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Evaluating how healthcare payment reform is really working

Medicare, Medicaid and commercial payers have made broad and sweeping changes to how they pay healthcare providers over the past eight years, 
with the goal of improving the quality, efficiency and affordability of healthcare. The industry is eager to know if, at a macro level, these efforts have succeeded.

Although evaluations of specific payment reform programs have produced mixed results, there is enough promise in each that experimentation will continue. But assessing the impact of one program at a time means looking at a tree, not the forest. Given how adaptable our healthcare system is, we may miss the real story unless we also take stock of the bigger picture.

Since 2013, Catalyst for Payment Reform has fielded scorecards on payment reform that measure both how much and what type of reforms are in place. We have since added metrics to shed light on whether payment reform correlates with improved quality and affordability across the healthcare system. Local healthcare improvement groups in Colorado, New Jersey and Virginia applied to pilot the new scorecards in their states and are using the resulting baseline information to steer strategic action. We are now working with a fourth state—New York—to replicate the scorecard with results expected in late 2019.

While my organization’s scorecards do not identify direct causal relationships between specific payment methods and specific outcomes, they do explore the relationship between the types of payment methods taking root and concurrent changes in healthcare quality and cost. The success of one payment reform program may not be scalable or may have negative ramifications as healthcare providers seek to maintain or maximize their revenue. Thus, it is critical to determine at the system level whether this flurry of activity to reform how we pay healthcare providers is leading to the intended outcomes.



While the results from the three pilot states show significant geographic variation, the states share similar reasons for their interest in the findings, including:

Traditional payments still dominate, despite the common opinion that we must “move away from fee-for-service.” In fact, shared savings and pay-for-performance—both of which are built on top of fee-for-service—are the most prominent payment reform methods in all three states.

Only in Colorado’s Medicaid market did a notable percentage of dollars flow through methods not based on fee-for-service, like payment for “non-visit functions” (a catchall category for payments intended to support quality improvements, but not directly tied to the delivery of services, such as payment for care coordination and after-hours availability) and bundled payments, which accounted for 9.5% of total Medicaid dollars in the state. Meanwhile, in commercial markets, bundled payments barely figure in the accounting, making up less than 1% of payments.

In each of the three states, more than 1 of every 10 people reported forgoing medical care due to concerns about cost. A commitment to increase the affordability of healthcare for residents was at the forefront of stakeholder reactions. Containing costs in the Medicaid market is a top concern for policymakers, particularly in states like Virginia, which recently moved to expand Medicaid to an additional 400,000 Virginians in 2019.

National averages for quality of care aren’t a high enough aspiration. Even though New Jersey beat the national average for the percentage of patients with diabetes who had adequately controlled hemoglobin A1c levels, stakeholders want to know which payment methods could help achieve quality results that are far better.

Payment reform is a means to use financial incentives to change behavior and potentially drive delivery reforms that improve outcomes. But the jury is still out on whether it’s working to improve care and make it more efficient and affordable. Going forward, we need bold experimentation and rigorous evaluation—of both the trees and the forest—to figure out how to get it right.

Interested in submitting a Guest Expert op-ed? Send drafts to Assistant Managing Editor David May at [email protected]


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