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Alternatives to Medicare's fee-for-service payment system examined

For years policymakers have attempted to replace Medicare's fee-for- service payment system with approaches that pay one price for an aggregation of services. The intent has been to reward providers for offering needed care in the most appropriate and cost-effective manner. But many of these programs have known pitfalls, says Stuart Altman, an economist and the Sol C. Chaikin Professor of National Health Policy at the Heller School for Social Policy and Management, Brandeis University.

On Friday, Sept. 7, Altman and his Heller school colleague Robert Mechanic, will take part in a briefing at the National Press Club in Washington, D.C. sponsored by the journal Health Affairs. Altman will discuss his recently published article in the Sept. issued of Health Affairs: "The Lessons Of Medicare's Prospective Payment System Show That The Bundled Payment Program Faces Challenges."

This edition of Health Affairs, entitled "Payment Reform To Achieve Better Health," is specifically devoted to current and future challenges surrounding payment reform in health, specifically examining current and future challenges regarding payment reform in the U.S. health care system.

Altman has been involved in debates over U.S. health reform since the 1970s, when he was deputy assistant secretary for planning and evaluation/health at the Department of Health, Education, and Welfare, which later became the Department of Health and Human Services. In 1977 President Bill Clinton appointed Altman to the National Bipartisan Commission on the Future of Medicare.

Altman's article provides a detailed analysis of how Medicare implemented the hospital prospective payment system, how hospitals responded to the new incentives, and lessons learned that are applicable to the bundled payment initiative. These lessons include that any Medicare payment reform needs to respond to the many different elements of the health system, and that payment reform should be coupled with reforms in private insurance payment.

Medicare's first payment change was the hospital prospective payment system, introduced during 1983󈟀. But because it focused only on hospital care, its impact on total Medicare spending was limited.

In 2011 Medicare began a new initiative to expand the "bundled payment" concept to link payments for multiple services that patients receive during an episode of care. The goal of Medicare's current bundled payment initiative is to provide incentives to deliver health care more efficiently while maintaining or improving quality.

Robert Mechanic, a senior fellow at the Heller School for Social Policy and Management, along with Darren Zinner, a social scientist at the Schneider Institute for Health Policy and a senior lecturer at the Heller School, have also published an article in the September issue of Heath Affairs. The article, entitled "Many Large Medical Groups Will Need To Acquire New Skills And Tools To Be Ready For Payment Reform," is a survey study regarding the readiness of medical groups for payment reform, particularly reform which holds health systems accountable for delivering care under predetermined budgets to help control spending.

The article also addresses improvements that medical groups might make to advance their readiness for payment reform. Mechanic and Zinner surveyed twenty-one large, multispecialty groups and list their findings within the study.

Mechanic was previously a senior health care analyst with Forrester Research and a senior vice president of the Massachusetts Hospital Association. From 1988 to 1998 he was a consultant and vice president with the Lewin Group, a Washington, DC-based health care consulting firm. He is currently a trustee of Atrius Health, a 1,000-physician multispecialty group practice.

His co-author, Darren Zinner, is a senior member of Brandeis University's Health Industry Forum, in addition to being a social scientist and lecturer. His research focuses on the management and structure of the U.S. scientific enterprise, especially on how funding for and the organization of scientific teams affects productivity and outcomes.


Contact: Susan Chaityn Lebovits
Brandeis University

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