There is no doubt we can do a great deal more to improve the clinical practice of health care in the United States. We know that we have the most expensive health care system in the world, and yet we are not achieving the results we should– we rank far down the list on many overall health indicators. To our credit, numerous great initiatives have been started to improve our care delivery. We have developed many evidence-based practices, and know that they should be implemented throughout the continuum of health care. The pay for performance system is improving quality measures faster than ever before. We are making great progress!! But the endpoint of clinical integration, healthy population management, remains precariously out of reach.

As complicated as it may seem, I see clinical practice reform as merely the icing on a two-layered cake. Let’s talk about the cake.

The layer of cake immediately underneath is compensation reform. In order to successfully achieve our clinical and operational goals, all stakeholders must not only be compensated fairly for their work, but the compensation system must be aligned in a way that promotes a healthy population. Disincentives presently exist in many areas of compensation. The push by CMS to reduce unnecessary readmissions, for example, though clearly a good thing for the patient, is plagued by the fact that given our present reimbursement structure, most hospitals would be better off paying a fine than losing the revenue from the empty bed. Compensation overwhelmingly promotes volume over VALUE.

I learned many years ago as a compensation consultant that the problem with incentives is that they work! Performance follows the incentives. It is simply human nature to do the things for which we are incentivized… and maybe not to the things for which we are not incentivized. Delivering the best possible care requires the alignment of the compensation/ financing systems with our ultimate clinical and operational goals. Fortunately we are heading on the right road with pay for performance, but the bulk of our compensation remains volume-based. Compensation reform must result in fair reimbursement for services rendered, and at the same time, promote continuously improving clinical and operational practice. Until we get there, true clinical and operational improvement will be extremely hampered.

The bottom layer of the cake is payment reform. In order to be able to successfully compensate the delivery system, the overall payment infrastructure has to be reformed. This will require a combination of the public and private sector initiatives. The payment structure “fills” the buckets that drive overall delivery system compensation. Until this happens, compensation reform will be piecemeal and vary considerably. Payment reform truly complicated and requires collaboration of both public and private sectors toward a common goal. Inherent in this discussion is what will be covered, and what will NOT be covered. Obviously, the more services covered, the higher the overall expense will be. Covered benefits drive ultimate costs. There have been some starts through the ACA and other public and private initiatives, but there is still a long way to go. Until we get there, compensation will be suboptimal to achieve our clinical goals.

Despite the multiple disincentives created through the existing financing and compensation mechanisms, I am impressed with how the delivery system has continued to drive many clinical and operational improvements. This has been accomplished through the very hard, and often times unrewarding work of the entire delivery system.

We CAN have our cake and eat it too !

Let’s prioritize solutions for the payment reform. Lets develop an overall compensation infrastructure that truly drives the performance we desire.

If we can do that, the very talented and dedicated stakeholders on the delivery side… physicians, hospitals and the rest of the health care team…. will be incentivized and empowered to do what’s best. Clinical and operational improvements will rapidly follow. Outcomes will improve much faster. We will achieve a healthy population.

After all, it is just the “icing on the cake”.

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