case study

How Can We Bend the Cost Curve?

Holly Korda

Gloria N. Eldridge

Payment Incentives and Integrated Care Delivery: Levers for Health System Reform and Cost Containment

The Patient Protection and Affordable Care Act encourages use of payment methods and incentives to promote integrated care delivery models including patient-centered medical homes, accountable care organizations, and primary care and behavioral health

integration. These models rely on interdisciplinary provider teams to coordinate patient care; health information and other technologies to assure, monitor, and assess quality;

and payment and financial incentives such as bundling, pay-for-performance, and gain- sharing to encourage value-based health care. In this paper, we review evidence about

integrated care delivery, payment methods, and financial incentives to improve value in health care purchasing, and address how these approaches can be used to advance health

system change.

National health care reform legislation enact- ed in March 2010 as the Patient Protection and Affordable Care Act (ACA) opened the door to significant changes in health care organiza- tion, delivery, and financing. The ACA introduces a variety of financial and other incentives for patients, providers, and health plans, with the goal of advancing value-based health care: improved health outcomes through quality care that is accessible and affordable, and slows the growth of health system costs. As health care approaches 18% of the gross domestic product (GDP), value- based approaches are becoming a popular alternative to price regulation, which has fueled sharp opposition from providers and concerns about access and gaming reimburse- ment to change service mix, mitigating recent cost-lowering efforts (McClellan 2011).

Payment methods and incentives are prin- cipal tools to advance and promote integrated care delivery and models under the ACA. These models include patient-centered medi- cal homes (PCMHs) and accountable care organizations (ACOs) that rely on interdisci- plinary provider teams to deliver coordinated patient care. These organizations use health information and other technologies to assure, monitor, and assess the quality of care. Care that integrates primary care and behavioral health can be developed within or apart from PCMH and ACO models. Obtaining value from these integrated approaches typically involves payment and financial incentives, such as bundling, pay-for-performance (P4P), or gain-sharing methods that reward coordi- nated interdisciplinary activities, patient-fo- cused care, and quality care (see Figure 1).

Holly Korda, Ph.D., M.A., is deputy director of systems research and initiatives, and Gloria N. Eldridge, Ph.D., M.Sc., is a senior analyst in systems research and initiatives, both at the Altarum Institute. Address correspondence to Dr. Korda at Altarum Institute, Systems Research and Initiatives, 4 Milk St., 3rd floor, Portland, ME 04102. Email: [email protected]

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These payment and financial incentives also are key policy approaches to address health care cost growth.

The ACA not only promotes integrated care models, it also calls for pilot programs and research and demonstration projects that test new value-based approaches to delivering health care services, paying providers, and designing benefits to be launched through the Centers for Medicare and Medicaid Services (CMS). These programs address ACOs’ shared savings, projects integrating care around hospitalization, pilot testing P4P programs with specific providers, national pilot programs on payment bundling, and more. These initiatives are intended to inform and refine use of these payment methods and incentives, and new delivery approaches for application and prac- tice in the field. As the ACA ushers in in- tegrated care delivery as a way to increase value for the health care dollar, how can payment and financial incentives be used to improve quality, accessibility, and affordability of care? What do we know about ‘‘what works’’ to use these tools as levers for cost containment and health system reform?

Methods

To inform these questions, we conducted a broad environmental scan and review of current literature to examine what is known about payment and other financial incentives that support the new integrated delivery models. This included a search and review of academic, peer-reviewed journals; white papers and reports from foundations, and federal and state public health agencies; and websites, online media, and print media from public, private, and nonprofit organizations. This review also builds on related work and experience of the study team in the areas of health care finance and delivery, and health care reform.

Approaches to Integrated Care Delivery

How do the ACO, PCMH, and other inte- grated care delivery models work, and what do we know about their performance and poten- tial to advance value in health care markets?

