PwC report points to need for new healthcare payment models

A new report published by PricewaterhouseCoopers' (PwC) Health Research Institute finds that two-thirds of health leaders, including government and private payers from 20 different countries, see problems with their current payment system.

"Health systems are at risk of a major financial cavitation, and there is a tremendous focus on cutting costs," says Tom Wong, Canadian Healthcare Services Leader for PwC. "But you get what you pay for, as one executive told us, 'If the government paid for Christmas trees, hospitals will produce Christmas trees.' Cutting costs at the expense of quality and efficiency is economically and socially devastating. This is why the right reimbursement model is so vital to future sustainability, and it must be reimbursement that properly aligns incentives versus the current perverse incentive structures that exist today."

The report "You Get What You Pay For: A Global Look at Balancing Demand, Quality and Efficiency in Healthcare Payment Reform" provides an overview of how payment models are changing in 20 different countries, lessons learned from the experiences of other health systems and findings of a survey of 200 health industry executives including government payers, private payers, hospital executives, and physicians.

On the IT front, PwC recommends that if investment in IT and adoption is desired, countries that do not already do so should build incentives for IT investment into their payment formulas.

Information technology has been identified as an effective means of improving efficiencies and better coordinating care, the report notes. However, Payers often express concerns about financing advancements in technology because medical technology such as better diagnostics to detect illness earlier may lead to increased utilization.

PwC's research found common trends around the world in how governments are juggling priorities:

(bullet) Meeting demand by caring for an increasingly aging population was rated the most difficult challenge facing health systems around the world.

(bullet) Cost control was ranked as the most important factor in developing payment systems in the future. It ranked more important than quality, efficiency or demand.

(bullet) "Better informed patients" or consumerism ranked highest as a way to better manage demand. Increasing out-of-pocket payments ranked lowest.

(bullet) Approximately eight in 10 global health executives said that better coordination of care would do the most to improve quality in their countries. Bonuses for care coordination to physicians and hospitals were among the top five methods needed to improve quality and efficiency.

(bullet) To better reward quality, quality information must be gathered, measured, and acted on. Data is becoming increasingly available to compare quality measures, but PwC found that patients and gatekeepers aren't acting on the data because patient choice is still largely driven by subjective perceptions of quality versus quantifiable medical or technical data. Payers are still reluctant to base reimbursement on quality alone.