As stated in the Harvard Business Review, As payers and providers in the U.S. health care system shift from fee for service to value-based approaches that pay providers for quality, they are turning to two models: One is procedure- and DRG-based bundled payments that pay one price for all the care related to treating a condition. The other is population-based “global” or “capitated” payments” such as accountable care organizations in which a provider is paid a fixed amount to cover all of a patient’s health needs for a specified period of time. The Center for Orthopedic Research and Education (or CORE Institute) — a group of musculoskeletal, neurologic, and rehabilitative physicians in Arizona and Michigan that includes orthopedic, spine, and pain-management physicians and a number of other types of clinicians — is pioneering an approach that represents a middle ground. It addresses a central criticism of bundled payments: that the approach doesn’t prevent unnecessary care.
Here’s how it works: The provider is accountable for the full cost of treating a patient with a particular diagnosis but then can decide which particular type of treatment to provide or, most significantly, not to provide. For example, while the current bundled-payment model covers the full cost of the care related to a knee replacement from surgery through physical therapy, CORE’s model allows a provider to be paid if the provider chooses alternative therapy to a knee replacement (e.g., injections of medication into the joint and/or physical therapy). For medical conditions or sets of related medical conditions that can easily be treated on their own, the advantage of this model relative to the global payments model is that the provider is only financially accountable for the types of diagnoses that it can reasonably influence.
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Harvard Business Review – A Payment Model That Prevents Unnecessary Medical Treatment