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Win-Win Payments for Providers and Payers

Rene Letourneau, for HealthLeaders Media, September 26, 2013

As healthcare moves away from fee-for-service to reimbursement models that reward quality and value, payers and providers are entering into new contract arrangements designed to align their financial incentives.

This article appears in the September issue of HealthLeaders magazine.

As healthcare moves away from fee-for-service to reimbursement models that reward quality and value, payers and providers are entering into new contract arrangements designed to align their financial incentives.

Although the relationship between these two sides historically has been adversarial, this innovative approach represents a chance for provider organizations to partner with payers to receive compensation for improving the quality of the care they deliver. Hospitals and health systems appear to realize the potential economic benefits: In the HealthLeaders Media Industry Survey 2013: Strategic Imperatives for an Evolving Industry, 64% of respondents cited value-based purchasing as an opportunity for their organization; only 20% labeled it a threat.

Many payers believe in the promise of these associations, too. In 2011, Hawaii Medical Service Association, an independent licensee of the Blue Cross Blue Shield Association, partnered with its statewide network of hospitals and the Premier healthcare alliance to launch a four-year program called Advanced Hospital Care. Through this initiative, HMSA is now tying 15% of reimbursements to outcomes for all hospitals, excluding small critical access facilities, using Premier's QUEST (Quality, Efficiency, Safety, Transparency) program as the framework.

"If you want to change behaviors, you've got to change incentives," says HMSA Chief Health Officer Hilton Raethel. Unlike a traditional fee-for-service model, which creates an antagonistic relationship between the provider and payer, the Advanced Hospital Care program creates shared goals and objectives, he says.

"Under this program we have aligned incentives, so it's a very different conversation with providers. It's a collaborative approach that is about improving care in the community, and that is what we should be doing."

HMSA is paying the fees for the hospitals to participate in the QUEST program and plans to extend the contract term beyond the original four years due to the significant results that have been achieved so far, including a 12.5% reduction in hospital readmissions and a 43% drop in hospital-acquired infections, Raethel says.

One reason for the program's success is transparency, Raethel believes. All participating hospitals see each other's data, and HMSA is working to make the information available to the public as well.

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