Outcome-Based Reimbursement Will Work in the Health Center Environment

While payers and hospitals expect outcome or value-based payments to rise and fee-for-service payments to dramatically decrease over the next five years, only 35% of providers believe that this change will have a positive financial impact on their organization. (Source: http://www.beckershospitalreview.com/finance/mckesson-new-reimbursement-models-to-eclipse-fee-for-service-by-2020.html)

Some believe that outcome-based reimbursement works only in a limited sector of health care, primary care not being one of those sectors. In this article, one physician makes several arguments against outcome-based reimbursement, expressing concern about doctors being blamed for bad outcomes beyond their control and comparing the healthcare field to other industries not using outcome-based payments.

I have to respectfully disagree with those who are against outcome-based payments, at least where health centers are concerned. I am absolutely in favor of "honest pay for honest work,” but that dictum doesn't necessitate fee-for-service payments.

Here’s why:

  • There are always going to be events outside of a physician’s control. There are always going to be non-compliant patients. There are always going to be bad outcomes. The point is to maximize everything we can control by providing coordinated care, which in turn is more efficient and minimizes poor outcomes.
  • As for other industries not using outcome-based payments, so what? Health care is not like other industries. For example, I don’t know of any other industry currently responsible for almost 18% of the country’s GDP. The status quo of healthcare spending is unsustainable with the congressional budget office (CBO) estimating healthcare spending to be as much as 22% of GDP by 2038. Payment for outcomes is one potential solution for improving population health and bending the cost curve.  
  • Politics aside, healthcare reform is required and this includes payment reform. The "fee-for-service" and "per visit" payment system creates a financial incentive to deliver as many visits, exams, tests, and treatments as possible for financial sustainability/profit rather than what is necessarily best for the patient. Couple that with malpractice concerns, and some physicians feel forced to practice defensive medicine, which is in direct conflict with the reason they chose a career in medicine. 

The bottom line:

Aligning payment methodologies with outcomes creates incentives to keep a person healthy rather than treating an encounter as just another doctor visit – Plus, it saves money.

There are many permutations of this concept from Patient Centered Medical Home (PCMH) to Shared Savings to Pay for Performance. What they all share is a focus on eliminating redundancy in care and unnecessary ER utilization, as well as discouraging low value, expensive technologies.

In this model, there are a lot of opportunities for cost savings that do not compromise quality of care. In fact, there is strong argument to be made that it is better care since it would be less disjointed. For example, you would be hard-pressed to find someone who wants to receive their care in the emergency room or have the same diagnostic test done multiple times.

Effective managed care and outcome-based payment work hand in hand to raise efficiency and reduce cost, leading to better patient outcomes.

So, what’s the problem?


Lesa Peterson is a Sr. Consultant for FQHC Associates and Merces Consulting.  Previously, as the Director of Operations for a community health center, she was responsible for the administrative operations of the organization,  including a Ronald McDonald Care Mobile® program.

Read more about Lesa here.

To contact Lesa, email her at LPeterson@FQHC.org.

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