To address the current flawed payment system, it is necessary to ensure that financial incentives promote quality care and patient health. Health care organizations and private health plans have been testing new models of care delivery; many of these innovations have shown initial success in improving quality and value (Higgins et al., 2011a; Milstein and Gilbertson, 2009; Song et al., 2011). Similarly, the Patient Protection and Affordable Care Act of 2010 has created opportunities to explore pilot delivery models, such as through the Center for Medicare & Medicaid Innovation, and established several new models for Medicare and Medicaid payment, such as the formation of accountable care organizations (Thorpe and Ogden, 2010). Both private and public innovations in health care payment offer opportunities to transition the health care system toward one characterized by continuous improvement. One example is described in Box 8-3.

There are multiple methods for transitioning health care incentives from the current system toward one that rewards value (Table 8-2). These methods may build on existing models, such as by adding incentives for care coordination or shared decision making to procedure-based payment. Another approach entails policies on coverage with evidence development, which are focused on incorporating new treatments and technologies into payment policies while building an evidence base on their effectiveness. More fundamental shifts include global payment systems that provide clinicians with a single payment for all the care needed by a given patient (with some versions adjusting for patient health status and other factors, as well as including incentives for improved patient outcomes). These incentive models also differ in whether they target changing provider or consumer behavior. Table 8-2 does not include all strategies for improving value; for instance, conditions of participation in an insurance plan could be a strong motivation for changing provider behavior. However, the table does highlight the breadth of payment and delivery system organization models currently under consideration.

Properly designed financial incentives can improve the quality of care and its outcomes (Conrad and Perry, 2009). As noted in the Institute of Medicine (IOM) report Rewarding Provider Performance: Aligning Incentives in Medicare, however, an evidence base does not yet exist for determining which type of payment strategy would best improve care quality (IOM, 2007). Since the publication of that report, systematic reviews and studies have continued to find conflicting evidence on which payment models best improve the quality and value of care delivered by individual clinicians and through health care organizations (Government Accountability Office, 2011b; Petersen et al., 2006; Rosenthal, 2008; Scott et al., 2011;

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