Innovation in payment models

As Americans continue to face higher health insurance premiums, insurers are looking for alternate payment models that can help contain the growth in costs. The New York Times published an article of health systems' experiences with such an alternate payment model. The piece discusses the danger of the traditional payment model -- known as fee-for-service -- where providers are paid more when they do more, regardless of the actual outcomes:

"In our current system, being inefficient means higher revenue," Dr. Blumenthal said. "It's hard to do the right thing in fee-for-service. But value-based payment reverses the incentives so they're aligned with patient and societal goals. When you get the incentives right, when you reward high value instead of high volume , you see a burst of creativity among providers finding ways to do better."

The pieces examines what some health systems do differently, given the different payment model that rewards efficiency (but employs some standards to help ensure quality of treatment). For example, health system providers can find it financially worthwhile to employ additional staff to help reduce costly hospitalizations. Under the fee-for-service model, providers had very little financial incentive to do so and generally would have been financially worse off for doing so.

There have been pockets of early successes, where the providers retain more money, payers pay less, and patients are less sick. It remains to be seen how widely these new models will be adopted.