Can We Fix the Healthcare Payment Mess?

Today’s healthcare payment system has produced a perplexing array of cross subsidies, hidden taxes and conflicting incentives, making it costly to administer and difficult to understand. And it has created such an intricate maze of conflicting incentives and priorities that any proposed solution damages at least one of the system’s stakeholders — government, payers, providers, business, and consumers.

To move healthcare toward a more effective payment system, the Healthcare Financial Management Association (HFMA) and GE Healthcare Financial Services have released Healthcare Payment: Goals, Trends, and Strategies, the first installment of the Financing the Future III series. Based on the experience and analysis of national thought leaders, the report advocates a payment system that rewards efficiency, quality and consumer involvement, but emphasizes such a system will require compromise and collaboration among all the stakeholders.

“The magnitude of these payment challenges and the consequences of failing to resolve them require stakeholders to give up adversarial relationships and competing agendas and work together to develop rational customer-focused payment strategies,” says Richard L. Clarke, DHA, FHFMA, President and CEO of HFMA.

This first installment takes a deeper look at payment system goals and gaps; today’s payment trends, including consumer-direct healthcare and pay for performance; and strategies for addressing the current situation.

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Randy Fuller, Manager of Market Intelligence for GE Healthcare Financial Services, highlights the importance of enhanced quality to payment system improvement. “Quality is a huge issue. To the extent providers could become more efficient and raise the overall quality equation, they could go a long way to making payers and consumers more content with the healthcare dollars they are spending,” Fuller says.

Key points emerging from the study include:

• While consumers will gain increasing influence over how healthcare dollars are spent, the impact of those decisions will vary widely by service type. For example, inpatient revenue may not change dramatically, because those services are less discretionary. On the other hand, competition between physicians and hospitals for outpatient services is likely to intensify, exacerbated by a waning market for expensive outpatient procedures.
• The momentum toward pay for performance is strong, with Medicare and other payers becoming a more active force to encourage quality and efficiency. However, much work remains to agree on what outcomes should be measured and how to measure them. The industry and its information systems must mature in their ability to collect, analyze, and apply outcomes data to a payment formula.

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The study also recommends best practices for organizations striving to meet the challenges posed by the evolution of healthcare financing mechanisms. According to the report, financial executives should work closely with:

• Financial, clinical, and operations leaders need to collaborate to measure and enhance quality and patient satisfaction, alter strategic plans to focus on operational and clinical excellence.
• Provider organizations need to be able to gather and communicate pricing information in a manner that will be meaningful for patients.
• Providers and payers need to collaborate to simplify charge systems, enhance transparency in contracting, and promote timely exchange of eligibility and benefits information.

They also should focus on training and staffing practices to support a new breed of patient financial services professionals with the skills to respond to patient demands for pricing information and financial counseling.

To read the complete study, please visit www.financingthefuture.org.