Accountable care organizations, currently in the concept stage under health care reform, are networks or groups of providers, such as primary care physicians and nurses, special-

Figure 1. Care models and payment and other incentives for value-based health care

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ists, and hospitals, that have collective responsibility for a population’s health care quality and costs. The ACOs will share in savings for reducing growth in health care costs and meeting established quality targets. The ACA legislation allows ACOs to use a broad range of organizational forms. Several are likely, including integrated health sys- tems, physician-hospital organizations, and group and independent practices, among others. Across these diverse organizational forms, all ACO entities will share three main features: 1) local accountability for the effective management of a full continuum of care, 2) shared savings based on historical trends and adjusted for different patient populations, and 3) performance measure- ment including outcomes and patient experi- ence (McClellan 2009). The ACA requires that organizations serve at least 5,000 people to be recognized as an ACO.

Patient-centered medical homes take deliv- ery of care from the level of population health to the individual, providing each patient with a primary care provider who leads an interdisciplinary team to facilitate seamless care across services and settings. The PCMH model has been implemented in diverse settings and substantial evidence is building for improved quality, improved patient and provider satisfaction, and decreased health care costs (Grumbach and Grundy 2010). The PCMH provides a perfect complement to the ACO models and, in many cases, is expected to reside within ACO frameworks.

Primary care practice plays a significant role in the ACO and PCMH models, and while the ACA legislation does not call explicitly for integration of primary care and behavioral health care, both ACOs and PCMHs are to be held accountable for addressing behavioral health as part of the continuum of patient care. Many provider systems will migrate, expand, or develop strategies that integrate behavioral health and primary care through diverse organizations and collaborations. This inte- gration may happen through screening or providing behavioral health care as part of the primary care visit, co-locating services, or integrating care through referrals across pro- viders in the same PCMH or ACO network (Collins et al. 2010).

Few studies have examined the perform- ance of these new models and the payment and other incentives they may use as they expand presence in local health care markets. Research from pilot programs and demon- strations involving public and private health plans in related areas may provide insight into the results we can expect from these integrated care delivery approaches and how these approaches can advance value.

Table 1 summarizes research and findings that address the performance and impacts of these models.

Payment and Incentives that Support Care Integration

Integrated care delivery models use a variety of payment approaches, and their application is expected to expand as ACOs, PCMHs, and other forms of care integration take hold under the ACA. These payment methods and incentives, alone or in combination, offer an alternative to basic fee-for-service payment approaches that reward providers for the volume of services given. The new payment methods are intended to encourage efficiency in care delivery, and they hold clinicians who provide care accountable for quality and cost results. For example, many PCMHs use fee- for-service payment with a monthly fee that has performance-based components. Epi- sode-based payments for specific procedures or treatments also can be used to promote value through the PCMH (Berenson 2010).

The ACA encourages payment incentives to drive integrated care delivery, including provisions for shared savings when provider groups and organizations achieve ACO qual- ity and cost targets. These incentives are expected to be important levers to advance the goals of integrated care delivery, encouraging providers to work together to take on broader responsibility for quality and cost, and re- warding their accountability for meeting quality goals (Guterman and Blake 2010). How these incentives are directed, communi- cated, and distributed will relate closely to their impact and effectiveness.

Payment methods and financial incentives expected to play a key role shaping provider performance in integrated care delivery mod- els include the following:

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% Bundled payments that integrate payment and reward for all services related to a specific treatment, condition or individu- al;

% Pay-for- performance (P4P) arrangements that give providers incentives to improve performance by rewarding them for at- taining established objectives such as appropriate levels of service;

% Gain-sharing arrangements that issue bo- nus payments to physicians and other providers to reward their efforts to deliver clinically appropriate care at significantly lower cost by being prudent in their clinical choices of, for instance, proce- dures, supplies, and devices that comprise a considerable portion of inpatient care costs.

Summaries of the emerging research on these payment methods and incentives follow.

