Hospital payment systems: will payers like the future better than the past?

Abstract

Unsustainable health care cost growth has forced payers to reexamine goals for hospital payment systems. Employers want simplicity and transparency, with comparative performance data available in the public domain. Insurers favor simplicity but prefer to keep the analysis of comparative performance data and pricing private. Thirty-five pay-for-performance experiments have been devised in the private sector, to reward hospitals for higher quality and move toward more effective payment systems. Definitive results are not yet known, and caveats remain, but early signs are promising. We develop three scenarios for future hospital payment systems and identify policy actions to improve outcomes.