• CPR for Fee-For-Service

    May 25, 2012

    An interview with Suzanne Delbanco

    Fee-for-service payments may be on their way out, but they will not go away quickly. A group of powerful employers wants to improve that system of payment, even as it pushes for a replacement.


    A little more than a decade ago hospital executives were quibbling about whether patient safety could be measured. As the founding CEO of the Leapfrog Group, Suzanne Delbanco, PhD, helped prove that it could. Leapfrog started collecting patient safety data from a handful of hospitals in 2001; today more than 60 percent of the nation's hospitals participate in its quality and safety survey.

    Now Delbanco has moved to the cost side of the healthcare value equation. As executive director of Catalyst for Payment Reform, she is helping large purchasers-both public and private-work together to insist on more value for their healthcare dollars.

    Frustrated that less than 2 percent of aggregate net payments today can be considered "value-oriented," Catalyst for Payment Reform set a goal to increase that to 20 percent by 2020.

    While that does mean pushing for bundled payments and other new approaches, it also means improving the current payment model.

    "It's not very common for people to say, 'We've got to improve fee for service,' but that is part of our agenda," says Delbanco. "Fee for service is not going to disappear overnight, and we can make quick changes to our current payment system at the same time as we push for bolder, deeper changes for the future."

    One Price for All Providers

    Catalyst for Payment Reform's first fee-for-service initiative focuses on reference and value pricing, in which purchasers and/or insurers set a standard payment amount for a procedure or bundle of services. Currently, prices for the same service can range widely across providers without reflecting differences in quality. "If enrollees choose to go to a provider that charges more than the reference price, they'll have to shoulder the difference," she says. "That sends a signal to providers that unwarranted price variation is not going to be tolerated anymore."

    Safeway has used this approach for screening colonoscopies in the San Francisco area, where prices for the procedure ranged from $900 to $7,200. The grocer set the reference price at $1,250, used its website to show employees their out-of-pocket costs if they chose a more expensive provider, and watched workers immediately start making high-value choices. Since then, Safeway has introduced reference pricing for some laboratory and elective imaging procedures.

    Evidence-Based Maternity Care

    Catalyst for Payment Reform's second fee-for-service initiative is designed to reduce medically unnecessary Cesarean deliveries, elective labor inductions, and elective pre-term births, which increase the risk that babies will need intensive care services.

    The rate of C-sections in the United States is 32 percent-well above the Healthy People 2020 goal of 23.5 percent. Many factors are responsible, says Delbanco, one of which is the fact that hospitals are paid at least 50 percent more for Cesarean deliveries. "Right now, there are only perverse incentives to intervene in labor and delivery, and no financial incentive to not intervene," she says.

    Catalyst for Payment Reform encourages insurers to explore alternatives to how they are paying for labor and delivery services. For example, they could set a single blended payment for an uncomplicated delivery so that hospitals are paid the same for a vaginal birth as for a Cesarean delivery. Maternity care is an area where provider practices are straying from evidence-based guidelines, Delbanco says, and Catalyst for Payment Reform hopes payment can be a lever for positive changes in clinical practice.

    Incentives for Better Care

    Delbanco considers Catalyst for Payment Reform's maternity care initiative to be the proving ground for tying payment to medical evidence for many services. "What if you created a payment scenario for lower back pain in which providers did not make more money by sending someone for an MRI before sending them to physical therapy?" she says. "There are many areas of care where we know that evidence is not being followed and the payment system is creating perverse financial incentives to do the wrong thing."  

    Suzanne F. Delbanco, PhD, is executive director, Catalyst for Payment Reform, San Francisco (sdelbanco@catalyzepaymentreform.org).