University of Washington School of Public Health

UW SPH News: Study Finds Key Lessons for Health Payment Reform

Study Finds Key Lessons for Health Payment Reform

10/10/2014
Share:

A University of Washington (UW) evaluation team led by Douglas Conrad, Professor of Health Services and Oral Health Sciences, and colleagues David Grembowski, Susan Hernandez, Bernard Lau and Miriam Marcus-Smith, recently found four key lessons in implementing value-based health payment reform. Their study was based on research in six states and seven projects over 30 months and appeared in the September 2014 issue of the Milbank Quarterly.

Dr. Conrad and his colleagues examined the experience of Washington, Oregon, Pennsylvania, Maine, Massachusetts, and New Hampshire, which are all aiming to implement new methods of paying health care providers. They are specifically moving away from "volume-driven," fee-for-service payment to "value-based" payment that rewards improved processes of care and health outcomes, as well as reduced cost.

The UW team identified four key lessons for policymakers and practitioners seeking to implement serious and sustainable value-based payment:

  • Organized health care purchasers – especially large self-insured employers and public purchasers (e.g., state employees, Medicaid programs) – must demand that health plans and providers move away from volume-driven to value-driven payment. Those parties must create a "burning bridge" that precludes a return to the status quo of fee-for-service.
  • By their very nature, multi-stakeholder, public-private coalitions of providers, employers, health plans and others are best positioned to develop consensus standards for measuring quality, outcomes, and cost; those efforts should be their focus. Examples of such coalitions are the Washington Health Alliance (formerly the Puget Sound Health Alliance) and the Maine Health Management Coalition Foundation. Collective agreement among multiple payers and provider organizations on payment method is extremely difficult and generally elusive, largely because of competing economic interests.
  • As provider organizations consolidate to enhance efficiencies and increase their pricing power relative to payers, strong anti-trust vigilance and appropriate regulation are critical to ensure health plan and payer competition in the public interest.  
  • Public transparency of the relevant prices and quality metrics of health plans and provider organizations, respectively, is a key ingredient in the menu of public policy options. Transparency will light the "burning bridge" that will force movement away from volume-driven payment and toward value-based payment.