Accountable payment models can help improve quality and lower costs
Fortunately, there are “win-win-win” approaches to paying physicians that can help improve quality and reduce health care spending without forcing physicians to take financial losses themselves. These accountable payment models have three key characteristics.
• They give physicians the flexibility to deliver the care patients need without worrying about whether the payment for one type of service is lower than another or whether they will lose revenue by performing fewer procedures.
• They give physicians accountability for ensuring that changes in care result in spending that is lower than it would otherwise have been, but this accountability is limited to the kinds of spending the participating physicians can control or influence.
• They separate insurance risk and performance risk, so physicians are not penalized financially for taking care of sicker patients or patients with unusually complex conditions.1
Accountable payment models can benefit both physicians and payers for a very simple reason; the vast majority of health care spending does not go to physicians. In Medicare, physician fee schedule payments represent only 16% of total Medicare spending. However, physicians prescribe, control, or influence most of the lab tests, images, drugs, hospital stays, and other services that make up the other 84%. If physicians can redesign care for patients in a way that reduces spending on all of the other services by a mere 3%, the physicians could be paid 5% more and still reduce total Medicare spending by 2%.
Accountable payment models are created by using one or more of the following three building blocks2:
• Bundled payment: Instead of paying all providers separately for each service associated with a procedure, a bundled payment is a single amount for the procedure that the providers can divide up on their own. For example, under bundled payment, if a physician helps reduce the hospital’s costs for a procedure (e.g., by more efficient scheduling), both the physician and the hospital can earn more while offering a lower total price for the procedure. A facility-independent bundled payment would allow the physician to be paid more if he or she does a procedure in a lower-cost setting. • Warrantied payment: Under a warrantied payment, the physician is paid more for a successful procedure than today but is no longer paid more for the costs of treating avoidable complications related to the procedure.
• Condition-based payment: Bundled and warrantied payments can help improve the quality and efficiency of care for a particular procedure, but they do not remove the financial disincentives for reducing unnecessary procedures. A condition-based payment solves that problem by paying for care of the patient’s health condition, regardless of what procedure is used. If the physician and patient agree that the patient’s condition can best be managed with a lower-cost procedure or no procedure at all, the physician’s payment would not be reduced the way it would be today.
By using different combinations of these building blocks, an accountable payment model can be custom designed for different types of procedures and patient conditions within each specialty. This could not only enable individual physician practices to improve care and control costs, it would help Accountable Care Organizations be more successful.
These approaches – a single payment for a complete product or service, with a warranty to correct defects at no charge – are how most other industries are paid, and it makes sense to use them in health care too. Moreover, they can be implemented by small physician practices, not just large health systems. The earliest known example of someone offering a warranty in health care was not a large health system but a solo physician. A study found that the physician received more revenue while reducing total spending by eliminating unnecessary services and reducing complications.3
Opportunities for gastroenterologists
How might accountable payment models be designed to support high-quality, lower-cost gastroenterology services?
• Episode payments for colonoscopy: A single payment could be made to a gastroenterology practice for most or all of the costs associated with a colonoscopy, including complications caused by the procedure. If the practice can reduce total costs, e.g., by using a lower-cost facility, using anesthesiologists less frequently, reducing complication rates, etc., the gastroenterologist could be paid more but charge payers less. Quality measures would help the gastroenterologists manage under the warranty and also assure patients that the lower cost does not mean lower-quality care. Some practices are already doing this,4 and the American Gastroenterological Association has developed a model colonoscopy bundle that can help additional practices to analyze their own costs and establish a bundled payment price that will enable them to deliver high-quality care at a lower cost to payers while maintaining or improving operating margins in their own practice.
