The Experts: How Should Physician Pay Be Changed?

  The Future of Physician Pay as posted in the Wall Street Journal. 

What changes would you like to see in the way physicians are paid? The Wall Street Journal put this question to The Experts, an exclusive group of industry, academic and other thought leaders who engage in in-depth online discussions of topics from the print Report. This question relates to a recent article that debated whether pay for doctors should be linked to performance and formed the basis of a discussion in The Experts stream on Tuesday, June 18.

 

Carl Wiens

The Experts will discuss topics raised in this month's Big Issues: Health Care Report and other Wall Street Journal Reports. Find the health-care Experts stream, recent interactive videos and other exciting online content at WSJ.com/HealthReport.
Also be sure to watch Murali Doraiswamy of Duke University Medical Center, Dr. Loren Cordain, author of "The Paleo Diet," vegan-cookbook author Isa Chandra Moskowitz and T. Colin Campbell of Cornell University as they discuss the positives and negatives of a vegan diet in an interactive video chat that aired on Monday, June 17, at 3 p.m. Eastern.

Jeffrey Flier: Let's Make It Easier to Experiment

Physicians are either in private practice, which is diminishing, or are salaried employees of health-care organizations of one kind or another. In both cases, their services are mainly billed to payers—insurers and government—on a fee-for-service basis. Much less commonly, payments are capitated—that is, linked to the number of patients on a physician's panel, with many variations in how this is applied. In a field as important and extensive as medicine, I don't believe that there exists a single best approach for all circumstances. Unfortunately, limited by many factors, including the regulatory context and the dominant role of Medicare and its administrative pricing approach, our health-care system has suffered from insufficient experimentation and a lack of innovation in approaches to physician and nonphysician provider compensation.
Having physicians as salaried employees of large organizations can work fine for patients and physicians, as long as the organizational incentives, which vary greatly, are aligned to provide excellent care while rewarding valued physician behaviors. This, however, is not always the case. In theory, such approaches can promote better teamwork and coordination while facilitating health outcomes at reduced cost. The details of such salaried positions are important for optimal outcomes related to both patient health and physician satisfaction.
Fee-for-service compensation, recently much maligned and seen as promoting excessive or unnecessary care, can also be an appropriate means for compensation. However, this approach is optimal to the extent that fee structures are determined through market forces with transparent prices for the patient as consumer—something that is rarely available now. When levels of reimbursement are determined through administrative pricing schemes that are independent of value—as with Medicare and Medicaid, which set the tone for payments in much of the private sector—the fee-for-service approach is dysfunctional, whether the payments go directly to the physician or to their employer.
"Concierge" arrangements—in which patients pay additional fees directly to physicians to ensure greater availability and, in some cases, access to physicians with superior reputations—are a means to align the demand for services with supply. This approach counters the disintermediation of physicians as a key source of value to the patient, which commonly results from salaried arrangements and from fee-for-service payments, both of which fail to reflect the value to patients of more time spent and greater physician access. Despite its value in specific circumstances, the general applicability of concierge practices is more limited.
Driven by the unsustainability of health-care spending and the unsatisfactory outcomes that have resulted despite excessive expenditures, the momentum for change brought about by health-care-reform legislation is leading us into a period that demands greater innovation in payment approaches for physicians. In general, this is a good thing because the current system is highly dysfunctional. What remains is the need to get it right, which is no small task. To achieve this, we will need to create an environment that promotes experimentation with a range of approaches.
Jeffrey Flier (@jflier) is dean of the Harvard Medical School.

Rita Redberg: End Fee-for-Service Medicine

I would like to see the end of fee-for-service medicine. There is widespread agreement among my colleagues that fee-for-service rewards high-volume medicine without regard for quality of care, outcomes or appropriateness. The incentives are misaligned in fee-for-service. There are many new models using value-based design; it is time to try them.
Rita Redberg (@RFRedberg) is a professor of medicine and a cardiologist at the University of California, San Francisco (UCSF) Medical Center.

