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The Hoops Hospitals Must Jump Through to Get Paid

Ways of Yore

As health care reform begins to take hold in America, we are beginning to see some significant departures from our “ways of old.” The new forms of payment that are taking hold seem so foreign to us because they are in direct opposition to our past system. Our previous method, primarily fee-for-service, was one where there was an incredible amount of wiggle room for what payments should be. Individual hospitals or practitioners would negotiate with an insurance company as to what their reimbursement should be for a given service or procedure. This has led to enormous disparities in what individual hospitals may receive for the same procedure and the same outcome.

This has partly contributed to the rising costs of health care and certainly does not reward  hospitals that are leaders in patient satisfaction for their efforts. All of these factors, plus many extrinsic ones, has led us towards the implementation of values based purchasing.

Introduction to Values-Based Purchasing

Values-based purchasing is a payment method that is supposed to reward providers on the basis of quality of care. This is achieved through payment incentives and bureaucratic transparency. In short, values-based purchasing is supposed to be an assessment and reward for quality, efficiency, safety and costs of care.

Medicare is considered to be the architect for this new method of payment and it has already begun to run its business in this manner. Since the national social insurance program for the elderly began this program, other companies such as Blue Cross and Blue Shield have also incorporated this method into their payment strategies in certain states. However its usefulness is still limited in the private sector as it has been limited to a few specialties (geriatrics, family practice, internal medicine, general practice and pediatrics).

Before we begin to delve into the implications of the new values-based purchasing model, we must first look at some of the other associated terms that present themselves in conjunction with it.

Bundled payments: In this method, the actual payment for care is dependent on the expected costs (for all related health care expenses) of treatment for a clinically defined episode. This is a great choice for insurance companies as they can set predefined limits on how much a treatment of a particular case “should” be and then pay out accordingly to all providers. However, bundling can cause many issues since there are so many variable costs in medicine that it can be truly hard to predict final costs. In addition, this could cause a great deal of animosity between physicians that are all fighting for a piece of the shared pool of money.

Global payments: In this model the insurance company would pay out a certain amount of money to a group of care providers with the intent of that money being expected to cover all costs of care for a patient population for a period of time. While this term is essentially identical to capitation, advocates of its use have pushed for the new term of global payments as they want to distance themselves from the unreliability of the original capitation models. With this model there has to be additional safeguards, such as stop-loss insurance or a secondary payment model, so that providers don’t suffer immense losses due to a singular event of care.

Accountable care organizations: A group of doctors, hospitals and other various health care providers that organize themselves under one roof to give high quality of care to a patient population (at this point, it is virtually limited to Medicare patients). This is an interesting model as it is designed to improve continuity of care and eliminate needless tests while providing care at the moments where patients need it most. The potential of ACOs could be further realized when electronic health records take hold and helps streamline many of these functions between health care providers.

Shared savings: This is an interesting model that follows global payments but also allows for a more holistic payment scheme. Only when providers help marginalize costs do they get a bonus (parts of shared savings or net savings), which directly rewards but does not necessitate savings on a given patient. This essentially provides a way to reward cheaper care, but allows for doctors to still provide proper care that may be more expensive if it is necessary.

Medical homes: This is the future for critical and long-term hospital based care in America. A team will be led by a physician that will take care of the sickest patients, who have the highest health costs. Under this model, those patients that need constant access to care will be able to get everything they need under one roof. This will hopefully decrease costs and unnecessary tests. It has been shown that models such as these can decrease costs by upwards of 25 percent in the first year of the implementation alone.


The Affordable Care Act has been the main driver pushing for the expansion of value-based purchasing and the other terms described above. The act has even pushed for various timelines that include dates of implementation. Pilot groups (such as the Montefiore Medical Center) have already undergone preliminary tests.

One of the main problems that regulators face is being able to balance new payment methods while maintaining physician employment levels. What we must do is find unique ways to pay through value-based purchasing that are not subjective or risky, but rather objective and risk free.

The regional effects of value-based purchasing have already begun to be felt as Medicare has switched to these types of payments. While initial proponents said it had a possibility of decreasing costs for these patients, those statements have yet to be proven. In fact, it is hard to imagine that implementing these systems, which involve a tremendous amount of paperwork and an additional level of regulation, will in any way reduce costs for taxpayers. Rather, this is more of a system for payment redistribution to hospitals that are considered “exceptional,” while the hospitals that fail in certain measures (and likely need the money to correct them) will be punished.

We can see that there are huge disparities between states and their amount of bonuses received. State such as Massachusetts, which had the new program based around their existing health care programs created by then Governor Romney, did very well under the new rules. Contrast that to states such as California, who have their own hospital regulations and issues to consider, which did very poorly. It seems counterintuitive that we would punish hospitals that don’t have the resources to fix their existing problems by denying them funds. Something that could be created to fix this lack of help would be an “improvement-based” model where hospitals that are working towards reaching goals may also get additional funds (or at least have their penalties negated). Indeed, if we do not help these hospitals they will eventually be crushed under the weight of not having enough funds and will likely adopt a new delivery strategy (such as delivering substandard care at a cheaper price).

We can even see disparities within the Dallas community, which shows how much of a difference even slight regional changes can have on bonuses.

While it is nerve-wracking to think of the changes that are coming, and the anticipated growing pains that will accompany them, there are definite benefits to this model of health delivery. Even in the short period of time these methods have been studied there have been vastly increased levels of patient treatment guidelines met. However, the “subjective” guidelines that are measure by patient satisfaction have been stagnant at their initial levels, indicating that these measures are either too hard to measure or too difficult to accommodate.

On a Personal Note

The subjective measures that are dependent upon patient satisfaction with their hospitals are horribly designed and need a complete revamping. Not only is the survey worded to elicit negative responses (human psychology dictates we don’t like to answer everything was satisfactory), but also surveys are generally only returned under negative circumstances. In addition, what they are measuring truly does not matter to the quality of patient care and is really only a factor when a patient is considering what to make their primary hospital. Does is matter if the trash is taken out every day? It is not likely to have an impact on whether or not they will survive their heart attack, get proper medication, etc.

Even small factors such as socioeconomic differences within patients can have a dramatic effect on the results of the survey. Some proponents of government health plans have quoted the relatively high levels of patient satisfaction at Veterans Administration hospitals, but what they fail to mention is that the average patient (a retired military man) is very likely to take orders, not fight against the hierarchical doctor-patient relationship, and be content with the free care they receive. This kind of logic could also be extrapolated to various cultural and ethnic differences as they would have different tendencies when taking surveys.

Keers Billingsly Keers Billingsly (2 Posts)

Contributing Writerl