Literature week 6
OECD (2016) Better ways to pay for health care.
Often the traditional ways of paying providers (FFS, capitation, salary, global budget, DRG)
do not align with the priorities like improving quality or delivering care more efficiently.
Current payment system does nothing to accommodate complex health needs. Often
financed in a silo – resulting in fragmentation of care with poor patient experience and poor
health outcomes. Traditional payment methods:
- Fee for service (FFS): incentivize providers to increase their clinical activity and
therefore the associated costs.
- Capitation: controls costs better but can encourage providers to deliver less hc than
optimal for patients.
- Global budgets: control total costs too, but may lead to access problems (e.g. waiting
times).
- DRG (diagnosis-related groups): focus on technical efficiency to make better use of
available resources and reduce average LOS but they also encourage hospitals to
increase no. of patients.
Lump sum payment: a large sum that is paid in one single payment, instead of installments.
In primary care, most OECD countries use blended forms of payments. In inpatient care
blended payments are the norm. In other cases, traditional payment systems are being
adapted to avoid skimping of care or cherry picking. Global budgets have evolved beyond
resource-based or historical budgets. In some countries, budget allocation is also adjusted
for risk factors (e.g. age, gender). Hospital budget allocation based on case-mix as measured
via DRGs can help to benchmark hospitals and incentivise the efficient use of hospital
resources. The introduction of volume thresholds can put a limit to spending increases. They
are used in primary care for FFS or inpatient care for case-based payment by a number of
OECD countries.
In order to adjust payment methods to policy objectives (like improving coordination,
quality and outcomes, and efficiency), three main approaches have been created:
- Blending payment methods and adapting traditional modes of payment include
combining diff payment mechanism and adjusting for population characteristics in
payment methods.
1
, Three distinct payment trends:
- Add-on payments (ex post or ex ante): made on top of existing payment methods for
coordinating activities, or P4P (focused on improving quality of care)
- Bundled payments for episodes of care or for chronic conditions, often relevant to a
specific medical condition and treatment and grouped together for payment. Aim to
improve QoC and reduce costs.
- Population-based payment in which groups of hc providers receive payments on
basis of population covered, in order to provide most hc services for that population.
Built-in quality and cost-containment requirements.
Key success factors involved the transparency of criteria for tariff setting and clarification in
identifying the targeted patient population. A focus on wide stakeholder engagement seems
to be key in catalysing buy-in.
Important spill-over effects include the increase of data collection that helps to expand
knowledge on quality metrics and performance. However, there are challenges including the
complexity of the designing and implementing payment policy, increased administrative
burden and the reluctance among some providers to bear more financial risk.
Add-on payments have helped coordinate health services across different levels of care.
They account for a small part of the total provider income (less than 5%). Add-on payments
are relatively easy to implement, with little provider resistance and generally required few IT
investments + data exchanges. The administrative burden is small. However the scope of the
incentives was limited, focusing only on the improvement of cooperation of hc professionals
and incentivizing specific behaviors at specific points in care pathways.
Add-on payments which reward quality or P4P schemes are applied ex post. P4P is now
widespread, mostly in primary care but also in other parts of care. Evidence on the effect of
P4P on health outcomes and cost savings remain inconclusive (on performance its good).
It is hard to prove causality between the change in payment method and change in quality.
Sometimes there are factors like self-selection, underlying trends or improvement to the
way data is recovered and reported which influence quality already.
P4P schemes are complex to administer as they require data systems for collection,
measurement and the calculation of rewards. Most use process indicators or intermediate
outcome indicators. In large they focus on clinical processes, and incentivize care that is
2
OECD (2016) Better ways to pay for health care.
Often the traditional ways of paying providers (FFS, capitation, salary, global budget, DRG)
do not align with the priorities like improving quality or delivering care more efficiently.
Current payment system does nothing to accommodate complex health needs. Often
financed in a silo – resulting in fragmentation of care with poor patient experience and poor
health outcomes. Traditional payment methods:
- Fee for service (FFS): incentivize providers to increase their clinical activity and
therefore the associated costs.
- Capitation: controls costs better but can encourage providers to deliver less hc than
optimal for patients.
- Global budgets: control total costs too, but may lead to access problems (e.g. waiting
times).
- DRG (diagnosis-related groups): focus on technical efficiency to make better use of
available resources and reduce average LOS but they also encourage hospitals to
increase no. of patients.
Lump sum payment: a large sum that is paid in one single payment, instead of installments.
In primary care, most OECD countries use blended forms of payments. In inpatient care
blended payments are the norm. In other cases, traditional payment systems are being
adapted to avoid skimping of care or cherry picking. Global budgets have evolved beyond
resource-based or historical budgets. In some countries, budget allocation is also adjusted
for risk factors (e.g. age, gender). Hospital budget allocation based on case-mix as measured
via DRGs can help to benchmark hospitals and incentivise the efficient use of hospital
resources. The introduction of volume thresholds can put a limit to spending increases. They
are used in primary care for FFS or inpatient care for case-based payment by a number of
OECD countries.
In order to adjust payment methods to policy objectives (like improving coordination,
quality and outcomes, and efficiency), three main approaches have been created:
- Blending payment methods and adapting traditional modes of payment include
combining diff payment mechanism and adjusting for population characteristics in
payment methods.
1
, Three distinct payment trends:
- Add-on payments (ex post or ex ante): made on top of existing payment methods for
coordinating activities, or P4P (focused on improving quality of care)
- Bundled payments for episodes of care or for chronic conditions, often relevant to a
specific medical condition and treatment and grouped together for payment. Aim to
improve QoC and reduce costs.
- Population-based payment in which groups of hc providers receive payments on
basis of population covered, in order to provide most hc services for that population.
Built-in quality and cost-containment requirements.
Key success factors involved the transparency of criteria for tariff setting and clarification in
identifying the targeted patient population. A focus on wide stakeholder engagement seems
to be key in catalysing buy-in.
Important spill-over effects include the increase of data collection that helps to expand
knowledge on quality metrics and performance. However, there are challenges including the
complexity of the designing and implementing payment policy, increased administrative
burden and the reluctance among some providers to bear more financial risk.
Add-on payments have helped coordinate health services across different levels of care.
They account for a small part of the total provider income (less than 5%). Add-on payments
are relatively easy to implement, with little provider resistance and generally required few IT
investments + data exchanges. The administrative burden is small. However the scope of the
incentives was limited, focusing only on the improvement of cooperation of hc professionals
and incentivizing specific behaviors at specific points in care pathways.
Add-on payments which reward quality or P4P schemes are applied ex post. P4P is now
widespread, mostly in primary care but also in other parts of care. Evidence on the effect of
P4P on health outcomes and cost savings remain inconclusive (on performance its good).
It is hard to prove causality between the change in payment method and change in quality.
Sometimes there are factors like self-selection, underlying trends or improvement to the
way data is recovered and reported which influence quality already.
P4P schemes are complex to administer as they require data systems for collection,
measurement and the calculation of rewards. Most use process indicators or intermediate
outcome indicators. In large they focus on clinical processes, and incentivize care that is
2