Harlan Krumholz: Base Pay on Achievements

If we are to move to a patient-centered health system, one that emphasizes outstanding service, care and outcomes, then the natural change is to see physicians compensated with an approach embedded with incentives for patient-centered care. In fact, I would like to see the entire health-care team paid based on what is being achieved.
Rather than pay for each service, we should be paying for success of the health-care team in producing, to the extent possible, exceptional health outcomes. For example, hip surgery should be compensated based on how a patient feels six months after the surgery, taking into account their experience over the entire period and the results achieved, taking into account the characteristics of the patient. Payment should not be provided merely for doing the surgery. Such an approach can be applied to particular interventions or the health of a population.
We need to ensure that the system is truly caring, respects the time of patients, provides easy opportunities to participate in decisions and makes it more likely that patients achieve the goals that they prefer. The payment system should encourage collaboration among clinicians, rewarding coordinated care based on seamless communication among health-care professionals. The system should provide more credit for taking care of the most challenging patients.
Physicians should also be paid more when there is an absence of errors and preventable complications. They should be paid more when they engage in high-quality decision making with their patients. For decisions that depend importantly on patient preferences, patients should be informed with the relevant facts and assisted in understanding their options and choosing an approach that is best aligned with their preferences and goals. Such a model contrasts with the current approach in which many doctors lose income if they assist a patient in making a decision not to have a procedure.
Harlan Krumholz (@HMKYale) is a cardiologist and the Harold H. Hines Jr. Professor of Medicine and Epidemiology and Public Health at Yale University School of Medicine.

Murali Doraiswamy: Align Doctors' Interests With Their Shareholders

Reverse investment banker and physician salaries—just half-kidding. When you tell people exactly what they will get paid for doing a specific test or exam (as current CPT billing codes in medicine do), they become like rats in a maze. Behavioral economists, such as my friend Dan Ariely, tend to call this the "complete contract," which leads people to try to game the contract and not be motivated about anything outside the contract. One could structure a doctor's salary so they get a decent base salary, a relatively high bonus based on meeting contracted targets that are in the public interest, and then a variable bonus determined by the doctor's own patients. That would make the doctor's interests more closely aligned to his shareholders—the patients.
P. Murali Doraiswamy is professor of psychiatry and medicine at Duke University Medical Center, where he also serves as a member of the Duke Institute for Brain Sciences and as a senior fellow at the Duke Center for the Study of Aging and Human Development.

John Sotos: Keep Your Eye on Improving Outcomes

This sounds like an "If I were king" question, so I'll answer it that way.
If I were king, I would want all my subjects to die at age 120, by accidentally falling into an ice crevasse while descending from the summit of Mount Everest. At night. In this kingdom, physicians are paid according to how close they come to achieving that outcome for each patient.
The incentives in this system are perfect: Both the physicians and patients want exactly the same thing. Implementation is tricky, however. Naive approaches would spur physicians to cherry-pick healthy patients and then spend lavishly to keep the patient alive and well.
Suppose, however, that each patient is treated, financially, like a public corporation. Each would have a fixed number of shares, and each share would pay an annual dividend based on the improvement in the patient's health status over the past year. Referrals to other physicians would dilute the holdings of the referring physician, forming a financial disincentive to excessive care that must be balanced against the goal of keeping the patient healthy and vigorous. Perfect.
Aiming the health-care-delivery system squarely at outcome improvements would encourage a long-term outlook, preventive care, and close follow-up of patients. It would transform medically underserved areas into the most lucrative places to practice, ultimately erasing disparities in health. Administering such a system would be data-intensive, but that heavy burden is already upon us.
In this kingdom, health-care reimbursement derives from clear, results-oriented goals, with inherent checks and balances on spending. Our real-world system is, alas, far from that—it is deranged.
John Sotos, a cardiologist and flight surgeon, was a medical technical adviser to the television series "House, M.D." and is the author of several books, including "The Physical Lincoln." His home page is www.sotos.com.

