How Should We Pay for Health Care?

Improving the way we pay for health care must be a central component in health care reform. Payment reform must link provider reimbursement and accountability to improving patient value: better health outcomes delivered at lower cost. Today’s deeply flawed reimbursement approaches, however, fail this test. They actively discourage providers from delivering value to their patients. We believe that reimbursement through bundled payments is the only approach that aligns providers, payers, and suppliers in a healthy competition to increase patient value. A bundled payment is a single payment that covers all the procedures, tests, drugs, devices, and services involved in inpatient, outpatient, and rehabilitative care for a patient’s medical condition. For chronic conditions and primary care, a bundled payment is a single payment to cover the care for the condition or population segment over a specified time period. The bundled payment should be contingent on achieving good outcomes for the patient, with the provider bearing financial responsibility for poor outcomes, such as avoidable complications.