Going Global: Health Officials Trumpet Moving Away from Fee-for-Service System

HealthLeaders Media Staff, October 22, 2009

Five healthcare officials from varying parts of healthcare said a new global payment system would reward physicians for quality and care coordination, reduce over-utilization, and would pay for results rather than services.

Speaking at the Center for Connected Health's sixth annual symposium Wednesday, Tom Lee, MD, network president at Partners HealthCare, said the health system should focus on improving value rather than bending the cost curve. Lee said one misconception is that global payments will result in cheaper per member per month payment. Instead, global payments provide better quality, he said.

"[A global payment structure] is not going to solve the cost challenges we have," said Lee, who is a physician. "I think the future is groups thinking about value in a disciplined way."

Robert Mechanic, senior fellow and director of Brandeis University's Health Industry Forum, said global payments are an opportunity to shift to a system that rewards higher-value activities and enables providers to use technology like online consultations and home monitoring.

One example of a move to global payments is Massachusetts. A state coalition of healthcare stakeholders recently recommended that the state move from a fee-for-service structure to global payments.

Glen Shor, the assistant secretary for healthcare policy in Massachusetts who worked on the payment reform effort, said state leaders still need to work out details in the plan, such as whether Massachusetts will create an oversight entity to help steer payment changes and make sure there are no legal or antitrust barriers in place that would impede the payment reform.

Massachusetts will also have to help providers move to global payments by educating them about contracting and care coordination practices, he said.

Mechanic said the Massachusetts payment change sets a definite timeframe in which providers can transition to global payments. But it also allows for flexibility to allow providers to remain in the fee-for-service structure if they prefer.

"We need to have an approach that is flexible," said Mechanic, adding that a new payment structure should also reward physicians who make the switch to global payments.

Another example of global payments is Blue Cross Blue Shield of Massachusetts, which offers providers an Alternative Quality Contract (AQC). BCBS of MA give providers who take part in AQC a baseline payment that is the same as the current fee-for-service contract as well as bonuses of up to 10% if the providers reach certain quality goals.

Andrew Dreyfus, executive vice president at BCBS of MA, said AQC is different from capitation, which is often criticized as a failed managed care relic of the 1990s, because AQC provides incentives and health status adjustments in the payments, which will sway doctors from declining care to high-cost patients. BCBS of MA will also share risk with physicians and hospitals through reinsurance and stop-loss insurance, he said.

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