Pricing must move beyond context of existing market


Healthcare experts say a move away from the fee-for-service payment model can't happen too soon.

NATIONAL REPORTS - Healthcare experts are weary of repeating the mantra that the current healthcare delivery system is broken and unsustainable. They say a move away from the fee-for-service payment model can't happen too soon.

Further, the move away from fee for service should be coupled with greater reimbursement for primary care physicians, more consumer engagement and more effective treatment of chronic conditions. It's necessary to shift to an outcomes-based delivery model.

"The trend in healthcare costs right now is simply not sustainable," says Robert Zirkelbach, spokesman for America's Health Insurance Plans and vice president of strategic communications. "Consumers and employers can't keep up with the rising costs of coverage, and healthcare costs are eating up a larger and larger share of federal and state budgets, which is crowding out other urgent national priorities."

A recent analysis by the Healthcare Industry Group of the firm Alvarez & Marsal in New York found that the current healthcare system is focused on revenue maximization and reimbursement and fails to pay sufficient attention to patient outcomes.

David Gruber, MD, director of research in Alvarez & Marsal's Health Industry Group, says the report also highlights inefficiencies and ineffectiveness already built into the current delivery system including a complex reimbursement structure, oligopolistic price competition, high pharmaceutical drug prices and a broken pricing structure.

"The Medicare, Medicaid and commercial insurers price to the existing system, and if the existing system is inefficient, we just price relative to that-as opposed to potentially looking for disruptive transformation, or doing things better, which could potentially result in very significant cost savings," he says.

To move toward a more outcomes-based delivery model, Gruber says there needs to be greater focus on and resources devoted to chronic disease management and a shift from transactional orientation to relationship-based care.

He believes this can be done by improving reimbursement for primary care physicians to allow for longer visits to address complex disease management, increasing reimbursement of Web-enabled tools such as telehealth, carving in behavioral health with primary care, increasing transparency in prices, and extending the medical home reimbursement model.

"The insurance companies are not perceived very well by many consumers, and they are viewed as a barrier to care as opposed to a supporter of care and a facilitator of care. There opportunities to do that in a more relationship-oriented manner," Gruber says. "There needs to be a lot more investment made in understanding the consumer and how you engage a consumer."

The current pricing system is complex and confusing for consumers, which Gruber says can be a barrier to consumer engagement in their own health.

One of the biggest changes necessary to achieve a sustainable healthcare delivery system, according to Gruber and Zirkelbach, is moving away from the fee-for-service payment model toward more capitation and value-based arrangements.

"What's really encouraging is there are numerous partnerships among health plans and their provider partners to change payment models and to start rewarding and paying for quality and value," Zirkelbach says. "These can take a number of forms whether it's ACO type models, the patient centered medical home or bundled payments. All of these types of initiatives are all different ways of trying out the same goal, which is moving away from fee for service and rewarding and paying for quality and value."

Gruber says he believes the key is capitation in a care coordination and collaborative system that is led by primary care physicians.


Health plans can foster value and quality, according to Zirkelbach, by providing real-time, accurate and comprehensive data to providers about their patient populations and assisting in better care coordination.

Gruber says health plans need to act now to pilot new approaches to care delivery and adopt new technology before employers decide to go direct to providers who are forming their own insurance companies or move toward insurance exchanges. New exchange models are emerging for employers to consider.

"The question is what will be the role of the insurance company going forward? Are they going to have a major role with the major employers?" he says. "If they want to have that role, they are going to have to enhance the value proposition."

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