Bob Wachter: Begin With a Salary, Then Offer Appropriate Bonuses

There is no perfect payment system for physicians. Fee-for-service, which has been the dominant payment system up until recently, creates a powerful incentive to do too much—too many office visits, too many days in the hospital, too many surgical procedures. While there are some unethical physicians who take advantage of this system by providing unnecessary care, I don't believe that is the crux of the problem. Rather, much of medicine involves decision making under uncertainty, and when the incentive system favors doing more, that's what we end up doing.
On the other hand, a pure salary system favors doing less, perhaps too strongly.
To me, the ideal payment system would begin with a fair salary and productivity expectations, and then build in the opportunity for bonuses (on the order of 10% to 15% of salary) for performance on a balanced set of measures in areas like clinical quality, evidence-based care, patient safety and patient satisfaction. The balance is important here: If an incentive is paid on patient satisfaction but not on evidence-based care, physicians have an incentive to accede to patients' requests for things like antibiotics for viral infections or CAT scans for relatively mild headaches. Unfortunately, patients can be quite happy even when they're receiving substandard care.
One of the things we've learned from behavioral economics is that the impact of incentives and payment-system changes cannot always be predicted by standard economic theory. So any revision of the payment system should be tested for its effects, including unanticipated consequences.
And, while it is important to get the payment system right, emerging evidence illustrates that powerful economic incentives can crowd out the most important incentive of all: Professionalism and the desire to do the right thing. Of course, physicians are economic animals, but they are also professionals and (mostly) altruists.
Robert M. Wachter (@Bob_Wachter) is professor and associate chair of the department of medicine at the University of California, San Francisco, and chair of the American Board of Internal Medicine. He is the author of a textbook on patient safety, "Understanding Patient Safety," and blogs at www.wachtersworld.org.

David Blumenthal: Liberate Doctors to Improve Care

We need to make it easier for physicians to "do the right thing" by replacing the fee-for-service payment system with new methods that reward providers who share responsibility for the overall costs and quality of care delivered to their patients. An extensive body of research, including much supported by the Commonwealth Fund, has shown that alternative payment arrangements that free physicians from getting paid for piecework, and give them a stake in improving quality, can lower costs while improving health outcomes. When hospitals and doctors are liberated to innovate and to find creative ways to improve care, as they do in these types of systems, the result is happier physicians, healthier patients, and more-efficient care.
Fortunately, the Affordable Care Act contains many payment and delivery system reform provisions consistent with this overall approach. A recent report from the Commonwealth Fund Commission on a High Performance Health System details several additional payment-reform recommendations that build on the law by introducing strong incentives for clinicians to participate in accountable-care organizations, medical homes, and other team-based models of care. Actuarial Research Corp. estimated that this set of payment policies would reduce national health expenditures by more than $1.3 trillion over 10 years. Changing the way we pay for health care offers the potential to return much-needed savings to patients, businesses, and the government while simultaneously improving the practice of medicine for doctors.
David Blumenthal (@DavidBlumenthal) is president and chief executive officer of the Commonwealth Fund, a national health-care philanthropy based in New York City.

