Friday, December 12, 2014
Health Affairs Blog
Once in A Weil
December 12, 2014
Why I Oppose Payment Reform
By Alan Weil, Editor-in-Chief, Health Affairs
I had my epiphany shortly after I announced my departure from the
National Academy for State Health Policy (NASHP) about nine months ago.
In an effort to help find my successor, I contacted some executive
search firms. One firm quoted what they referred to as the "market
price." When I pressed them to tell me how much effort this price
represented, they declined to do so. Ultimately, I recommended that
NASHP contract with a search firm that charged by the hour.
It was then that I realized that, given the choice between capitation (a
fixed fee for the outcome I desired) and fee-for-service (an hourly rate
with no accountability for the outcome), I, as a purchaser, chose
fee-for-service. Only a hypocrite would go around talking about the
importance of payment reform, while secretly conducting business the old
Having given the matter some further thought, I present my five reasons
for opposing payment reform:
1. The premise of payment reform is flawed.
The major actors in today's health care system have thrived in the old
payment model, which rewards volume: filling beds, making referrals,
conducting tests, and the like. We now say we want them to improve
population health and clinical outcomes while holding down costs.
Different competencies are required to achieve these different
objectives. There is no reason to expect that the people and
institutions that were successful under the old model are the best
people and institutions to charge with carrying out the new model.
2. Payment reform is insufficiently disruptive.
As we capitate or bundle payments, these aggregated payments are
generally given to the highest cost actor in the system: the hospital,
health plan, or large medical practice that already has the most
resources. We expect that, due to new incentives, they will share those
resources with other, lower-cost professionals like dieticians, social
workers, and community health workers, whose efforts may improve health
outcomes. But this may be wishful thinking. Hospitals and health plans
operate with inertia and under constraints that may prevent them from
having what an observer might consider a rational response to the new
incentives. Marginal changes in payment policy fail to disrupt the
concentration of power held by expensive institutions, thereby limiting
the likely effects.
3. There is no evidence to suggest that payment reform will achieve the
goals we need it to achieve.
The Institute of Medicine tells us that 30 percent of health care
spending is wasteful. Only nineteen of the original thirty-two Pioneer
ACOs remain in the program, and only twelve are producing enough savings
to be shared. Only 58 of the more than 200 participants in the Medicare
Shared Savings Program are saving more than 2 percent. For all the
effort we are putting into payment reform, at this point, we don't have
an evidence base that shows what we are doing will achieve the end
result we desire.
4. The original rationale offered for payment reform doesn't match the
The current iteration of payment models began with integrated health
systems, like Geisinger and Intermountain, complaining that they were
financially penalized when they delivered high quality care. They had a
point. Efforts to, for example, improve birth outcomes, yielded
financial losses due to reduced revenue from Neonatal Intensive Care
Units. Today's narrative is that we need payment reform to leverage a
system that is resistant to change to fundamentally alter the model of
care. The original rationale required only that incentives be
directionally correct — keep your savings when you invest in better
quality. The more ambitious goal of payment reform opens up tremendous
risks such as providers gaming quality metrics and avoiding complex
patients. The payment reform movement has been hijacked to suggest it
can accomplish things its founders never imagined.
5. Payment reform poses a risk for the growing understanding of the
importance of patient-centered care.
Imagine the following scenario: three people come to the doctor with
knee pain. Each person has their own goal for the outcome of their
treatment: one wants to manage pain during her daily activities, one
wants to play tennis again, and one wants be completely pain free. Now
try and imagine a "value formula" for providers to achieve these three
patient-centered outcomes. Even if you could come up with one,
operationalizing it would be nearly impossible. And what provider would
be willing to accept financial risk for achieving such varied patient
goals? When we implement payment for "value" we oversimplify to make the
methods administrable, but lose all nuance of patient preference.
Despite all of these reservations, I do not actually oppose payment
reform. We all know current payment methods system are seriously flawed
and that we can do better. But this list serves as a reminder that
payment policy, like grass, is always greener on the other side.
Comment by Don McCanne
The health policy literature is saturated with expressions of the
concept that we are no longer going to pay for health care based on the
volume of care delivered, but rather we are going to start paying for
quality instead. Traditional fee-for-service medicine encourages greater
use of resources simply because that increases revenues. Innovations in
payment reform are being proposed that supposedly will change
fee-for-service to a system rewarding quality. Alan Weil,
Editor-in-Chief of Health Affairs, provides us with insight on what
those innovations might do.
Some of the proposals include accountable care organizations, pay for
performance, bundling of payments, Medicare shared savings, capitation,
and increased transparency combined with placing the upfront financial
responsibility on patients so that they are forced to be better-informed
shoppers. Each of these has its own problems and some could actually
cause worse outcomes than our traditional fee-for-service system.
Perhaps the most important point that Weil makes is that those who have
thrived on the volume-driven model are the same individuals we are
asking to improve clinical outcomes while holding down costs. As he
states, "There is no reason to expect that the people and institutions
that were successful under the old model are the best people and
institutions to charge with carrying out the new model."
In the video at the following link, after presenting the five reasons
for opposing payment reform, Weil suggests five elements that should be
embraced when considering payment reform. I found them to be
disappointing. For instance, he suggests that we should allow the
leaders to lead and then follow them as we implement the payment reforms
under a multi-payer system. He makes no attempt to distinguish these
leaders from the MBAs who are already maximizing their business models
while basically ignoring patient service concepts.
Perhaps more important is what is missing from Weil's comments. He says
absolutely nothing about concepts of social insurance, particularly the
single payer model. Yet single payer would be far more effective in
improving health care value than would any of the payment reforms under
at 5:24 PM