November 16, 2009

Global Payments to Improve Quality and Efficiency in Medicaid: Concepts and Considerations

This brief was written by Mark Heit, Sellers Dorsey, and Kip Piper, Sellers Dorsey. In this brief, the writers state that there is general consensus that public and private payers need to better align provider payments to encourage delivery of effective, efficient and high-quality care. Among the many solutions being considered is the use of global payments. Fee-for-service (FFS) reimbursement is the primary form of provider reimbursement used by health care payers. In simple terms, FFS creates an incentive for providers to increase volume rather than value, as it does not reward for the clinical efficacy and cost-effectiveness of the care that providers deliver. Under global payments, providers would be paid a set amount to provide all care for a person for a defined contract period. With payment to providers fixed under this model, there is a disincentive to provide costly and unnecessary care. On July 16th 2009, the Massachusetts Special Commission on the Health Care Payment System recommended that the Commonwealth transition to a system of global payments for healthcare providers over the next three to five years. Payers are beginning to experiment with various new forms of reimbursement, including bundled payment and global payment approaches. This initiative will combine physician and hospital payments for certain identified conditions, strengthening the financial incentive for physician-hospital coordination. In Massachusetts, Blue Cross Blue Shield has developed the Alternative Quality Contract (AQC), which is paying hospitals or physician practices a global fee to reimburse for all care provided to members assigned to the contracted entity. Outside Section 117 authorizes the Secretary of Health and Human Services to "establish an aggregate prospective payment to cover the total cost of a defined set of health care services...creating incentives for such providers to integrate services, manage costs and utilization, and ensure high-quality care."