Moving Away from Fee for Service Payment

As I have said in previous posts, one of the best ways to control health care costs is to change the way providers are reimbursed. Paying them on a fee for service basis everyone agrees provides an incentive for unnecessary care which by some estimates makes up over 30% of the total medical expenditure in this country. However moving away from FFS will not be easy for a variety of reasons. One just has to look at the experience of BCBS of Massachusetts. This Blues Plans is at the forefront of developing an episodic payment structure or as they called them, Alternative Quality Contracts or AQCs. Well the Plan reported a loss of over $150M in 2009 and a report in the Boston Globe said up to a third of the deficit could be attributed to the company's effort to establish AQCs with its providers. On top of this, their CEO, Cleve Killingsworth resigned after six years which some say was due to the poor financial performance. I have no idea if this is true but it certainly will give senior management some pause as they think about changing their provider reimbursement methodology which if true would be unfortunate.