Lack of Payment Reform Leads to Fragmented Care

The nation's health care delivery and payment systems primarily are organized to support the diagnosis and treatment of acute or episodic conditions, resulting in fragmented, ineffective and costly care for people with chronic diseases. That's according to a new study conducted by the Center for Studying Health System Change, or HSC.

"Getting What We Pay For: Innovations Lacking in Provider Payment Reform for Chronic Disease Care" found "widespread acknowledgement that current provider payment methods do not encourage efficient or effective delivery of chronic disease care." At the same time, actual fundamental payment reforms are virtually nonexistent, perpetuating a disjointed health care system that fails to adequately compensate providers for prevention or care coordination.

The study, which was funded by the California Healthcare Foundation, is based on a review of the literature and 33 semi-structured interviews with market observers and stakeholders -- including the medical directors of health plans and employer groups -- between September 2007 and January 2008. It cites the prevalence and costs of chronic diseases in the United States, pointing out, for example, that chronic illnesses account for 70 percent of all U.S. deaths and 75 percent of the nation's $2 trillion in annual medical costs. Chronic conditions also cause major limitations in activity for 25 million Americans, says the study.

"People with chronic conditions, particularly those with more than one chronic disease, typically receive care from multiple providers and take multiple prescription medications," the HSC study says. "Consequently, there is increased risk for duplication of services and tests, avoidable hospitalizations, and adverse drug reactions."

The study does not make any specific recommendations, but the authors point out that "optimal care for people with chronic diseases involves coordinated, continuous treatment by a multidisciplinary team of health care professionals." The authors also list the components of the Chronic Care Model as essential elements of a health care system that encourages high-quality disease care, and they briefly mention the patient-centered medical home as an example of a payment reform model.

The report is critical of the three payment modalities that currently dominate the public and private payer systems: fee-for-service, capitation and pay-for-performance. Each payment modality fails in its own way to promote optimal chronic disease care, according to the study.

Fee-for-service, for example, rewards high volume, creating incentives for overuse and duplication of services. Capitation, by contrast, creates incentives to withhold care or even to avoid taking care of high-risk patients, and pay-for-performance programs were never intended to serve as a comprehensive approach to provider payment for chronic disease care, according to the report.

But the biggest drawback of each payment method is the failure to recognize and reward physicians for care coordination, says Ann Tynan, M.P.H., an HSC researcher and co-author of the study.

Chronic disease care often focuses on expensive procedures and diagnostics, such as diagnostic scans, at the expense of prevention and care coordination, said Tynan in an interview with AAFP News Now. At the same time, there is not a great deal of incentive or will in the private health care sector to change the existing payment systems.

The report itself lists four barriers to payment reform: fragmented care delivery, lack of payment for nonphysician providers and services supportive of chronic disease care, the potential for revenue reductions, and a lack of a viable reform champion.

However, the study does describe several payment-reform experiments and pilots that are taking place in various parts of the country.

"We were hoping to find more than what we did in terms of a lot of the innovation going on," said Tynan. "What we found is people are very aware of (payment reform). They are talking about it. They are thinking about it. It just takes time."

The HSC study identifies Medicare as a potential catalyst for major payment reform, saying, for example, that "for any major payment reform to gain traction, it would likely have to be adopted by Medicare, the largest single payer of health care services nationally."

"Given its size -- in terms of beneficiaries and expenditures nationally -- and political significance, Medicare has considerable influence," the report says. "In contrast, the private sector -- with its fragmented health care purchasing structure -- is less likely to be able to successfully champion a task as onerous as payment reform."