Editor’s note: The article that follows originally appeared as a column under a different title in the Idaho Statesman’s Business Insider.
I firmly believe that the fee-for-service payment model is at the root of the problems with the health care delivery system in the United States, and that if we are to reform health care, then we must evolve to value-based payments.
"Fee for service" is payment to health care providers for every service, test and procedure they perform, regardless of the appropriateness, necessity or outcome. Value-based payments are tied to quality, safety or outcomes of care.
Some people think the more services provided, the better. That is not the case.
For example, when CT scans are overused, patients are exposed to excessive radiation. Not infrequently, clinicians find "abnormalities" that turn out to be nothing of consequence but that result in more procedures and the cost of unnecessary evaluation.
Sometimes, when clinicians prescribe antibiotics for a patient who has a viral infection, not only does the patient incur the costs of a prescription that confers no value, but he or she also may develop complications from the antibiotics themselves.
The provision of low-value or no-value services in this country accounts for 30 percent to 50 percent of health care spending and presents a tremendous opportunity to reduce costs.
St. Luke's has been working to transform our clinical care model to reduce low-value services and to promote care coordination, but under fee-for-service reimbursement, every service that we don't provide is lost revenue. Additionally, all the costs we incur in care coordination to prevent unnecessary services are unreimbursed, making this transformation slow and difficult.
St. Luke's has advocated for value-based payments to promote health and wellness, prevent avoidable hospitalizations and complications and coordinate care.
To that end, St. Luke's became Idaho's first federally designated Accountable Care Organization just over two years ago, in a model where St. Luke's takes accountability for both the costs and the outcomes of care for about 25,000 Medicare patients. In just the first year, we reduced per-beneficiary spending by 2 percent. Spending went up 2 percent for Medicare patients elsewhere.
American health care is now approaching a tipping point that will help drive value. The U.S. Department of Health and Human Services has just announced plans to move the Medicare program towards value-based payments and has committed to ensuring that 85 percent of its payments through the fee-for-service Medicare program are value-based by 2016 and that 90 percent are by 2018.
This is what St. Luke's has been waiting for! This will help accelerate the changes we have been working on and will benefit the people of Idaho as we work to provide better health, better care and lower cost for the population as a whole.
Idaho also has received a federal grant to help accelerate development of patient-centered medical homes, interoperable electronic health records and care coordination, with the participation of the major insurance companies. The goal is to have 80 percent of all payments in Idaho be value-based within five years.
These steps are game-changers. Health care will be at the tipping point as soon as next year. For St. Luke's, it's not a moment too soon.
David C. Pate, M.D., J.D., is president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.