and other healthcare purchasers, which together provide health insurance for about half of all Americans. For over a decade, our members have demonstrated strong interest in value-based payment strategies that lead to better quality and affordability. These models for paying healthcare providers should be more broadly implemented, for numerous reasons.

Healthcare costs continue to climb at an unacceptable rate. More Americans struggle to afford care and life expectancy has dropped for two years running.

The legacy fee-for-service approach to paying healthcare providers further drives up costs by incentivizing providers to use more services, while discouraging them from investing in care delivery models that improve the appropriateness of care and prevent the need for medical services in the first place—by keeping people healthy.

We know that a value-based system aligning provider incentives with the best health goals for patients has the potential to improve both care experience and outcomes, and mitigate costs for everyone involved: providers, health plans, patients and employers.

While the past decade of experimentation with alternative payment models has delivered mixed results, there is reason for optimism. Several have demonstrated improvements for patients and providers, but there is growing consensus that it is time to focus on fewer models and getting them right.

Leaders at health systems and other provider organizations should recognize the pursuit of coordinated, value-based care is growing among purchasers and embrace financial models enabling it. This means provider payment rate negotiations should start from a value-based care lens, centered on improving quality and keeping care affordable. The examples that follow feature elements of value-based care that more healthcare providers can certainly adopt.

One example with promise is direct primary care, which eliminates fee-for-service payments and patient cost-sharing by instituting monthly payments to providers for patient care, often leading to reduced emergency department visits and hospitalizations and higher job satisfaction among providers. In other words, providers in direct primary-care practices are rewarded, financially and otherwise, when their patients stay healthy and are pleased with their care.

Accountable care organizations hold providers collectively responsible for the overall costs, healthcare quality and outcomes of a group of patients. These organizations have seen success, especially when led by primary-care physicians. For several years, providers who form physician-led ACOs have achieved sizable savings in the Medicare Shared Savings Program, including 85% of those participating in 2020.

Bundled payments, which can be thought of as a singular payment for an “episode” of care rather than payments for piecemeal services, have helped reduce the costs of cancer care for over a decade. And now they’re often used for surgical procedures. This approach rewards providers who deliver higher-quality care efficiently, often by coordinating patient care with other medical professionals. The current healthcare landscape would benefit from expanded bundled payment models because they enable providers to succeed financially via relationships with other specialties. This is not the case in a fee-for-service environment.