Bundled payments. These are considered core tools for advancing value-based health care. The Medicare Payment Advisory Com- mission (MedPAC) has endorsed bundled payments under health care reform, noting the intent of this method: to decrease spending by reducing the number of unnec- essary physician services during a hospital- ization; to encourage more judicious use of health care resources during the hospital stay; and to reduce post-discharge costs, including unnecessary post-acute care services and avoidable readmissions (MedPAC 2008). Bundling lets providers share in the risks and rewards of patient care. If the costs of an episode of care are less than the bundled payment amount, the providers (hospital and physicians) can keep the difference. If the costs of care exceed the bundled payment, the providers bear the financial liability. Health care cost savings will depend on the design of

Table 1. What we know about integrated care delivery models

Accountable care organizations (ACOs) Research on the performance of ACOs is limited because they are a new model of health care delivery. Beyond

the Centers for Medicare and Medicaid Services Physician Group Practice demonstration, there is little additional evidence that this approach improves quality and reduces costs (U.S. GAO 2008). However, experience suggests bonus payments that reward the ACO network for reducing cost growth and meeting established quality of care targets may be required to encourage physicians and hospitals to establish ACO networks (MedPAC 2010). Cost savings from this model are expected to result primarily from reduced hospitalizations and readmissions.

Patient-centered medical homes (PCMHs) Evidence is mounting that the PCMH model improves quality and patient and provider satisfaction, while

decreasing costs (Grumbach and Grundy 2010). PCMHs have been successfully implemented in a variety of settings and for a variety of populations. For example, models that have resulted in a 10% improvement in either a cost or quality dimension include models for children by Colorado Medical Homes and Community Care of North Carolina; models for chronic diseases by Geisinger Health System, Intermountain Healthcare, MeritCare Health System, and Blue Cross Blue Shield of North Dakota; and models for all primary care patients by Group Health Cooperative and Vermont Blueprint for Health (Fields, Leshen, and Patel 2010; Reid et al. 2010). These represent integrated delivery system models, Medicaid-sponsored PCMH initiatives, and private payer-sponsored PCMH initiatives (Grumbach and Grundy 2010).

A significant barrier to widespread adoption is the lack of reimbursement for additional resources (e.g., staff, health information technology) in order to provide greater access and coordination. Although primary care providers are clearly influential in directing care, they have less control over the care being delivered by specialists, hospitals, and other care providers, and the degree to which information is shared by these providers. In this sense, the PCMH model potentially could operate to greater effect within an integrated delivery approach, such as an ACO.

Integrating primary care and behavioral health care Integrated care has achieved positive outcomes in most studies. A research review by the Agency for

Healthcare Research and Quality notes the difficulties distinguishing ‘‘the effects of increased attention to mental health problems from the effects of specific strategies, evidenced by the lack of correlation between measures of integration or a systematic approach to care processes and the various outcomes. Efforts to implement integrated care will have to address financial barriers’’ (Butler et al. 2008). It is difficult to compare evaluation results from studies from varied models, such as full integration, co-located services, and referral within and across networks and systems.

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the payment system, the particular services that are bundled, and the performance of the participating system before implementation. In a shift from traditional debates about payment policy reforms, more recent reforms have focused on bundling attempts to tie payment to quality of care as well as cost containment to address concerns about stint- ing, or reducing care to inappropriate levels (McClellan 2011).

Bundled payment methods can yield savings for payers if discounted rates are negotiated at the outset or if payment amounts are adjusted downward to reflect the efficiencies achieved after the system is in place. A study by Casale and colleagues (2007) compared bundled services for 117 patients in the intervention with those of 137 patients from a year prior to implementation of bundling and found that hospital costs dropped by 5%.

There are several types of payment bun- dling: by procedure or episode of care, which provides a single payment for all combined services for a well-defined procedure, such as cardiac bypass or orthopedic knee replace- ment; by condition-specific capitation, which allots a set fee for managing all care provided to an individual with a chronic or other condition; or by global capitation, which sets an all-inclusive payment per enrollee for a defined scope of services, regardless of how much care is given.

