Two-Thirds of World Health Leaders See Problems With Payment Systems, According to New PricewaterhouseCoopers Report On Global Healthcare Reimbursement Strategies
NEW YORK, June 25, 2008 (PRIME NEWSWIRE) — Healthcare payment processes are in flux, as governments around the world seek ways to control costs without further compromising quality at a time when the needs of an aging population threaten to overwhelm health system resources. A new report published today by PricewaterhouseCoopers’ Health Research Institute finds that two-thirds of health leaders, including government and private payers from 20 different countries, see problems with their current payment system, and they are exploring new payment models that use incentives to better balance access, quality, efficiency and demand.
“Health systems are at risk of cavitating financially, and there is a tremendous focus on cutting costs,” said David Chin, M.D., leader of the Health Research Institute. “But you get what you pay for, as one healthcare executive told us, ‘If the government paid for Christmas trees, hospitals will produce Christmas trees.’ Cutting costs at the expense of quality and efficiency is economically and socially devastating. This is why a reimbursement model that properly aligns incentives to promote quality and efficiency is so vital to future sustainability.”
The report entitled “You Get What You Pay For: A Global Look at Balancing Demand, Quality and Efficiency in Healthcare Payment Reform” provides a comprehensive overview of how payment models are changing in 20 different countries, lessons learned from the experiences of other health systems and findings of a survey of 200 health industry executives, including government payers, private payers, hospital executives, and physicians.
Key findings in the report include:
* Most industrialized countries use gatekeepers such as physicians to control the demand for healthcare, ensure patients receive the right treatment and prevent over-utilization or use of more expensive treatments than needed. Yet, traditional gatekeeping systems are broken or breaking down, according to PwC. * Case-based prospective payment that groups reimbursement rates into diagnostic related groups (DRGs) is the emerging standard for hospital payment, having proven to improve efficiencies. This type of hospital reimbursement already has been adopted by 70 percent of countries within the Organisation for the Economic Cooperation and Development (OECD). However, it does have drawbacks, particularly with managing patients across the continuum of care, and forces the focus onto transactional care. * A number of countries that have historically had tax-funded or social systems are adding market-based competition to spread the burden of payment and to encourage efficiencies. But multiple funding systems and payers operating together in the same market creates conflicting incentives and causes confusion if incentives are not coordinated and properly aligned. * Reimbursement to general practitioners and primary care physicians is far more varied among different countries and regions than reimbursement to hospitals. Models that integrate hospital and physician payment have proven best at creating mutually aligned incentives.
“The optimal payment system is one that is totally based on providing the best possible outcome for patients and the community, but that is very challenging, given the current demands being placed on the system,” said Dr. Chin. “Each country needs a hybrid health payment system, one that balances cost containment and efficiency with quality and demand. There is no global cookie-cutter solution that will work universally, which is why each country needs to take parts and pieces that work given their culture, social goals and health system.”
Balance of Cost, Quality, Efficiency and Demand
PricewaterhouseCoopers’ research found clear trends around the world in how governments are juggling priorities. It found that:
* Meeting demand by caring for an increasingly aging population was rated the most difficult challenge facing health systems around the world. * Cost control was ranked as the most important factor in developing payment systems in the future. It ranked more important than quality, efficiency or demand. * "Better informed patients" or consumerism ranked highest as a way to better manage demand. Increasing out-of-pocket payments ranked lowest. * Approximately eight in ten (81 percent) global health executives said that better coordination of care would do the most to improve quality in their countries. Bonuses for care coordination to physicians and hospitals were among the top five methods needed to improve quality and efficiency. * To better reward quality, quality information must be gathered, measured and acted on. Data is becoming increasing available to compare quality measures, but PwC found that patients and gatekeepers aren't acting on the data because patient choice is still largely driven by subjective perceptions of quality versus quantifiable medical or technical data. Payers are still reluctant to base reimbursement on quality alone.
Information technology has been identified as an effective means of improving efficiencies and better coordinating care. Payers often express concerns about financing advancements in technology because medical technology such as better diagnostics to detect illness earlier may lead to increased utilization. PwC recommends that if investment in IT and adoption is desired, countries that do not already do so should build incentives for IT investment into their payment formulas.
Globalization Drives Need for Rational Pricing
There is a potential need for rational pricing across different countries and territories, particularly in Europe, as the healthcare marketplace becomes more global. Patients who are paying more out-of-pocket for care are shopping around for care in non-traditional venues and locations. Countries need to prepare to develop rational pricing for competing in the global market for healthcare services.
PricewaterhouseCoopers’ Health Research Institute commissioned a global survey of more than 200 healthcare executives from 20 countries: Australia, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Malaysia, the Netherlands, Norway, Poland, Singapore, Slovenia, Spain, Switzerland, the United Kingdom and the United States.
A full copy of the report is available at http://www.pwc.com/hri.
About the PricewaterhouseCoopers Health Research Institute
PricewaterhouseCoopers Health Research Institute (http://www.pwc.com/hri) is an unparalleled resource for health industry expertise. By providing cutting-edge intelligence, perspective and analysis on issues impacting the health industry, HRI assists executive decision-makers and stakeholders worldwide in navigating their most pressing business challenges. PricewaterhouseCoopers is one of the only firms with a dedicated global healthcare research unit, capitalizing on fact-based research and collaborative exchange among our network of professionals with day-to-day experience in the health industries.
About PricewaterhouseCoopers Health Industries Group
PricewaterhouseCoopers’ Health Industries serves as a catalyst for change and the leading advisor to organizations across the health continuum, including payers, providers, health sciences, biotech/medical devices, pharmaceutical and employer practices in the public, private and academic sectors. With a distinctive approach that is collaborative, multi-disciplinary and multi-industry, PricewaterhouseCoopers draws from its broad perspective and capabilities across and beyond the health industries to help solve the array of emerging complex problems health organizations face, lead cultural and clinical transformation, and create a new sustainable model for care delivery that is quality driven, patient centered and technology enabled.
PricewaterhouseCoopers Health Industries’ clients include 40 of the top 100 hospitals in the U.S. and 16 of the 18 best hospitals as ranked by U.S. News & World Report; all 20 of the world’s major pharmaceutical companies; all of the top 20 commercial payers in the U.S.; municipal, state and federal government agencies and many of the world’s preeminent medical foundations and associations.
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CONTACT: PricewaterhouseCoopers LLP Todd Hall (617) 530-4185 todd.w.hall@us.pwc.com The Hubbell Group, Inc. Lisa Stearns (781) 878-8882 lstearns@hubbellgroup.com