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New Payment System Will Reward Quality, Encourage Collaboration

I recently met with hospital leaders in North Carolina and across the nation to talk about health care reform.  As a member of the American Hospital Association’s task force on payment reform, we spent much of our time discussing how reform will likely change the way hospitals and other health care providers are paid (or not paid) for the care they provide.

The new payment structure we’re discussing will be designed to focus on the quality of care, instead of the amount of health care services provided.  Currently the nation employs a fee-for-service model where providers are paid for each service they deliver.  The AHA task force is devoting a good amount of time discussing the concept of bundling of payments – where all providers involved in a patient’s care will be paid one flat fee on an “incident of care” basis.  This bundling, as proposed by the government, would encourage teamwork among health care providers, improve cost efficiency and enhance health care quality and safety. Equally important, it will allow for better distribution and use of existing resources and therefore improve the access to care.

As a first step, we have identified several recommended guidance principles to help ensure that all health care providers across the nation are fairly compensated.  This includes figuring out how to handle the differences between various markets, types of institutions and physician practices and payment populations.  It’s important for our nation to create a sustainable model that will work for physicians and, of course, hospitals of all types:  rural hospitals that treat fewer patients, inner city hospitals that primarily care for low-income or uninsured patients and large non-profit hospital systems like WakeMed. 

The AHA task force still has quite a way to go because the national health care system is extremely complex, but when the work is complete, I will share with you a copy of the task force’s final observations and recommendations related to nation-wide reform.


2 thoughts on “New Payment System Will Reward Quality, Encourage Collaboration

  1. Thanks for the interesting post Dr. Atkinson. In the short term, what do you think of the Accountable Care Organizations being proposed in the reform legislation? Is the goal for the AHA committee to finish its work before any ACO projects are up and running? Thanks.

  2. Thanks for your questions, Adam.

    Accountable Care Organizations (ACOs) appear to be a good model for delivery of care in settings that have the resources, complex infrastructure, information systems and workforce necessary to provide and/or arrange for comprehensive, timely care. The “future of healthcare” model being discussed by the American Hospital Association (AHA) includes ACOs as a definite component of the long-term design. This said, there are some organizations around the US already capable of ACO operation. The AHA recognizes that some have the option – and even direct encouragement – to move forward with ACO development and operations with or without a formal “reform” of the present US healthcare “system.” I have spoken with several physician and administrative leaders in some of the nation’s most comprehensive healthcare provider organizations and they have almost to a person reported that their organizations view ACOs as a viable “next model” for their own groups. From a personal observation, I too believe ACOs represent a logical “next step” in the evolution of healthcare delivery and service as relates to access, cost and quality.

    Accountable Care Organizations (ACOs) are also an interesting alternative to the current fee-for-service payment model. Both ACOs and payment bundling models share the same end-goal, of improving cost efficiencies through collaboration and uniting care providers into a common risk pool. Each model has benefits and drawbacks, which would probably play out differently at various health care provider organizations. ACOs could potentially be even more collaborative than payment bundling, because ACOs provide the opportunity for physicians, hospitals and the other “providers” within healthcare to work together around the care they provide and the planning, coordination and balancing of funding that allows for that care.

    In evaluating how to improve the current system, it’s important to keep in mind that we can’t develop a single group of solutions that will work for everyone. There is no magic answer that will lower costs, increase coverage and improve quality at every hospital, physician’s office or other health setting across the country. It’s important to figure out how to handle the differences between various markets and types of health care institutions and providers when evaluating payment reform. And a great way to do this is through pilot projects. I am aware of a few healthcare originations that are already working on pilot project requests around ACOs. I believe many additional organizations will follow.


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