The high cost of healthcare is a burden on families across the country, and that burden is only getting heavier. A recent Lown Institute Report shines a light on an under-discussed driver of healthcare spending: the extraordinarily high volume of low-value procedures and services perpetuated by the fee-for-service payment system.
The duality of this cost conundrum is tragic: healthcare costs are forcing Americans to consider delaying medical care or avoiding it altogether, despite the increased need for and utilization of healthcare services. As the need for care continues to rise, so too does the potential for overuse and misuse of inappropriate treatments and procedures. This not only drives up costs for patients and the healthcare system at-large, but can cause genuine harm to patients by crowding out higher-value, more appropriate services.
At the heart of the business of healthcare are two key drivers of wasteful care: misaligned provider incentives and consumer selection. This is a complex economic dynamic, and it's wholly unique to the healthcare industry. On the provider side, where behaviors conform to payments, inappropriate care is fueled by the highly transactional, value-averse fee-for-service system. On the consumer side, we've learned over the past decade that there is no easy way to help patients understand which types of care are most valuable. Purchasers of healthcare can tackle the waste created by both sides of this dynamic head-on by embracing alternative payment models (APMs), designed to incentivize the reduction of inappropriate care and direct plan members toward high-value services.
In an effort to better understand inappropriate care and how we can reduce misuse through APMs, Signify Health examined evidence on the overuse of cardiovascular disease and back pain, including results of analyses conducted by Signify Health on several large de-identified datasets of individuals with commercial insurance. In our analysis, published in a white paper, we identify three APMs that can be adopted today to stem the rise in inappropriate and unnecessary care.
The evidence of the overuse of low-value procedures presented in the Lown Institute Report is clear. At the heart of the cost-quality conundrum is the largely transactional fee-for-service payment model, which provides a financial incentive to deliver tests and treatments regardless of patient benefit, and rewards the volume of services overvalue. As part of a more comprehensive cost reduction strategy, health plans and other healthcare purchasers should consider adopting value-based payment models - in particular, those designed to limit overuse through shared risk agreements with care providers.