Few studies have addressed the effects of episode-based payment on cost and quality, although there are examples of episode-based programs having positive influences on struc- ture and process quality measures as well as decreased costs of care. For example, evalua- tion of first-year results of Geisinger’s Pro- venCare coronary bypass program showed a 10% reduction in readmissions, shorter aver- age length of stay (ALOS), and reduced hospital charges. More recent data show that over the course of 18 months, the program achieved a 44% drop in readmissions (Me- chanic and Altman 2009).

Current episode-based payment approaches address only a fraction of all patient care. A number of design and operational issues need to be resolved or considered, including varying definitions of episodes, methods for calculat- ing and distributing per-episode payments,

and data infrastructure needs. Desired out- comes include reducing unnecessary physician and ancillary services to compensate physi- cians for efficient resource use and reducing complications and readmissions (Mechanic and Altman 2009). However, some argue that paying for discrete episodes does nothing to control the total number of episodes and could actually encourage more episodes (Robert Wood Johnson Foundation 2009).

Condition-specific capitation (e.g., the Pa- tient Choice System) (Network for Regional Healthcare Improvement 2009) is a bundled approach that pays for condition-specific, risk-adjusted care according to capitated bids by cost- and quality-tiered provider group- ings. Consumers who select from higher tiers must pay the difference between bids and prices for higher-tier groupings. This ap- proach was introduced in the 1990s by Minnesota’s Buyers Health Care Action Group (BHCAG) as value-based purchasing that combines provider incentives for com- petitive pricing and consumer selection based on price and quality transparency (Christian- son and Feldman 2005; Christianson et al. 1999). Analyses on the BHCAG model found that costs were controlled without sacrificing quality (Lyles et al. 2002). This is consistent with research on consumer choice, which shows that while there are differences in the way different subpopulations use quality information, consumers tend to choose better performing health plans and providers and do respond to initiatives that supply quality information (Buchmueller 2009; Kolstad and Chernew 2009; Abraham et al. 2006).

The Patient Choice System risk-adjusts the provider’s budget to reflect the characteristics of the patients served to more equitably hold providers liable for the performance compo- nent of their bid (Network for Regional Healthcare Improvement 2009). Patient Choice is reported to have encouraged patients to select more cost-effective provid- ers and has encouraged providers to reduce costs while maintaining or improving quality in order to attract more consumers (Network for Regional Healthcare Improvement 2009).

The Patient Choice approach has been exported to several markets nationwide— including Des Moines, Iowa; Sioux Falls,

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S.D.; St. Louis, Mo.; Denver, Colo.; Port- land, Ore.; Boston, Mass.; and Milwaukee, Wis.—with varying rates of acceptance by key hospitals and large employers (Christian- son and Feldman 2005). The Patient Choice System as implemented by Wisconsin’s WPS Insurance reported premiums up to 20% lower than other plans in southeastern Wisconsin (WPS Insurance website 2010). The Wisconsin program also reports that it has reduced cost increases and administrative fees while spurring quality improvements (Patient Choice Health Care website 2010).

Global capitation is an all-inclusive pay- ment per enrollee for a defined scope of services, regardless of how much care is provided. This bundled payment method is intended to contain costs, reduce the use of unnecessary services, and encourage integra- tion and coordination of services. Some forms of global payment add incentives to improve the quality of care, a response that helps to address concerns about under- provision of appropriate services.

Studies have shown that payment approach- es involving risk-sharing with providers, includ- ing global payment or capitation, are associated with lower service use and cost than fee-for- service arrangements (Mathematica Policy Re- search, Inc. 2009). Programs that combine global payment and quality bonuses (e.g., Blue Cross Blue Shield of Massachusetts) have been able to improve margins and reduce spending below rates of inflation (Mechanic and Altman 2009). Potential problems or issues related to global payment are that providers may select less expensive patients, thereby creating access, quality, and equitable provider payment issues.

Pay-for-performance. Pay-for-performance incentives are based on performance assessed against a defined standard. Typically, other components of the payment are independent of the amount at risk. Many P4P arrange- ments address quality-based measures, al- though performance objectives and metrics could target other variables (e.g., profitabil- ity, volume, customer or patient satisfaction) (Hahn 2006). Financial incentives are often used to reward encouraged behaviors. P4P programs are shifting from process measures, such as rates of mammography screening, to

outcomes measures and cost efficiency based on actual patient care outcomes. There has been little or no consistency in the selection of measures across P4P programs.

