Robert Wood Johnson report calls for healthcare payment reform

Healthcare is so expensive in the United States because we don't reimburse doctors and hospitals intelligently, according to a new report by the nonprofit Network for Regional Healthcare Improvement.

The U.S. healthcare payment system is built to reward the quantity of treatment, not the quality, says the report, From Volume to Value: Transforming Health Care Payment and Delivery Systems to Improve Quality and Reduce Costs.

This backward payment system penalizes doctors and hospitals financially for eliminating unnecessary tests and treatments, preventing infections and keeping people healthy.

The report resulted from a summit of more than 100 leaders from across the United States, including physicians, hospitals, insurers, academics, foundations, government and regional healthcare collaboratives. Summit attendees endorsed a profound transformation in the way hospitals, doctors and other healthcare professionals are paid.

"We can help lift the quality of healthcare by fixing the way we pay for it," said Michael W. Painter, MD, a senior program officer at the Robert Wood Johnson Foundation, which funded the summit and the report. "We need to quit paying for things that don't work - like unnecessary and even dangerous tests and treatments - and pay for things that we know do work, like helping patients better manage their chronic illnesses."

The report recommends that insurers pay physicians and hospitals a single amount that covers all the services a patient needs instead of separate fees for each service. Moreover, insurers should change the system from paying more to correct errors and preventable complications to rewarding providers for successfully treating patients.

The report also addresses ways to encourage patients to use higher-quality, lower-cost doctors and hospitals; how to protect patients from receiving too few services; and how to help healthcare providers change to new payment systems and lower-cost care.

"Higher quality healthcare can actually cost less if we reward doctors and hospitals for providing the most effective, efficient and least expensive care," said Harold D. Miller, president and CEO of the NRHI, which organized the summit and authored the report. "This report shows that healthcare leaders from across the country agree not only on the changes that should be made in payment systems, but on many of the key steps to actually implement those changes."

To change payment systems, the report recommends:

  • Pay primary care physicians for services for which they are not reimbursed, such as care management. Physicians should take greater responsibility for reducing preventable hospitalizations and controlling the cost of patient care. Primary care physicians should be evaluated on whether they help patients stay well, rather than requiring them to meet rigid formulas for organizing their services.
  • Pay hospitals and physicians jointly for the full episode of care for a patient, in order to encourage coordination and efficiency.
  • Although consumers should be free to choose their doctor or hospital, they should also have access to easy-to-understand information about the quality and cost of healthcare providers and services, and insurers should reward them financially for using the most efficient, high-quality providers. Consumers also should have financial incentives to maintain their health.
  • Do not penalize physicians and hospitals financially for serving patients who are sicker or who require more time and assistance. In addition, providers should report publicly on the quality of services they provide, particularly to minorities and poor people.
  • Test new payment systems as pilot programs at the regional level. Health insurers and Medicare should support projects that improve quality and reduce or control costs, and the federal government should provide funding to help regional healthcare collaboratives design and evaluate pilot projects.
  • Businesses, individuals and governmental agencies that buy health insurance should choose only health plans that implement improved payment systems.
  • Provide technical and financial assistance to hospitals, small physician practices and other healthcare providers to help them make the transition to a more efficient, cost-conscious healthcare system.
  • Neutral organizations, such as regional healthcare collaboratives, should compile and issue public reports on the quality and cost of healthcare providers and services, encourage insurance plans to align their payment structures and incentives and educate consumers about changes in payment and care.

This report is the first in a series from NRHI examining ways to reform payment systems, improve quality and reduce costs in the healthcare system. NRHI plans to hold another national summit on payment reform in 2009.

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