To better understand Payment Reform strategies and how they can positively influence healthcare purchasing, let’s begin by explaining how healthcare is typically delivered. On a basic level, the traditional healthcare model utilizes a fee-for-service payment methodology where physicians are paid based on the number of patient treatments and referrals, which means there’s a fixed focus on volume – not value – of services provided.

The Fee-for-Service Problem

The problem with fee-for-service payments is they can potentially conflict with the physician’s sense of duty in providing treatment options that are in the best interest of the patient; what’s minimally necessary (and minimally invasive) may not always coincide with producing a profit.

Additionally, fee-for-service makes it nearly impossible to understand the price of a procedure – which can vary wildly between different providers – and the quality of services rendered. There is no correlation between cost and quality, so the adage “you get what you pay for,” isn’t applicable to buying healthcare.

How Are Alternative Payments Better?

Payment Reform strategies then, can be described as implementing an alternative payment model that aligns financial incentives with the patient’s best interest. In other words, these non-traditional payment methods intend to “free” the provider to give the truest, most accurate care for the patient because it benefits both parties.

The “win-win” situation that a performance-based model of payment creates is why Payment Reform is a core driver of The Alliance in delivering High-Value Healthcare to employers and their employees.  We’re executing Payment Reform on two fronts: inconsistencies in price and quality measurement.

The Alliance’s Payment Reform Strategies

Reference-Based Contracting by The Alliance

Regarding price, it’s important to set a benchmark for purchasers to compare costs between different providers. In our CEO’s words, “you can’t manage what you can’t measure.”

That’s why The Alliance uses Reference-Based Contracting – which standardizes prices based on a percentage of Medicare – in over 80% of our contracts. This price transparency enhancement not only allows the healthcare consumer to make smarter decisions, but it also produces a more competitive market in terms of price.

Bundled Services

The Alliance contracts with multiple providers who have agreed to bundle common surgeries and tests into a single, manageable price. These services typically require various medical personnel and equipment to treat the patient, and consequently, are billed as separate line items which make it difficult to compare prices between providers. Bundled pricing packages all of those services into one comparable price – which helps defend against surprise billing.

Smarter Care AdvisorSM

Our Smarter Care AdvisorSM tool helps employees make informed decisions about their healthcare. Employees can search for procedures in your provider network and choose a result based on the cost estimate. We also offer a Cost Estimate Request Form so employees can get a better idea of the costs and plan for them accordingly.

Alternative Payments Based on Capitation

The Alliance strives for a future where all healthcare is bought and paid for through methods that are simple, transparent, and predictable – a fixed price based on the amount and/or risk of enrollees using a per person, per period-of-time fee schedule.

This payment method not only advocates for better price transparency, but because a patient pays their share regardless of if they used the care or not, they’re more inclined to seek care when they believe they need it. In doing so, this model controls both cost and health outcomes, because as more patients seek primary-level care sooner, they rely less on expensive (and invasive) surgeries, specialists, and ER visits.

If you want to learn more about how utilizing Payment Reform strategies, like alternative payment methods, can work in your favor – contact your Account Executive

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Kyle Monroe

Kyle Monroe

Former Vice President, Network Strategy & Value Measurement

Kyle Monroe joined The Alliance in 2017 as vice president of network development and provider relations. His responsibilities included creating and maintaining relationships with health systems and providers to support The Alliance’s strategic goals of improving health care value and organizational growth.

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