Making Value-Based Payment Work for Academic Health Centers

Under fee-for-service payment systems, physicians and hospitals can be financially harmed by delivering higher-quality, more efficient care. The author describes how current "value-based purchasing" initiatives fail to address the underlying problems in fee-for-service payment and can be particularly problematic for academic health centers (AHCs). Bundled payments, warranties, and condition-based payments can correct the problems with fee-for-service payments and enable physicians and hospitals to redesign care delivery without causing financial problems for themselves. However, the author explains several specific actions that are needed to ensure that payment reforms can be a "win-win-win" for patients, purchasers, and AHCs: (1) disconnecting funding for teaching and research from payment for service delivery, (2) providing predictable payment for essential hospital services, (3) improving the quality and efficiency of care at AHCs, and (4) supporting collaborative relationships between AHCs and community providers by allowing each to focus on their unique strengths and by paying AHC specialists to assist community providers in diagnosis and treatment. With appropriate payment reforms and a commitment by AHCs to redesign care delivery, medical education, and research, AHCs could provide the leadership needed to improve care for patients, lower costs for health care purchasers, and maintain the financial viability of both AHCs and community providers.