Economic Incentives to Promote Innovation in Healthcare Delivery
- Harold S. Luft PhD
- … show all 1 hide
Economics influences how medical care is delivered, organized, and progresses. Fee-for-service payment encourages delivery of services. Fee-for-individual-service, however, offers no incentives for clinicians to efficiently organize the care their patients need. Global capitation provides such incentives; it works well in highly integrated practices but not for independent practitioners. The failures of utilization management in the 1990s demonstrated the need for a third alternative to better align incentives, such as bundling payment for an episode of care. Building on Medicare’s approach to hospital payment, one can define expanded diagnosis-related groups that include all hospital, physician, and other costs during the stay and appropriate preadmission and postdischarge periods. Physicians and hospitals voluntarily forming a new entity (a care delivery team) would receive such bundled payments along with complete flexibility in allocating the funds. Modifications to gainsharing and antikickback rules, as well as reforms to malpractice liability laws, will facilitate the functioning of the care delivery teams. The implicit financial incentives encourage efficient care for the patient; the episode focus will facilitate measuring patient outcomes. Payment can be based on the resources used by those care delivery teams achieving superior outcomes, thereby fostering innovation improving outcomes and reducing waste.
- Barboza D. China orders new oversight of heparin, with tainted batches tied to U.S. deaths. New York Times. March 22, 2008. Available at: http://www.nytimes.com/2008/03/22/world/asia/22heparin.html. Accessed November 29, 2008.
- Centers for Medicare and Medicaid Services. CMS announces sites for demonstration to encourage greater collaboration and improve quality using bundled hospital payment, January 7, 2009. Available at: http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3394&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=false&cboOrder=date. Accessed May 6, 2009.
- Herzlinger R. Market Driven Health Care: Who Wins, Who Loses in the Transformation of America’s Largest Service Industry. New York, NY: Basic Books; 1999.
- Lenzer J. Healthcare group agrees $500 m settlement for unnecessary surgery. BMJ. 2006;333:59. CrossRef
- Luft HS. Total Cure: The Antidote to the Health Care Crisis. Cambridge, MA: Harvard University Press; 2008.
- Lurie JD, Bell JE, Weinstein J. What rate of utilization is appropriate in musculoskeletal care? Clin Orthop Relat Res. 2009 May 19. [ePub ahead of print].
- Economic Incentives to Promote Innovation in Healthcare Delivery
- Open Access
- Available under Open Access This content is freely available online to anyone, anywhere at any time.
Clinical Orthopaedics and Related Research®
Volume 467, Issue 10 , pp 2497-2505
- Cover Date
- Print ISSN
- Online ISSN
- Additional Links
- Industry Sectors
- Author Affiliations
- 1. Palo Alto Medical Foundation Research Institute, Health Policy Research, 795 El Camino Real, Ames Building, Palo Alto, CA, 94301, USA