Form drives function and incentives drive function. That’s the basic principle that is driving so many to focus on moving away from fee for service to alternative payment models. In March, Catalyst for Payment Reform issued a scorecard showing that barely 89% of total health plan payments were still fee for service. That means the prevailing incentive in health care is to produce more volume (the function), and health care providers are optimally organized to do just that (bad form). A year ago we asked Bailit Health Purchasing to provide an overview of some of the national activities related to bundled payments, essentially focusing on a part of the 11% not being paid fee-for-service. What they found was a number of health plans and providers engaged in pilots, trying to get through proof of concept. Since then, some of those pilots have closed up shop, preferring to either continue to focus on the prevailing incentive, or engaging payers in other payment alternatives. However, others have filled in the ranks, leaving the total number of active pilots stable, at 19. While that number seems paltry, there is an underlying shift that merits a closer look.
To do so, Bailit focuses on two case studies. One is about two Blue Cross Blue Shield plans that have moved resolutely to full, scalable implementations. The other is about a new model of financially integrating providers to accept financial risk from the new Medicare bundled payment pilot. Each offers important lessons. First, payment reform requires the adoption of new operating platforms that are not endogenous to health plans. That’s a big hurdle because most of the plan CFOs will look at the cost of adopting these new platforms as an incremental cost when they should, instead, look at it simply as a cost of doing business in a the new world of valuebased healthcare. Clay Christensen teaches us that most of these CFOs will get it wrong and jeopardize the future of their organizations. Second, non-integrated providers can band together to accept financial risk and improve their collective performance. Remedy Partners has facilitated that process for hundreds of physicians and hospitals across the country. Their analytic support and push to clinical integration assures that the financial integration will work. This is an essential lesson to payers everywhere. They keep looking for integrated systems that can take full risk, when in fact efficiencies are far better optimized by integrating service lines and taking performance risk instead of insurance risk. Again, the CFOs of many provider organizations will get this wrong, for the same reasons the health plan CFOs will get it wrong.
But for every one that gets it wrong, some will get it right, and this year’s report shows us that the momentum continues to build strongly towards thoughtful payment reform. We’ll know for sure next year whether the tide has turned, but if I were you, I wouldn’t bet against the innovators. I’d bet against the incumbents.
Francois de Brantes, MBA, MS
Health Care Incentives Improvement Institute