Gurpreet Dhaliwal: More Is Not Necessarily More

Physician compensation should have more alignment with patient outcomes through a blend of fee-for-service and fee-for-outcome. Physicians will always warrant a base income of some sort (e.g. salary or revamped fee-for-service) for their time and efforts, but we should increasingly combine that fixed income with incentivized payments based on the quality (= value/cost) of care that a doctor or their employer delivers to their patients.
The principal-agent problem (where the interests of the agent [doctor] are not perfectly aligned with the principal who hired them [patient, system]) is ubiquitous and without a perfect solution. Currently more medicine = more income. But the ABIM Choosing Wisely Campaign, JAMA Internal Medicine Less is More series, and BMJ Too Much Medicine campaign all provide indisputable evidence that doing more frequently equals worse health and represents low-quality care.
A blended system rewards physicians for their hard work and skills, gives them the nudge to focus on high-quality rather than high-quantity care, and offers the prospect of bending the overall cost curve.
Gurpreet Dhaliwal is an associate professor of clinical medicine at the University of California, San Francisco. He directs the internal-medicine clerkships at the San Francisco VA Medical Center, where he sees patients and teaches medical students and residents in the emergency department, inpatient wards and outpatient clinic.

Drew Harris: Stop Paying Physicians a la Carte

Let's align the payment incentives with the objective: better health. We need to stop paying physicians just for the volume of care rendered and instead reward them for avoiding unnecessary care and delivering high quality, cost-effective treatment.
Our current system creates a perverse incentive to do more: more tests, more diagnoses, more procedures and more of everything. This excess care is not making us any healthier and may be making us sicker. The Institute of Medicineestimates that as much as $210 billion of the $2.5 trillion we spend annually is for unnecessary care. Poorer-quality care may even be profitable.
A key first step is bundled payments. Instead of paying for each service a la carte, pay for episodes of care—prix fixe—soup to nuts. No more separate bills for the surgeon, anesthesiologist, facility, medical supplies, etc. One negotiated payment should cover everything. We expect our health-care providers to work as a team and they should be paid as such. The team will work harder to control costs when every dollar going to needlessly expensive technology or excessive care comes out of their pocket.
We also need to pay physicians for not treating us—or at least doing their best to keep us from getting sick in the first place. Primary-care physicians earn much less than specialists, yet effective primary care can prevent or catch disease when small and manageable…and cheap. A family-practice doctor counseling a patient on weight loss makes markedly less than the surgeon treating obesity's long-term complications.
Reforms in the Affordable Care Act are moving us in this direction. Medicare pay for performance rewards providers for delivering higher-quality care and Accountable Care Organizations share the savings that accrue when local health-care providers focus on population health.
Drew Harris (@drewaharris) is director of health policy at the Jefferson School of Population Health at Thomas Jefferson University in Philadelphia, where he focuses on the complex interplay between public health, medical care and public policy.

Carol Cassella: Incentivize Quality over Quantity

In an ideal world all physicians would be so compassionate and ethical that no medical decision could be hijacked by greed, even subconsciously. I'd say the same for Congress, too, but at present it seems prudent to design systems that play to our better natures. Currently there are as many modes of physician reimbursement as there are health-care-delivery models. All of them have their merits for both patients and physicians, but most can be gamed for financial advantage. Unfettered fee-for-service has been blamed for excessive testing and procedures resulting in higher medical costs with no discernible improvement in care. Strictly capitated plans, in which a defined sum is paid per patient regardless of their health problems, can unfairly reward overly restricted care. And to complicate any plans for quick reform, health-care economics doesn't tend to obey classic market forces such as supply-and-demand logic.
The trick is to incentivize good, cost-effective medicine and shift the financial incentives from quantity of care to quality. Some experimental medical models seem to be making strides toward this goal by paying a per-patient fee combined with bonuses for evidence of better outcomes and utilization. As for my own income, I'd vote for streamlined, single-payer insurance, at least for baseline care. Medical decisions should be driven by clinical findings and proven therapy rather than what myriad private and public insurers pay. And imagine how much face-to-face patient care could be purchased with those administrative savings—the billions of dollars now spent negotiating contracts and filing paperwork.
Carol Cassella (@CarolCassella) is a practicing physician and author of the novels "Oxygen" and "Healer."

