Transformation of the Health Care Industry: Curb Your Enthusiasm?

March 2018 | Lawton Robert Burns, Mark V. Pauly | Original Investigation

Policy Points:

  • Policymakers seek to transform the US health care system along two dimensions simultaneously: alternative payment models and new models of provider organization.
  • This transformation is supposed to transfer risk to providers and make them more accountable for health care costs and quality.
  • The transformation in payment and provider organization is neither happening quickly nor shifting risk to providers. The impact on health care cost and quality is also weak or nonexistent.
  • In the longer run, decision makers should be prepared to accept the limits on transformation and carefully consider whether to advocate solutions not yet supported by evidence.

Context: There is a widespread belief that the US health care system needs to move “from volume to value.” This transformation to value (eg, quality divided by cost) is conceptualized as a two-fold movement: (1) from fee-for-service to alternative payment models; and (2) from solo practice and freestanding hospitals to medical homes, accountable care organizations, large hospital systems, and organized clinics like Kaiser Permanente.

Methods: We evaluate whether this transformation is happening quickly, shifting risk to providers, lowering costs, and improving quality. We draw on recent evidence on provider payment and organization and their effects on cost and quality.

Findings: Data suggest a low prevalence of provider risk payment models and slow movement toward new payment and organizational models. Evidence suggests the impact of both on cost and quality is weak.

Conclusions: We need to be patient in expecting system improvements from ongoing changes in provider payment and organization. We also may need to look for improvements in other areas of the economy or to accept and accommodate prospects of modest improvements over time.

Keywords: value, cost, quality, payment, organization.

Read on Wiley Online Library

Volume 96, Issue 1 (pages 57-109)
DOI: 10.1111/1468-0009.12312
Published in 2018