Recent
studies suggest that at least 35%—and maybe over 50%—of all health care
spending in the U.S. is wasted on inadequate, unnecessary, and inefficient care
and suboptimal business processes. But efforts to get rid of that waste face a
huge challenge: Under current payment methods, the providers who develop
more-cost-effective approaches don’t receive any of the savings. Instead, the
money goes mainly to insurers. The providers, who are paid for the volume of
services delivered, end up actually losing money, which undermines their
finances and their ability to invest in more cost-saving innovations. To
address this quandary, say two top execs from the nonprofit Intermountain
Healthcare system, we need a different way to pay for health care:
population-based payment. PBP gives care delivery groups a fixed per-person
payment that covers all of an individual’s health care services in a given
year. Under it, providers benefit from the savings of all efforts to attack
waste, encouraging them to do it more. And though PBP may sound similar to the
HMOs of the 1990s, there are significant twists: Payments go directly to care
delivery groups, and patients’ physicians—not insurance companies—assume
responsibility for overseeing and managing the cost of treatment. Provider
groups are also required to meet quality standards that further protect
patients. By applying PBP in just part of its system, Intermountain, which
serves 2 million people, has been able to chop $688 million in annual waste and
bring total costs down 13%. [ABSTRACT FROM AUTHOR]