This type of incentive has been endorsed by the Institute of Medicine (2007) and some plans and providers, but the approach has received mixed reviews overall. There have been questions about the lack of standard measures used to reward providers and concern that financial incentives may widen health disparities as providers seek to maxi- mize patient care revenue by selecting ‘‘eas- ier,’’ less complex and less socioeconomically diverse patients (Darves 2007). Evidence of the impact of P4P has been mixed also, especially regarding cost reduction. Mechanic and Altman (2009) state that P4P programs are ‘‘unlikely to affect spending trends as long as their primary emphasis is rewarding providers for delivering ‘underused’ services rather than for judicious use of potentially ‘overused’ treatments.’’ They also note that P4P does not encourage integration across providers, though programs that reward adoption of information technology and care management processes may be beneficial on the margin.

Essential to the success of a P4P program is that those being evaluated agree and accept that the objectives are fair and the measures appropriate, that performance is accurately measured, and that the incentives make the effort worthwhile. Possible shortcomings and unintended program consequences include inappropriate measures and objectives, com- peting or uncoordinated efforts, insufficient or inappropriate incentives, and excessive focus on the reward. MedPAC recommends that the P4P system be budget neutral, with the incentive pool funded by setting aside 1% or 2% of budgeted payments (MedPAC 2005).

Another form of performance payment, introduced by the American Reinvestment and Recovery Act (ARRA) in 2009, includes pay- ment for adoption and meaningful use of health information technology. These technologies provide the backbone of integrated care delivery strategies, although some studies report little impact on quality improvement and, in some cases, increases in costs (Black et al. 2011).

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Gain-sharing. Evidence of the impact of gain-sharing approaches and financial incen- tives on improving health care market per- formance, alone or in combination with new, integrated delivery models, is sparse but growing as experience with these strategies continues to develop (McClellan et al. 2010). Early studies show promising results with providers, by encouraging more efficient use of clinical resources that results in cost savings without negative impacts on quality, and with consumers, by encouraging selec- tive use of outpatient testing and service providers.

Gain-sharing between hospitals and physi- cians involves aligning payment incentives for physicians and other clinicians to improve efficiencies and reduce waste while maintain- ing quality care. Gain-sharing arrangements typically involve payments from hospitals to physicians for assistance in generating cost savings. For hospital–physician gain-sharing agreements to be successful, careful monitor- ing and a high degree of trust between parties is needed.

Jain and Roble (2008) name several poten- tial safeguards to help ensure successful hospital-physician gain-sharing:

% ensuring clinical and financial transparen- cy of quality indicators;

% using a proven risk-adjusted system; % implementing ongoing measurement and

monitoring to determine the program’s success and to confirm that the program is not having an adverse impact on clinical outcomes;

% basing payments to physicians on all procedures to avoid disproportionate participation of federal health care pro- gram beneficiaries;

% capping potential payments to physicians; % using baseline thresholds to guard against

inappropriate reductions in service; % providing clear feedback to physicians

about their quality and efficiency; % terminating participation if a physician is

noncompliant; % defining fair market value in advance with

the participating physicians; % and limiting total savings by meeting

appropriate utilization standards.

Studies of gain-sharing are limited, but some suggest that this approach can effec- tively reduce waste and generate cost savings without reducing quality. Ketcham and Furukawa (2008) studied the effects of 13 gain-sharing programs on coronary stent patients. Compared with other hospitals, gain-sharing hospitals reduced costs by 7.4% per patient, with 91% of the savings from lower prices and 9% from lower utilization. Before 2006, the available mea- sures of access and quality suggest that neither was reduced, nor was access to specialty stents. Other ongoing evaluations have not yet generated results. One notable example is an evaluation of a demonstration initiated in 2009 by the CMS with a consortium of 12 New Jersey hospitals. The Northern New Jersey Mobile Intensive Care Consortium is examining the effects of gain- sharing aimed at improving the quality of care and eliminating unnecessary costs.

