“(P)ayment reform is just a piece of the puzzle in driving better value and better quality in American health care and that much more needs to be done. Different readers likely had different reactions, but this Californian saw immediately where he was going…
On a recent trip through wine country with out-of-town guests, a friend quipped how nice it would be to own a winery in retirement. How hard can it be? You pick some grapes, stomp around a wine vat for a few days, put the juice in a barrel, add some yeast, and wait. But those who have ever had a subpar bottle of wine at a not so subpar price know that it’s far more complicated than it seems. As it turns out, the process of winemaking has a lot in common with the American health care system.
While we sometimes know what’s to blame for a bad bottle of wine—grapes ruined by heat, a drought, or the wrong winemaker—these variables are part of an intricate and delicate process that goes into creating a quality product. The same is true about the main culprits behind our broken health care system. We know that misaligned clinical and financial incentives are a problem, but the path towards a solution involves many factors, including market conditions, strong leadership, execution, and collaboration. Successful integration of these components has the potential to create the health system that Americans need and deserve.
The Grapes — Necessary But Not Sufficient
Just as starting with a good grape is a critical element of a quality bottle of wine, appropriate payment incentives are fundamental to achieving a high-functioning, value-driven health care system. It’s obvious that the way we have historically paid for care is wrong. Decades of fee-for-service payments to providers have rewarded volume over value and made “more is better” the default decision in health care…
From Grapes To The Glass
Terroir embodies many things: the climate, soil quality, elevation, and geology of the vineyard. In health care, if we look to payment models alone without considering the terroir—or the environment in which business is conducted—we have failed to consider several key questions:
How concentrated are local insurance and provider markets? Payment reform is unlikely to interest hospitals and provider groups with significant pricing power who are doing well under the status quo.
Are payers and providers in the market willing to go beyond contractual arrangements to engage in real partnerships, evidenced by joint governance models with equal representation? Self-interest works great in commodities markets; collaboration in pursuit of a common goal is more likely to succeed in health care.
Is the regulatory environment supportive of or antagonistic to payment reform? Rigid scope of practice laws and minimum medical loss requirements—just two of many examples—work against integration by codifying the status quo (or worse yet, the status quo of the 1960s).