Hello everyone and nice to meet you. My name is Michael Rachmilowitz, and I will be writing this blog to keep you informed on the latest developments in value-based healthcare. We will cover the latest news in value-based medicine (MACRA/MIPS implementation, Bundled Payment programs, Accountable Care Organizations, and more).
Did you know that about 17% of the United States’ GDP in 2015 was spent on healthcare? Furthermore, almost half of that spending was government spending, while the remaining half was private health insurance and beneficiary out-of-pocket expenses. Compared to other G7 countries, where a majority of healthcare spending is done by the government, 17% is very high. Japan, Germany, and the United Kingdom expended between 10-11% of their GDP on healthcare that same year. In recent years, compared with the rest of the world, the United States has spent the most of its’ GDP on healthcare.
While the insurance market in the United States is a unique mix between public and private health insurance, it is important to realize that the basic foundations of healthcare payment remain the same in most countries. Just like grocery shopping, healthcare services are itemized one by one and sent to insurers for reimbursement (fee-for-service). Reimbursement is awarded based on negotiations between provider and insurer. Unlike grocery shopping, the medical market is not so simple and human lives are at stake. There is in most cases no way to “return” a medical service if it doesn’t work. Grocery stores can generate revenue by selling more product, while a hospital is limited by its patient pool size and its negotiated rates with insurers. Furthermore, due to historically limited growth in medical payment rates, some providers have had to increase volume of care to remain profitable.
What if providers were paid based on the quality and value of care they provided? If we eliminate redundancy in the medical system and incentivize quality and cost-effective care, everyone stands to benefit.