Payer-provider gain-sharing encourages providers to reorganize care and eliminate inefficiency and unnecessary cost by being prudent in their clinical choices. Payer- provider agreements, like hospital-physician gain-sharing arrangements, encourage pru- dent use of resources at the clinical point of care. They are attractive in environments where negotiated discounts are limited or do not exist. Payers also view gain-sharing as a potential approach to improving the physi- cian and hospital ‘‘business case for quality.’’ Although many contracts with providers involve a global cost (e.g., diagnosis-related group), others, depending on the market in which they are operating, involve a separate payment for large expenses, such as devices and implants.

Patient-payer gain-sharing agreements are an attempt by employer payers to shape the behavior of consumers and patients by providing incentives for patients to be selec- tive in their use of services, especially when choosing providers for ancillary and outpa- tient services. Incentives may also be offered for behavior change (e.g., weight reduction or smoking cessation).

The availability of cost and quality data has fueled interest in gain-sharing that rewards patients for participating in generat-

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ing cost savings. Patient rewards may be provided as bonus payments, reductions in coverage costs, and other incentives. This information inspired one self-insured employ- er in South Bend, Wis., to pay bonuses to patients who have radiology examinations completed at lower-cost centers. Insured employees are paid $500 bonuses for com- puted tomography and magnetic resonance imaging scans done at a lower-cost center; the total cost for an examination is $1,000 lower to the employer than if done at a higher-cost center (Jain and Roble 2008).

Health Information Technology: Supporting Payment Incentives and Integration

Payment methods and incentives are impor- tant drivers of practice transformation involv- ing integrated care delivery models. However, health information technology (HIT) is an important complement to payment and finan- cial incentives in advancing care integration, enabling the sharing of patient treatment plans and protocols, and monitoring quality and costs in the ACOs and PCMHs. Electronic medical records (EMRs) help reduce and eliminate errors in patient management and allow the sharing of patient information across providers and locations. Both ACOs and PCMHs rely on EMRs, and both models seek to use health information technology to improve communication. Many providers already have trained for and experienced the benefits of EMRs, which have been imple- mented in many hospitals and health networks and promoted through financial incentives to providers in the 2009 American Reinvestment and Recovery Act. Assistance for implement- ing HIT is included as part of this economic stimulus legislation.

Other forms of HIT, including patient registries, quality assurance and improvement systems, and high-tech diagnostic, treatment, and remote monitoring approaches for patient care and self management, are important tools for facilitating patient and population health improvement. Providing real-time data for care delivery as well as feedback from clinical records and insurance claims, HIT offers important tools for achieving, measuring, and demonstrating the quality outcomes at

lower costs targeted by integrated delivery models. Quality oversight requires measures of integration— measures that cross different provider types but still hold members of the teams accountable for results. The National Committee for Quality Assurance (NCQA) recognizes practices as medical homes and groups them into tiers based on the features implemented (Fields, Leshen, and Patel 2010). NCQA is developing ACO standards.

Discussion

Many organizational forms and payment options can be used for integrated care delivery. In addition, health care market factors influence the possibilities for both the organizational structure and performance of these care delivery models since provider availability, health plan market share, and service area demographics are considered in the design and development of integrated care models. The organizations’ plan and market features are important in matching payment approaches and incentive structures for opti- mal performance. ACOs, PCMHs, and inte- grated primary care and behavioral health models require strong collaboration among providers, training for providers to work as part of interdisciplinary teams, reimburse- ment incentives for integration, and a HIT infrastructure within the integrated system.

Evidence on the effectiveness of new pay- ment methods and approaches is growing, but research and field experience strongly favor bundled payment approaches, in particular episode-based payments. Bundled payment systems can yield savings for payers if a discounted rate is negotiated at the outset or if payment amounts are adjusted downward to reflect the efficiencies achieved after the system is in place. Both public and private sector purchasers may see savings through bundling, especially if it is combined with preferred provider status.

