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July 09, 2016 01:00 AM

Dr. Reed Tuckson: The long-term prognosis for payment policy in an era of demand for value

Dr. Reed Tuckson
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    Dr. Reed Tuckson is managing director of Tuckson Health Connections. His background includes 13 years at UnitedHealth Group, the last seven as executive vice president and chief of medical affairs.

    The task of forecasting the direction of healthcare finance and payment is difficult enough in just the short term, given the pace and scope of change that characterizes today's strategic environment. Trying to look decades ahead is a particularly challenging task, made more so by the need to make a number of complex assumptions in a rapidly evolving industry. Any assumptions have to be considered with several variables in mind. And they're just as complex. Consider:

  • The available sources of funding and the extent of multipayer consolidation leverage on the marketplace.

  • The necessity and willingness to use political intervention to shape the organization and financing of care.

  • The characteristics of the delivery system, including provider supply/demand ratios and the status of provider consolidation, as they affect price negotiation.

  • The ability of biopharma and technology innovation to produce value in care outcomes and the relationship between value and pricing.

  • The sophistication of health information technology systems and analytics to provide transparent and actionable information about the relationships between cost/price outcomes.

  • The lessons learned and the foundation established from today's innovations in value-based reimbursement.

  • The prevalence of chronic illness—especially conditions that are preventable—which will determine the demand for preventive and clinical services.
  • Cost, consumerism and value

    One trend that can be predicted with some certainty is that the ongoing imperative for cost control will significantly influence the ultimate impact of those variables and any assumptions we make. Of course, since no one can predict exactly how market forces will play out over a long period of time, we need to concentrate prognostications on what payment should look like as we envision the future.

    By nature, I'm an optimist, and over the duration of my career I have developed an appreciation for the intelligence of our nation's clinical and stakeholder leaders. Given the larger social purposes and consequences of payment for health and medical care delivery, it is imperative that we get it right. So here's what I see:

  • Cost pressures will remain a dominant force that will drive discipline in all aspects of healthcare financing. Access to health and medical care will remain an essential priority for our nation, but it will not be permitted to account for any significant increase in the nation's gross domestic product or public expenditures above what it represents today.

  • Healthcare funding will be dominated by public expenditures at the federal and state levels. However, there will still be a role, although significantly diminished, for employer participation by those companies and industries requiring incentives to attract highly skilled employees. These include direct service contracting, innovative benefit designs, premium subsidies and wellness services. There also will be increasing collaboration and leveraging between private and public purchasers, payers, and consumers as they identify and implement strategies that improve value and control costs.

  • Of particular importance will be the increasing role of consumers, who will have multiple opportunities to interact with health and medical care services in a true consumer market retail economy, outside of traditional insurance, especially for routine sick care and preventive services. Many telehealth-enabled services, whether delivered online at home or in kiosks located in pharmacies and other consumer-friendly facilities are but one of many examples. The availability of new consumer tools, including pricing transparency and alternative monetary transaction mechanisms—advanced systems following in the footsteps of offerings such as Apple Pay, Venmo and bitcoin—will also be fully realized in healthcare. As such, a significant amount of primary care will be delivered outside of traditional insurance.

  • Today's payment systems serve not only to reimburse for services rendered but to propel enhanced value in care delivery. Today's performance demands, innovations and best practices will drive the next generations of physicians, other health professionals and health facility leaders operating in well-established, health professional-led cultures, focused on the value imperative and informed by health information technology and analytics. The tenets of “population health” philosophies and responsibility for total outcomes of care will have been firmly established. Meanwhile, the measurement of care delivery performance will be transparent and based on actionable metrics for continuous quality improvement, network inclusion, consumer decisionmaking and payment. As a result, the underlying mechanisms of payment will be firmly aligned with the demonstration of value. For complex and tertiary care, the underlying cost and risk economics will be understood well enough, combined with the practice infrastructure enhancements noted above, to lead to globally capitated models as the dominant payment format. Stand-alone fee-for-service will have ceased to exist except in the consumer retail marketplace.

  • Given the importance of unit costs to the payment formula, we can easily predict that public and private payers and purchasers will continue to vigorously negotiate with increasingly consolidated care providers. Inevitably, unit cost escalation will be controlled within the limits necessary to ensure affordable access to care for all. Unfortunately, it's not unreasonable to expect that government price controls will have been necessary for especially challenging issues—such as pharmaceutical pricing—because it is doubtful that existing market forces will have resulted in long-term solutions.

    Ultimately, as an optimist who believes in the creative intelligence and social responsibility of all the stakeholders in this industry, I'm confident we will develop the tools, innovations, financing mechanisms and social policies necessary to achieve the optimal balance between access, quality and affordability.

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        • - Hospital of the Future (Fall)
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