Old habits die hard, and so it goes with America's healthcare industry. We all know that our fee-for-service approach shortchanges patients and costs too much, but somehow we just can't let go.
Well, enough already. Patient needs, demographics and market forces make it clear we must end our dysfunctional relationship with fee-for-service and embrace risk-based coordinated care. The transition may seem daunting, but it's the right thing to do—for patients and the economic well being of our nation.
The problems with the fee-for-service model are well documented. While healthcare is one of America's most robust economic engines, the ever escalating costs associated with the current approach are not only unsustainable, but also divert resources from other important public priorities, like education and highways.
For patients, frustrations abound in the fee-for-service world, where providers are rewarded based on the volume of office visits, tests or procedures they perform but lack incentives to pursue the highest quality, most cost-effective care.
What makes a risk-based alternative payment model preferable? For starters, it provides integrated, collaborative care for patients in an efficient, economically responsible manner. Under capitated contracts, for instance, physician groups receive a monthly per-member payment and in return provide a range of specified services, including case management, behavioral health and home support.
The physician groups are held to strict performance standards and use internal report cards to compare and incentivize individual doctors. Such oversight motivates physicians to guide patients toward the highest-quality care and ensures treatment is coordinated to achieve the best results.
Externally, state and national quality assurance programs guarantee accountability for both financial and clinical performance. Incentives are aligned to improve quality, reduce waste, and encourage team-based primary care.
The risk-based model also provides financial predictability, a benefit that can be elusive in the healthcare market yet is critical for large purchasers, like major corporations and government programs.
Most importantly, the risk-based model outperforms the fragmented fee-for-service system when it comes to health outcomes. In one recent study, the Integrated Healthcare Association found that “health plan products that rely primarily on integrated care delivery networks … generally have higher quality without using more resources.”
Based on data from 19 million Californians, the IHA study revealed that for critical measures of quality, Medicare Advantage—relying on an integrated delivery network—consistently outperformed traditional Medicare. In addition, commercial HMOs performed between 11% and 46% better than PPOs across five of the six quality measures examined.
The same trend is evident with accountable care organizations participating in Medicare's Shared Savings Program. Recently, the CMS announced improvements in quality scores on the majority of performance measures tied to shared savings payment programs.
At CAPG, these positive results come as no surprise. For more than two decades our members have been achieving higher levels of efficiency and quality by providing comprehensive healthcare through coordinated and accountable physician group practices. We have committed to moving 90% of members' Medicare business into capitated arrangements by 2018, and we won't turn back.
We strongly believe that patient-centered, collaborative care is the best and most fiscally responsible healthcare approach—for physicians and patients. Advances in technology make the integrated delivery of health services easier and more effective every day.
The market makes it clear we're on the right track. Medicare Advantage, which relies on an integrated delivery network, already penetrates 30% of the Medicare population and will hit 50% in five years. As our population ages and the benefits of coordinated care become more obvious, the move to risk will only accelerate.
Soon, all physicians will have the choice to either jump on this train or linger in the station. The Medicare Access and CHIP Reauthorization Act, enacted in April, provides incentives for doctors who participate in risk-based models beginning in 2019. While we await regulations that will spell out what this means, physicians must begin thinking about which option suits them best.
While transitioning to a risk-based model requires a leap of faith, it's a leap well worth taking. It empowers physicians to structure care delivery in a way that makes sense for their patient population and creates a sensible system that prizes value over volume.
Let's not cling to old habits just because they're familiar and make us feel safe. Our patients, and our nation, deserve better.
Donald Crane is president and CEO of CAPG, which represents physician organizations practicing capitated, coordinated care.