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Fixing U.S. health-cost crisis: Bundled payments vs. capitation

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In the Harvard Business Review, Michael E. Porter and Robert S. Kaplan argue for bundled payments, writing that it generates the kind of competition among providers that improves the value of healthcare. But in the accompanying piece, Brent C. James, M.D., and Gregory P. Poulsen push for capitated payments, which  they call the only approach  that would encourage healthcare providers to attack all types of waste.

(We at Cambridge Management Group think that the bundled-payments approach works best.)

Professors Porter and Kaplan conclude :

“The time has come to change the way we pay for healthcare, in the United States and around the world. Capitation is not the solution. It entrenches large existing systems, eliminates patient choice, promotes more consolidation, limits competition, and perpetuates the lack of provider accountability for outcomes. It will fail again to drive true innovation in healthcare delivery.”

And, “Much remains to be done to put bundled payments into widespread practice, but the barriers are rapidly being overcome. Bundled payments are the only true value-based payment model for healthcare. The time is now.”

But Dr. James and Mr, Poulsen argue:

The solution to America’s healthcare cost “quandary is to change the way businesses, government, and other purchasers pay for healthcare to population-based payment. Under this approach, providers receive a fixed per person (or ‘capitated’) payment that covers all healthcare services over a defined time period, adjusted for each patient’s expected needs, and are also held accountable for high-quality outcomes. It’s the only payment system that fully aligns providers’ financial incentives with the goal of eliminating all major categories of waste. It fundamentally shifts the role of managing the amount, form, and cost of care from insurers to medical practitioners. It also ensures that providers receive enough of the savings that they can afford to fund the changes needed to bring down costs.”

To read both articles, please hit this link.

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