J.D. Kleinke: Pay Doctors as Part of a Team

All caregivers, not just physicians, should be paid as part of a multidisciplinary team, in lump sums. For healthy people and for people with chronic conditions, that means a lump sum per year to keep them as healthy as possible. For patients with an acute illness or condition requiring a surgery, that means a lump sum to manage the illness or get the patient on the road to recovery as quickly and effectively as possible.
The entire practice of medicine can and should be redesigned around this overdue corrective to the abuses, dysfunctions and Balkanization of medical care under our exhausted, century-old fee-for-service system. This redesign toward team-based care should involve multiple levels of caregivers; the use of email and connected apps for health-status monitoring; and when and where appropriate, home care, group visits and other types of ongoing support for the post-discharged hospital patient and chronically ill.
Physicians can and should lead these new or reoriented teams of caregivers. In the process, they will be helping transform today's mostly antiquated nonsystem into a more holistic, cost-conscious, data-driven, outcomes-oriented system that works much better for everyone involved.
J.D. Kleinke (@jdkonhealth) is a medical economist, author, health-care-business strategist and entrepreneur. In 2012, he was a resident fellow of the American Enterprise Institute. Prior to joining AEI, Mr. Kleinke was co-founder and chief executive officer of Mount Tabor, a health-care information-technology development company.

Fred Hassan: Pay for Outcomes and Protect from Litigation

Pay for outcomes (where practical)—and also provide protection from the litigation industry so doctors can follow reasonable treatment guidelines. Where there is a fee for services, avoid distortions such as paying an endocrinologist $3 for a blood-sugar test in the office but allowing a hospital to charge the same patient $269 (finger stick).
Fred Hassan is the chairman of Bausch & Lomb.

Peter Pronovost: It's Time for Bundled Payments

The United States has some perverse payment systems that unfortunately allow hospitals to profit from care that's not in their patients' best interest. For example, if a patient is readmitted after hospital discharge—as one in five Medicare patients is—the hospital profits, though it now may face a 2% penalty if its readmissions rate is high. If a physician orders unnecessary tests, which may account for a third of health-care spending, he profits.
Instead of receiving payment on a fee-for-service basis, hospitals and physicians should receive a single bundled payment that includes fees for hospital and physician services for up to 30 to 90 days after hospitalization to allow complications and preventable harm to be factored into payment. The United States is starting to experiment with this approach, currently used in Germany.
With bundled payments, physicians and hospitals would be incentivized to do the right thing for patients: Eliminate preventable harm, optimize patient outcomes and experience, and reduce health-care waste. A complication often doubles or triples the average cost of treatment. As such, the bundled-payment model provides a financial incentive for physicians and hospitals to prevent rather than profit from complications.
Still, these types of bundled payments risk limiting access to care for patients who are at higher risk for costs. Some higher costs may be driven by preventable complications while others are due to patient characteristics. Risk-adjustment models should seek to account for risks based on fixed patient characteristics, but should not adjust for risks influenced by the health-care system. The models should also define these patient populations, determine appropriate payments and develop performance measures.
A bundled-payment system should also protect against physicians and hospitals providing too little care. Incentives that too strongly influence physicians to limit health services without also encouraging high-quality care pose a risk for the underuse of services. More importantly, a bundled payment could help enhance the vital trust between patients and physicians—a trust upon which healing is based.
Peter Pronovost is a practicing anesthesiologist, critical-care physician, professor, Johns Hopkins Medicine senior vice president and director of the Armstrong Institute for Patient Safety and Quality.