Following cautious introduction in the 1990s and early 2000s, by 2005 the Medicare Payment Advisory Committee strongly en- dorsed gain-sharing agreements, just as the Office of the Inspector General issued several advisory opinions in support of particular instances of gain-sharing (MedPAC 2005).

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While studies of gain-sharing are limited, this approach is likely to be most effective in high- cost markets with considerable waste and inefficiency. Early empirical results from studies of gain-sharing are promising.

The evidence on performance-based incen- tives, such as pay-for-performance arrange- ments, is less convincing. There is little demonstrable return on investment (i.e., evidence of net savings) from such programs. Because the U.S. health care system is characterized by a large number of overlap- ping contracts among payers (i.e., health plans and government programs) and pro- viders, financial incentives introduced by any one payer must account for a relatively large percentage of total reimbursement to justify any quality improvement effort with substan- tial fixed costs (Rosenthal and Frank 2006). There is no empirical evidence suggesting how large a payment gradient needs to be to stimulate quality improvement (Werner and Dudley 2009). Incentives also must be clearly communicated, understood, and transparent to physicians and other providers.

Possible unintended consequences of pay- for-performance arrangements include gam- ing, where participants find ways to maximize measurable results without actually accom- plishing the desired objective; skimming of healthier patients for treatment by physicians; and the multi-tasking problem, where com- pensation based on available measures may distort effort away from unmeasured objec- tives (Rosenthal and Frank 2006). Among other limitations of pay-for-performance are: defining and unifying measures across the vast number of reporting initiatives, risk adjustment for clinical outcome measures, resource burdens on smaller versus larger hospitals, and the need for data on the effectiveness of pay-for-performance in im- proving care processes and outcomes (Ni- chols and O’Malley 2006).

Successful incentive arrangements for inte- grated care models address care coordination and recognize the contributions of all mem- bers of the interdisciplinary care team. Rewarding members of the team equitably encourages smooth communication and col- laboration to share the effort required for high value care. Care can be challenging to

coordinate for some patient groups—those with chronic and complex conditions who may benefit most from coordinated, integrat- ed care. Incentives for patients, financial and other, can encourage adherence to treatment regimens, self-management of chronic condi- tions, and participation in wellness and prevention programs.

Health information technology is critically important for facilitating integration and is a central tool for achieving the care delivery aims of payment reforms. Without it, many integration models fail. Electronic health records and processes and systems for assess- ing care quality—including care coordination processes and outcomes—and for measuring resource use and costs are requisite tools for transformation. Quality measures for integrat- ed systems are still developing and can be challenging to implement when multiple pro- viders or systems are involved. Further, HIT can be costly, even when economic incentives for implementation have been offered.

Conclusion

Payment methods and financial incentives have demonstrated a powerful influence on provider and health plan performance; pur- chasers and payers in the public and private sectors have used these strategies to encour- age, shape, and reward provider and plan behavior in health care markets. These pay- ment approaches provide powerful leverage for change in the hospital and long-term care sectors. Their impact is amplified when major purchasers and payers (e.g., the Medicare program), larger employer groups, and health care networks and systems adopt common approaches with health care markets.

Expansion of integrated care delivery models under health care reform presents a natural experiment, and an opportunity to build on lessons from the field in health care financing and delivery to refine payment and financial tools that advance value-based health care. As already noted, evidence about the effectiveness of various payment and financial incentives for ACOs, PCMHs, and primary care and behavioral health integration models is limited, given only recent emergence of these delivery approaches on the health care

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scene. However, we can glean some insight from what is known about payment and incentive strategies as they have played out in other settings and with other care delivery models (e.g., hospital-physician group net- works and managed care arrangements, among others).

Still, natural experiments and innovations have their limits. The real test of payment incentives, integrated care models, and health care markets will take place in the field as we translate, apply, and align what we do know to serve challenging populations and bring imperfect markets to scale.

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