Further imagine that AFTER you have arrived safely and on-time, your selected airline requires a bonus – or incentivized payment – from you because they performed their work to your expectations. Perhaps you provide a ‘tip’ upon arrival at the gate, or promptly receive an ‘add-on’ fee to your credit card.
What if this new type of payment approach also occurred within other industries? For example, you take your car in for routine maintenance and servicing. In this scenario, you pay the vendor not only the cost for the work but also a small incentive bonus because it was performed to your satisfaction.
Or, consider the employer who works with a benefit consultant and pays the contractual fee charged by the consultant. At the end of the contract period, the employer is invoiced a ‘bonus incentive’ because it was somehow determined that he/she received quality ‘outcomes’ throughout the contract period.
Wait! Under the aforementioned scenarios, the airline, auto-mechanic and benefits consultant are ALREADY getting paid to provide ‘presumed’ quality services to their customer. Why should these vendors be paid an incentive – don’t they have ample motivation to fulfill their promises to customers? That motivation can be in the form of repeat business, enhanced reputation, customer referrals and a host of other incentives – including business survival! Shouldn’t the inclusion of quality service be part of the ‘base’ price paid to the vendor?
Absolutely! Quality should be included, and, in most industries, it is the minimum threshold in which the vendors perform their services to the public.
But in today’s healthcare world, we are frantically searching for payment incentives to boost care-quality based on several factors that include disease management, patient satisfaction and safety, along with hospital re-admission rates. Such incentives are provided through the Medicare Hospital Value-Based Purchasing Program, in addition to new payment deals arranged through private accountable care organizations around the country.
One may reasonably ask this simple question:
“Why do we need to incentivize provider behaviors to do things they SHOULD already be doing?” These incentives are touted to be ‘cost saving’ or ‘cost neutral’, but shouldn’t quality and safety already be baked into the existing bloated prices for the care we receive?
Revenue earned by today’s health providers is largely derived from third-party payers, such as government and private insurers. Because of this, provider revenue and subsequent behaviors are insulated from the end user – you and me – who seek care. By default, you and I are merely sideline spectators watching others determine how a nice chunk of our economy will eventually become priced for the services we seek. By not having a marketplace that allows for a true transactional buyer-seller relationship, incentives to push the ‘right’ provider motivations are in-vogue.
A huge trend in this country is to replace traditional fee-for-service reimbursement with incentive-based payments that encourage higher quality care and lower costs. Medicare, due to its sheer size, is taking the lead by boldly moving half of all Medicare payments in this direction by 2018. Private payers are also following with various experimental reimbursement methods.
Understanding the true motivations and behaviors of healthcare providers is obviously important to ensure that proper incentives are given. It does, however, seem quite paradoxical that we spend so much time, effort and resources to develop new toys to either motivate or pacify one-fifth of our economy to do what they should have been doing for years.
The reimbursement process has become a perpetual cat-and-mouse game between the payers and providers. And, you can be assured that ‘innovative’ payment incentives will proliferate into the unforeseeable future. Unfortunately, as the past has proven many times, unintended consequences eventually erupt from well-intentioned incentives, resulting in rather nefarious outcomes.
Perhaps someday, this mature sector can graduate from pacifiers to training wheels?
To learn more, we invite you to subscribe to our blog.