Leah Binder: End Perverse Payment Incentives

We need top-to-bottom reform in how we pay doctors because, as one leading analyst, Francois de Brantes, puts it, "It's hard to be good when you're encouraged to be bad."
The fundamentals of this are simple, but the execution is complex. Most of the time, physicians (and sometimes other providers, like nurse practitioners) are paid for each service they deliver, no matter whether that service was needed, helpful or successful. If the doctor accidentally used a Band-Aid when the wound really needed stitches, he still gets paid for a Band-Aid, and then paid again for properly patching up the wound. If all this results in an infection, the doctor then gets paid for treating that, too. Just send the bill.
This, of course, creates perverse incentives. The more mistakes and complications there are, the more billings. The more care delivered, whether it's necessary or not, the more payments. While we believe most doctors try to do the right thing, the payment rules certainly don't make it easy.
Obviously, payment should be tied to desired outcomes of care. Payment should reward excellence and discourage complications, incompetence and unnecessary care. This is the standard in most other industries, where quality commands higher prices. But bizarrely, the whole idea is new in health care.
Admittedly, for physician payment this is difficult to execute, but it's not impossible. Over the past decade especially, experiments have yielded significant new insights on how best to change payment rules. One of the most promising approaches is Bridges to Excellence, run by Mr. de Brantes, which measures the quality of care in physician practices and calculates appropriate incentive payments. Medicare is trying a similar approach, what they're calling "value-based purchasing"—tying some of its payment to the quality of services delivered. Health plans are moving in this direction, too.
But the pace is slow and the stakes are high. Our health-care system embodies exactly what you would expect from perverse payment incentives: the Institute of Medicine (IOM) estimates as much as a third of health-care expenditures are wasted. That's a breathtaking amount of money when almost 18% of our GDP goes to health care. Dozens of medical specialty societies have gathered together under the banner of a terrific campaign called Choosing Wisely to identify hundreds of screenings and other services that are often unnecessary and ought to be questioned—and that's just the tip of the iceberg. Errors and complications are rampant, though we have little data on them because so little information on physician performance is made public.
It's time for those who pay the doctor's bills to change. That means employers and other purchasers, health plans, federal and state agencies, and even the new health marketplaces under Obamacare.
Leah Binder (@LeahBinder) is president and chief executive of Leapfrog Group, a national organization based in Washington, D.C., representing employer purchasers of health care and calling for improvements in the safety and quality of the nation's hospitals.

Atul Grover: Encourage Value, Discourage Waste

The movement toward paying for value makes perfect sense. When I meet groups of clinicians and health-professions students and ask if they favor "value," 90% raise their hands. A similar number say they are against "waste." The challenge is defining what is wasteful, particularly in the context of any patient's life and his or her preferences. Figuring out all of this requires extraordinary efforts from both doctors and patients. It also requires time and effort that may be hard to measure in today's reimbursement system.
Future payment systems need to recognize the value not just of technical skills and procedural expertise, but also the increasing amount of time it takes to diagnose and counsel patients. We also need to find ways to reimburse for care delivered by a team of professionals ranging from physicians to medical assistants. Health care is a team sport.
As we move toward a payment system that finds ways to better incentivize quality and outcomes for patients, we also need to be sure that any measures of value take into account patients who are sicker, with more complicated conditions, or are poorer and have fewer resources. Not adequately risk adjusting our payment methods will harm those patients who are already among the most vulnerable.
Atul Grover is chief public-policy officer of the Association of American Medical Colleges.

