From volume to value: better ways to pay for health care

Abstract

Payment systems for health care today are based on rewarding volume, not value for the money spent. Two proposed methods of payment, "episode-of-care payment" and "comprehensive care payment" (condition-adjusted capitation), could facilitate higher quality and lower cost by avoiding the problems of both fee-for-service payment and traditional capitation. The most appropriate payment systems for different types of patient conditions and some methods of addressing design and implementation issues are discussed. Although the new payment systems are desirable, many providers are not organized to accept or use them, so transitional approaches such as "virtual bundling," described in this paper, will be needed.