HEALTHCARE PAYMENT models around the world are changing as government and private payers wrestle with the challenge of controlling costs without compromising either access to care or quality of treatment.
A new PricewaterhouseCoopers’ Health Research Institute report finds growing concern among both health industry executives and practitioners that current reimbursement models are deeply flawed, threatening the future sustainability of healthcare systems. Yet promising new payment systems are evolving, drawing on experimentation around the world.
The findings are detailed in the Health Research Institute report, “You Get What You Pay For: A Global Look at Balancing Demand, Quality and Efficiency in Healthcare Payment Reform,” which examines trends in reimbursement models in 20 developed nations. The report reflects PricewaterhouseCoopers analyses and a comprehensive survey of more than 200 leading health industry executives and practitioners.
As the report title suggests, the incentives in payer reimbursement models often don’t align with the objectives they seek to achieve. Increasingly, reimbursement requirements are outdated, ineffective in helping to achieve stated goals and frequently result in unintended outcomes. As the chairman of the board of a leading European hospital candidly told researchers, “If the government paid for Christmas trees, hospitals will produce Christmas trees.”
The survey respondents understand the truth of that statement. More than half of the respondents globally (but fewer than one in four in North America) said their health systems were performing well. However, nearly two-thirds of the respondents globally, and four in five North Americans, said their current payment system has problems balancing quality, efficiency and demand. It’s like a high-performance sports car that can race at 200 miles per hour but that also guzzles gas and constantly breaks down.
The sustainability of healthcare systems worldwide depends on their being able to balance conflicting goals and control costs without reducing the quality or availability of care. The right reimbursement model can provide incentive structures that make healthcare economically viable and more sustainable in the long term. Not surprisingly, the survey respondents indicated that they are exploring alternatives, including completely new ways of reimbursing providers.
Historically, reimbursement models have employed gatekeepers to control demand to provide adequate care without the use of unnecessary or overly expensive treatments. These gatekeepers, whether they are health professionals, hospital staff or screeners employed by government agencies, insurance companies or other payers, are part of a system that is collapsing under the weight of growing demand, aging populations, more complex treatments and other strains.
As the gatekeeper model loses its effectiveness, some health systems are basing their hopes for cost containment on providing information for patients to make sound decisions; the consumer-directed healthcare movement in the U.S. is an example of this trend. Indeed, the survey respondents rated “better-informed patients” as the best way to control demand, well ahead of higher out-of-pocket payments and more rigorous gatekeeping. Accordingly, healthcare payers and providers are collecting and disseminating data on the quality of treatment, and government mandates are encouraging the development of technology needed to generate these data.
However, neither gatekeepers nor patients regularly use the quality information currently available in making treatment decisions. Because there’s uncertainty and confusion about what the data actually indicate, payers are not inclined to base reimbursement decisions on quality alone. Moreover, patients are less likely to base their decisions on quantified medical or technical data than on their own assessments of quality, even if those perceptions are uninformed.
What can we learn from various countries’ experience with various reimbursement models? Globally, the emerging standard for hospital payments is a case-based prospective payment that sorts reimbursement rates into diagnosis-related groups. Seven of the 10 members of the Organization for the Economic Cooperation and Development have adopted this system and found it increases efficiency.
Reimbursement to practitioners, such as physicians, is far more varied than reimbursement to hospitals. Models that integrate payment to both physician and hospital can generate mutual incentives that are aligned. For example, the Netherlands is shifting to a DRG payment model in which self-employed physicians must negotiate their fees with hospitals within a government-set range.
Payment models also must address changes in care. For example, patients increasingly are seeking care from lower-cost, non-traditional sources such as retail clinics and other outpatient settings. Capital costs for such providers should be incorporated to promote continued flexibility and innovation. In addition, reimbursements need to be rationalized to reflect changes in medical protocols and the use of technology so payments truly reflect the resources required to provide the services.
Although quality measurement have not yet lived up to their promise as a factor in decision-making, increasing amounts of data are becoming available - from surveys, insurance claims, diagnostic tests and electronic medical records. Providers and payers alike should use the data from these varied sources to evaluate their payment system, and encourage understanding and use of these data by patients.
In the end, there is no single solution that will succeed equally well for all countries. Each nation needs to work towards a hybrid health payment system that draws on global best practices to effectively balance cost control and efficiency, on the one hand, with quality and access to care, on the other. To be acceptable, these payment systems also need to respect national cultures, social goals, and local healthcare customs and practices.
Creating such payment systems is a complex challenge, but one that could yield significant benefits in improved quality of care, better-controlled costs and truly sustainable health systems.
Benjamin Isgur is assistant director of the PricewaterhouseCoopers Health Research Institute and Paul Veronneau is U.S. healthcare payer and insurance advisory leader, PricewaterhouseCoopers LLP.