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Design Payment Transformation

Design Payment Mechanisms

If only making lasting changes to complex coding, billing, and payment systems was as easy as waving a magic wand and shouting, “Make it so!” More often than not, innovation is a slow process with many interconnected, moving parts. Frustratingly, making a change in one place can result in unanticipated need to make a change in another. To transform care delivery, each potential component of the process must be reviewed and analyzed so all components work in tandem toward the end goal. It can be difficult to see how payment is inextricably tied to a care intervention. Yet, how care is financed and how members pay for care is an important aspect of the care transformation process and should not be overlooked. There is no one-size-fits all approach, but there are several strategies that teams can adopt to develop an equity focused payment structure that will support–not impede–the care delivery transformation.

Ensure Payment Supports Equity

As we have argued elsewhere, current payment systems are not designed to alleviate inequities as much as keep existing systems functioning as smoothly as possible. Interventions for marginalized populations are frequently stymied by expectations regarding cost savings rather than increased value for overall patient health. The payment design question driving the intervention should then become: “How can the payment model support care delivery changes to ameliorate this inequity?” Anti-racist approaches to payment reform should support care delivery changes that address the root causes of the health inequity you are trying to eliminate; it will result in better overall care for the patients and caregivers that your initiative will serve. For example, all patients might need to take time off work to receive care and undergo testing. Yet taking time off to undergo testing may be more likely to come at the expense of one’s livelihood for People of Color, people with disabilities, LGBTQ+ people, and/or others who are more highly represented in inflexible, low-wage, or hourly professions. 

Other examples of how payment models can address root causes of inequities include:

Assess Stakeholder Needs

In addition to deciding how data will be used to identify health disparities, who the major stakeholders are, and what the team will do to create a culture of equity, take some time to think through the financial priorities of your stakeholders. Is the provider organization concerned about reducing inefficiencies and waste? Does your patient population want more varied services and expanded access to the care team? Understanding what aspect of the payment structure each stakeholder group might be most concerned about will help you create feasible care intervention and payment reform options.

Determine the Upfront and Maintenance Costs

A change in “business as usual” will likely require some upfront costs as well as costs to maintain the initiative. Those costs can be measured in time, such as the time it takes to reorganize care teams or retrain team members. It can also be measured in money, such as the dollars and cents needed to hire extra personnel or create and disseminate materials. Consider how much upfront investment will be necessary and whether investing more in those costs at the outset of the process will result in decreased costs in the future.

Decide on Progress Measurements and Set Performance Targets

The team should be clear about which performance measures would best illustrate achievement of the health equity goal. They should also reflect on the feasibility of their plans for collecting accurate data, analyzing it, and sharing the results with those who need it in a timely fashion. Measuring health disparities, tracking and analyzing data, and sharing the results with those who need it is an integral aspect of designing a payment transformation. Without a strong understanding of how the transformation is working, it is impossible to know where funds should be allocated, increased, or decreased.

An important step is deciding how to chart improvement as well as which benchmarks of success to use. Will you calculate progress by looking across groups with a tool like the Index of Disparity (IDis) or focus on one specific population? See the chart in “Leveraging Value-Based Payment approaches to Promote Health Equity” to learn more about the pros and cons of common performance targets.

You might also consider charting progress using a stepping stone method, whereby expectations for achievement become increasingly higher over time as each smaller goal is met. With this method, organizations can accomplish short-term goals, such as making improvements in process measures on the way to realizing their long-term goal of a total care transformation.

Creating benchmarks using an organization’s internal historical performance rather than comparing it to an outside organization with different resources and configurations of a similar priority population may be the fairest way to chart progress.

Decide on a Payment Model

Broadly speaking,retrospective payments are made after care is delivered and prospective payments are made before care is delivered. It is possible to combine the two so some aspects of the care transformation are paid both prospectively and retrospectively. Perhaps your team decides to use a mix of prospective and retrospective payments in relation to their care transformation goals relating to Black adolescents with asthma. You might secure prospective funds to provide training for staff on providing comprehensive, culturally sensitive care and retrospective funds that reward care teams that improved the number of Black adolescents who used their inhalers correctly.

As your team decides on a payment model, there are some questions they might ask to help them in their deliberations:

If you decide to combine the two, think deeply about how to incorporate the two payment types into your care transformation.

Plan Your Incentives

Individual, team-, and organization-wide incentives, financial or otherwise, require nuanced consideration as to how they may positively or negatively impact motivation. There are factors beyond money that health care teams and individual team members may find motivating, such as seeing positive movement in the reduction of a disparity and related quality of care measures. The best way to determine appropriate incentives is to ask directly. Consider creating avenues for feedback, such as an anonymized survey, that would allow the care team members to identify what would energize them most as they work to implement the care delivery transformation.

Be Flexible

As your care transformation gets underway, you may notice that certain aspects of your payment design may not be as effective as you’d hoped. Perhaps the team isn’t motivated by the incentives offered, or more funds need to be directed toward training than previously thought. In those cases, having clear, accurate, timely data is of the utmost importance because your team can use it to decide how and where to reallocate resources to ensure a stronger programmatic outcome.