Change Medical Payment, Improve Care, Value

“Changing Medicare’s payment methods is essential to improving efficiency and value in health-care delivery,” the Medicare Payment Advisory Commission (MedPAC) concluded in its annual Report to Congress—Medicare Payment Policy. MedPAC is an independent congressional agency established to advise the U.S. Congress on issues affecting the Medicare program. According to MedPAC, bundling payments around an “incident of care,” including payment for inpatient hospital, physician, and care after hospital discharge requiring service provider coordination would be an effective way to improve efficiency and value.

MedPAC also emphasized the need to pay for Medicare services based on the quality of care and of the necessity of services. Currently, providers get paid more by providing more services and they are not accountable for quality of care, nor are they given incentives to coordinate care with other providers, MedPAC noted.

Modifying the way we pay for medical services, primarily bunding of payment for services related to one incident of illness, and paying for value rather than for volume, is an essential element of health care reform. The bills passed by both chambers of Congress contain provisions for cost containment and quality improvement. Where Medicare leads, private payers follow. In fact, MedPAC reports that insurers have told it that if Medicare takes the lead, paying for care to reward providers for quality rather than for quantity, insurers will follow.

Medicare already has successfully tested payment “bundling.” The program’s heart-bypass demonstration project paid a single fee for services provided by hospitals and cardiac surgeons for bypass operations, including doctors who saw the patient both before and after hospitalization. As a result, participating providers improved care coordination, patients expressed greater levels of satisfaction, Medicare costs dropped, and hospitals’ and doctors’ incomes rose.

“Each payment reform would attempt to reduce the prevailing incentive to provide more care, especially more complex care,” MedPAC wrote. “In addition, payment reforms strive to reward better coordination of care, especially for patients with complex conditions.”

Without meaningful financing and delivery system reforms, the high rate of health care cost growth will continue, MedPAC warned.

To begin to address the problems, MedPAC recommended changes including rewarding providers for improving quality and holding providers accountable for the quality of care Medicare beneficiaries receive and the resources used to provide care. Apropos payment for post-hopitalization care providers such as nursing homes, home health care, and inpatient rehabilitation, MedPAC further recommended that Medicare implement hospital readmission policies that motivate providers with shared responsibility to avoid unnecessary re-hospitalizations. This would include bundling payment for hospitalizations for certain medical conditions to include post-discharge care.

So you see, cost-containment and quality improvement already are on the health reform agenda. We will all benefit from these efforts--what's stopping us now?