Everything Old Is New Again

Blue Cross Blue Shield of Massachusetts Inc. recently announced a deal covering 60,000 members of the Caritas Christi Health Care system. The new payment arrangement is touted as one of the country's largest experiments in fundamentally changing the way doctors and hospitals are paid.

The contract includes a so-called global payment system in which the hospitals will be paid fixed amounts based on the estimated annual costs of patients’ care instead of the fee-for-service system in which providers bill insurers for individual visits and procedures. It also includes incentives to improve the quality and affordability of care.

Not to take anything away from a health plan attempting to address the ills of fee for service incentives, but the new system has an old name: capitation.

Capitation payment systems have been used in many forms for many years. However capitation has not become the predominant payment system in US healthcare because it shifts the provider incentives from doing too much to potentially doing too little. Providers want to deliver good care and be compensated in a reasonable manner. Asking providers to be the arbiters of the value of treatments puts them in an uncomfortable, if not impossible, position.

Patients should decide the value of treatment options. Different patients will make different decisions.

To actually make a fundamental change the current healthcare system, health plans need to support pricing transparency and plan designs that let patients have some 'skin in the game' as they make decisions.

Related articles:
WSJ
Boston.com