July 23, 2008
Common complaints regarding the current healthcare payment system are that it does not adequately support wellness, high-quality care, or efficiency, and that it drives up costs with its complexity.
But what can be done to remedy these shortfalls?
That is the focus of the Healthcare Financial Management Association (HFMA) report Healthcare Payment Reform: From Principles to Action, part of an ongoing effort to foster a new payment system.
For payment reform to be effective, it must take place within a set of principles that support the nation's health goals, as well as support the needs of key stakeholders: consumers, providers, payers, and employers. Such a strategy will best ensure that changes to the payment system result in improvements that can be shared by all stakeholders and any unintended burdens or negative consequences would be minimized.
To this end, HFMA engaged with healthcare thought leaders representing a range of system stakeholders to identify payment system principles, as well as actions needed to make the principles a reality.
The principles that HFMA and the thought leaders identified are:
Quality. Payments should encourage and reward high-quality care and discourage medical errors and ineffective care. Wherever possible, payments should reward positive outcomes, rather than adherence to processes. In the absence of outcome measures, payment systems should reward the use of accepted practice and evidence-based processes and protocols that meet or exceed standards of quality and safety to promote optimal outcomes. Payers should not be responsible for payment to cover costs directly related to serious preventable medical errors.
Alignment. Payments should align incentives among all stakeholders to maximize the efficiency and coordination of health services based on accepted practice and evidence-based delivery models and protocols. Payment systems should stimulate and reward healthful behavioral choices and selection of value-based services by consumers related to prevention, primary care, acute care, and chronic disease management. Care decisions should be made through a shared decision-making process in which consumers' values and preferences are identified and respected.
Fairness. Payment systems should sufficiently balance the needs and concerns of all stakeholders. Payments should recognize appropriate total costs for the efficient delivery of healthcare services that are necessary and consistent with evidence-based care, high-quality/low-cost provider benchmarks, and the advancement of medical science. Payment systems should accommodate payers' and purchasers' needs to allocate funds in a predictable, manageable fashion. In addition, consumers should have financial incentive to select high-quality, efficient care without being discouraged from seeking necessary and appropriate services.
Simplification. Payment processes should be simplified, standardized, and transparent. Payment and billing systems should reduce the volume and complexity of communications sent to healthcare consumers and the cost of billing, adjudication, and payment for providers of care and payers. All parties should use payment methodologies, standardized at the national level, to reduce complexity. The payment methodologies should be transparent to those affected by them, and comply with privacy, security, and antitrust laws and regulations.
Societal Benefit. The resources needed to support broad societal benefits such as medical and public education, medical research, and care for disenfranchised or uninsured persons should be identified and paid for explicitly. Similarly, payment systems should reward innovators who develop technologies, services, processes, and procedures that enhance safe, high-quality, and efficient care.
To make these principles actionable, HFMA examined potential payment design elements. HFMA then shared some of these design elements with representatives of key industry stakeholders--providers, payers, employers, and consumers--to identify areas of consensus and potential challenges that might arise with implementation.
To read more about these principles, design elements, and areas of consensus and concern, view the report Healthcare Payment Reform: From Principles to Action. The report is sponsored by 3M Health Information Systems, KPMG, and McKesson.
In September, HFMA will hold its 2nd annual thought leadership retreat on building a new payment system, which will bring together members of various healthcare stakeholder groups to further define how the payment system can be designed to accomplish the nation's larger health goals.
Any initiative on payment reform must incorporate Medicare, which has been moving toward value-based purchasing. HFMA's Medicare Payment Forum provides regular news and tools related to Medicare's payment changes.
One of Medicare's recent efforts to match payment to the services provided is the Recovery Audit Contractor initiative. The original demonstration project targeted three states and resulted in collections of nearly $700 million of improper Medicare payments. CMS has announced it will continue with its plan to implement a nationwide RAC review program by 2010, with rapid expansion in 2008 and 2009. HFMA is presenting a RAC readiness assessment and organizational involvement plan at a series of Executive Briefings this September in Atlanta, Chicago, Phoenix, and Minneapolis. Included is a case study from Adventist Health System.