What’s in a name? The ABCs of provider payment reform.

Historically, the U.S. health care system has included misaligned incentives that reward doctors and hospitals based on quantity instead of quality.

That’s all changing as payers move away from fee-for-service toward performance-based reimbursement. This transition been accelerated by the Affordable Care Act, and new payment models are being tested across the country with support from the Medicare and Medicaid Innovation Center.

The Harvard Business Review notes that this new “value agenda” is intended to fix health care with a shift from a supply-driven system to patient-centered care. And it changes everything: It changes the way care is delivered. It changes the way results are measured. It changes reimbursement strategies.

And it introduces a whole new vocabulary into our lexicon.

It’s easy to get lost in the new lingo, so here’s an overview of the buzzwords being used in the health payment arena today.

Accountable care organizations (ACOs). These organizations are groups of doctors, hospitals, and other health care providers who work together to coordinate care and manage chronic disease. They are “accountable” to patients and payers for the cost and quality of care. ACOs are paid a set amount for each patient enrolled, which creates a shared-risk mechanism. Insurance companies are working hand-in-hand with hospital systems to create this transformation.

Alternative payment models. This umbrella term describes the move away from payments based on the quantity of medical procedures to payment based on the quality of care. This includes accountable care organizations, bundled payments and other quality-based reimbursement models.

Bundled payments.  A single payment that groups together services from multiple providers during a single episode of care. The American Medical Association uses this example: If a patient has cardiac bypass surgery, instead of paying the hospital, surgeon and anesthesiologist separately, the payer makes a single payment.

Consumer-driven health care. From a broad perspective, this refers to engaging and empowering beneficiaries in the delivery of health care services and benefits. This can take the form of consumer-driven plans, like high deductible health plans and health savings accounts. It also can provide more direct incentives. For example, some plans encourage beneficiaries to use transparency tools, and then rewards them for checking prices and/or for choosing less costly care options.    

Managed care. The concept of managed care goes back the Health Maintenance Organization Act of 1973 and the transition to HMOs. More than 40 years later, the approach continues to reduce unnecessary costs and improve the quality of care.

Population health. This moves the focus from the health of individuals to improving the health of an entire population by attacking chronic diseases and promoting healthy lifestyles. It encompasses a broad range of factors and conditions that influence health, and it aims to reduce health inequities among population sub-groups.

Value-based care reimbursement. Payers are driving this switch to a value-based reimbursement structure with a population health approach. The goal is to achieve better clinical outcomes across the community while lowering the total cost of care.

These shifts are keeping providers on their toes as they make fundamental changes that impact the delivery of care as well as back-office workflows and internal systems.

The bottom line? As value-based care becomes the norm, payers may be able to spend less overall, controlling the cost of care for employer groups and individuals while improving health outcomes.

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