Controlling Costs and Reforming Payment Approaches


Key transformations in the organization and delivery of care hold great promise not only for improvements in quality and efficiency but for cost containment as well. However, capitalizing on these transformations may require funding to conduct comparative effectiveness research and develop tools for using it. Such research would provide an objective basis for selecting appropriate procedures, preventive services, and interventions. Three strategies that could both improve quality and decrease costs are the efficient use of health information technology (HIT), payment structures that provide incentives for desired outcomes, and care coordination.

More widespread use of HIT: This technology can help clinicians adhere to evidence-based practice guidelines, eliminate service duplication, make correct diagnoses, and reduce errors (e.g., those caused by illegible handwriting). Sharing electronic information among providers can promote coordination. HIT can also remind clinicians and patients to use preventive services and enhance consumers’ self-management and engagement by affording them access to their personal health information. It would streamline administrative processes through electronic appointments and speed retrieval of test results.

Strategies that align payment with desired outcomes: These strategies would encourage higher-quality and more efficient care. Examples include lower payments for preventable hospital readmissions and shared-risk strategies. Another example is refusing payment for services that should never have been provided (“never events”), such as surgery on the wrong body part. New payment methods that create quality incentives should include robust risk adjustment so that providers do not avoid high-cost patients and measures that assess performance.

Improved care coordination: Better care coordination, along with more patient- and family-centered care, would improve quality and potentially save resources by avoiding duplicative tests and repeated hospital visits. Improved coordination among clinicians would also improve the quality of care patients receive as they transition among clinicians and care settings. This is particularly important for individuals with chronic conditions and long-term services and supports needs. Research is needed to inform methods of payment and service delivery. It would be beneficial to consider how operations research could inform clinical practice.

Consumer incentives: These could encourage the use of higher-value services and could lead to cost savings if patients seek care from the most effective and efficient practitioners and providers.



Strategies to reduce health care costs

Federal and state governments and employers should explore and pursue innovative strategies to reduce health care costs- to constrain growth in price, volume, and intensity of health care services without compromising quality of care or inappropriately denying access to care. Cost-containment efforts should address the root causes of unproductive cost growth. They should not create incentives to shift costs inappropriately to patients or other payers.

While transparency efforts may play an important role in improving the value of care, the burden of health care cost reduction should not fall primarily on the consumer.

Payment approaches

Federal and state governments should test and evaluate payment approaches that create incentives for providers to be more efficient and effective and that reward good-quality care. Payment approaches should have robust risk adjustment (so that providers do not benefit from avoiding high-cost patients) and be designed to hold providers accountable. In addition, they should be fully transparent, fair, and feasible to implement and administer. Meaningful performance measures will be needed to align with appropriate incentives and hold providers accountable for quality.