Exit Strategy

Farewell, Fee for Service

  Feature 2 - Exit Strategy
By Sandy Graham

See the doctor. Get a blood test. Take a flu shot. Have your gall bladder removed.

Each service, whether an office visit, lab test, immunization or operation, involves a payment, a model known as fee for service.

"Today, and this rings true for most health insurance carriers, the reimbursement model is fee for service," says Janet Pogar, regional vice president of Anthem Blue Cross and Blue Shield of Colorado and Nevada.

But gradually, the traditional payment system in health insurance is starting to change with the goal of controlling costs and improving quality of care. Insurers are exploring new care models and how to pay for them, collecting better data on which to base decisions and designing insurance plans to encourage insured individuals to make better health care choices. The Affordable Care Act (ACA) has influenced some of these steps, but insurers are initiating many of them.

"There are always changes that insurers are making; these continue alongside specific responses to the ACA," says Paul B. Ginsburg, president of the Center for Studying Health System Change in Washington, D.C.

For example, Ginsburg sees more insurers contracting with health care providers to form accountable care organizations, which bring together the various segments of the health industry – primary care, specialty care, hospitals, home health care and more – into networks that share responsibility for providing quality care to patients. While the ACA promotes accountable care organizations for Medicare, the publicly funded health plan for older Americans, many insurance companies and health care providers are going ahead independently.

"The ACA likely made these ideas more prominent, but insurers are not waiting to piggyback on Medicare pilots," Ginsburg says.

With the fee-for-service model, there is little incentive to limit the quantity of care or seek lower-cost alternatives. A reformed system would give providers financial incentives to avoid unnecessary care and provide quality care.

For example, some insurers are encouraging a care model called the patient-centered medical home in which a team of providers coordinates comprehensive, continuous care that strives to keep individuals healthier. Practitioners in the medical home model might receive a flat fee from insurers to care for each patient or might get incentive payments for achieving good-health benchmarks such as controlling hypertension, keeping cholesterol low or immunizing children.

When Anthem Blue Cross and Blue Shield participated in a multiyear medical home project with several other health insurance giants a few years ago, "we liked what we saw," Pogar says. Blue Cross Blue Shield members in medical homes had fewer emergency room visits, fewer hospital admissions and fewer visits to specialists.

Beginning this year, the company is working with some larger medical practices with large numbers of Anthem members to encourage them to benchmark care to clinical guidelines. Ultimately, in the second phase of the company's reform efforts, providers will be paid a set amount per member per month. Those providers who keep the cost of caring for each member below that amount keep the balance. Ultimately, in a third phase, Anthem will support the formation of additional accountable care organizations.

"We want them to really have some skin in the game," Pogar says. "We want to reimburse [providers] for the right kind of care at the right time with the right collaboration."

In addition to reforming health care payment, insurers also are adopting value-based benefit design, which promotes "bang for your buck" services or treatments. For example, flu shots might be free, but an MRI for a backache would involve a sizable copay because there is not strong evidence that an MRI would help diagnose the problem.

Ginsburg says that large employers striving to bring health insurance costs under control are among the biggest proponents of this. "It's pretty easy for insurers to implement [value-based benefits] when their clients want it," he says.

Anthem is studying the idea, Pogar says, and will work with providers to make sure they are developing plans that help providers and customers reach health quality goals. "We'll ask them, 'What can we do to help you get the outcomes we all want?'" she says.

Several large companies have successfully introduced value-based benefits, according to The Commonwealth Fund, a private foundation working toward a high-performance health system. The fund's 2009 study cites Colorado Springs School District 11, which provided financial incentives to its insured employees for minimally invasive surgery instead of "open" surgery. The district saved $1 million.

When it comes to forming a health care system that delivers good value and quality care, good data are needed. Colorado has been a pioneer in forming an All-Payer Claims Database. Administered by the Center for Improving Value in Health Care, the database will aggregate information from medical, dental, pharmacy and other claims through public and private payers. The information can be used for policymakers and those who consume health care to track and ultimately reduce health care costs.

The first database was set up in Maryland in 1998; 11 states now have them. Colorado's law was passed in 2009, and supporters were still trying to find funding for the effort as this issue of Health Elevations went to press.

Although the database doesn't affect the cost of health care or insurance as directly as some other steps, Colorado formed a Medical Clean Claims Task Force in 2010. Consisting of providers, payers and government representatives, the task force is developing a uniform set of insurance codes and payment rules to be used by all payers contracting with health care providers. The goal is to reduce the time and money providers spend trying to get claims paid.

Together, insurer-initiated changes in insurance payment, benefit design and similar efforts are likely to have a bigger impact than the ACA on the country's skyrocketing health costs, says Jim Riesberg, Colorado's insurance commissioner.

"The ACA is not primarily about driving down costs. It's about getting people insured," Riesberg says. "Cost control will come about through insurance contracts with provider networks."