Charles Denham: Fill the Care-Coordination Vacuum

Until now, in most instances, physicians have not been made accountable for coordinating care and making sure the right information gets to the right place so that patients receive the right care. Nor have they been explicitly paid for it. In the old days, we just did it. We used to describe the primary-care doctor or a lead specialist for comprehensive treatment as the "go-to doctor" or as the "captain of the ship." It is still presumed by the majority of patients that someone still is the captain and is watching out for them…. However, with the fragmentation of care and the volume-centered incentives of fee-for-service still dominating the game, there is a vacuum of care coordination that used to be a responsibility that doctors readily assumed. None of us will forget the images of the Italian cruise ship, the Costa Concordia that sunk in the Mediterranean with the loss of 32 lives and the shocking story that the captain was missing in action. He was arrested on charges of manslaughter in connection with causing a shipwreck, failing to assist 300 passengers, failing to be the last to leave the wreck, and for abandoning incapacitated passengers.
Unfortunately, many patients feel a similar form of abandonment when they can't get doctors to talk to each other, cannot get their own medical records sent to their caregivers, or even get their records or tests so that they can be their own courier. Many find it impossible to get anyone to help them navigate the dangerous waters of fee-for-service care that once had professionalism at its core when doctors were proud to be in charge. When patients find great doctors who still practice that kind of medicine (and there are many), they can't get in to see them because these doctors are in such terrific demand. As we move into the value-based accountable-care era, when care coordination is an absolute requirement of bundled care processes, things will change. Especially if there is a financial consequence for failure to coordinate care, we will see new winners and losers in the marketplace. For instance, as we develop virtual Cancer Centers of Excellence for employers that will require true care coordination, watch how fast the market turns. We all know the Golden Rule and our own families are only a biopsy away from remembering what it takes to deliver great coordinated care. It is time to pay for it and demand it.
Charles Denham (@Charles_Denham) is the founder of the not-for-profit Texas Medical Institute of Technology, a medical-research organization, and the for-profit HCC Corp., an innovation accelerator.

Helen Darling: Provide Only Care That Adds Value

Charges for the majority of common procedures, visits, tests and imaging should be bundled and physicians should have control over what services are included. Physicians should be encouraged to avoid tests, imaging and other treatments that do not provide clinical value, as demonstrated by scientific research. If they follow appropriateness criteria of their medical specialty, and that is documented, then physicians should have no risk of medical malpractice if something goes wrong. How physicians are paid is important, but given how much care is provided that is "overtreatment" we should as a nation spend equally as much time helping consumers understand what they can give up or avoid; then how doctors are paid becomes less important.
Transparency of charges or prices is essential for consumers, patients and purchasers. Along with transparency, the appropriateness criteria for the services being considered should also be included. A patient should be able to easily find out whether the test or service is appropriate for them, not that they are clinicians but they should be fully informed about the benefits, risks and harms of all services. Since many services are not needed, patients should not only know what they and their insurer of employer will be charged but also whether they are really needed and what clinical value might accrue to the patient. If the treatment or testing is a mix of possible benefits, risks and harms, and those are well understood, doctors may be surprised to see that patients are more discerning and cautious than they would have guessed.
Helen Darling is president and chief executive officer of the National Business Group on Health, a Washington, D.C.-based nonprofit member organization composed of more than 360 of the nation's largest employers, including 66 of the Fortune 100.

Susan DeVore: Pay Should Encourage Collaboration

The Medicare payment system, which sets the overarching incentives in health care, is a vital resource for people and providers. But is has also created care silos, a focus on sickness-based care and competition among health-care providers.
To overcome this, new value-based models—such as value-based purchasing, bundled payment and shared savings—are being designed. These models have the potential to incent what health care needs—collaboration among physicians, hospitals, payers, corporations, even people.
Last year, the Department of Health and Human Services announced a "bundled" payment program. This model allows providers to bid as a team for fixed price reimbursement for physician payment, nursing-home care, surgery and medications, primarily for common treatments such as heart surgery or hip and knee replacements.
Paying for care in its entirety, rather than having providers bill insurance companies separately, has advantages that directly benefit patients. For one, paying a fixed price incents providers to collaborate to ensure the best outcomes. That's because if any link in the chain fails, costs are added, and providers will have to dip into their own pockets.
Paying a fixed price has also been shown to lower costs—both for providers and patients. A Medicare heart bypass surgery bundled-payment demonstration saved $42.3 million, or roughly 10% of expected costs, and reduced patient insurance costs by $7.9 million while improving care and lowering mortality rates.
Our health-care system has waited too long to make these critical changes. People, payers and providers want to work together to improve health, but this can only be done when we start rewarding innovators who embrace flexibility and ingenuity. Bundled payments are a good start. Let's hope for more.
Susan DeVore is president and chief executive officer of the Premier health-care alliance.

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