This document summarizes different methods for paying health care providers and discusses incentives associated with each method. It describes traditional fee-for-service and capitation models and also innovative approaches like population-based payments, episode-based payments, and pay-for-performance. Case studies from Sweden, the Netherlands, the US, Germany and Portugal show some positive impacts of these new models in reducing costs, improving quality and achieving better health outcomes, though mixed results remain. Going forward, the document advocates for payment models that reward quality, facilitate care coordination, and involve proper evaluation.

1. PAYING HEALTH CARE
PROVIDERS – GETTING THE
INCENTIVES RIGHT
Divya Srivastava, OECD Health Division
4th Joint Meeting of SBO Network
16th – 17th February 2015

2. Traditional ways to pay health providers
Payment mechanism Description Examples
Fee-for-service
Retrospective activity-based
payment; billing of individual
services
Predominant mode of payment
for GPs and for outpatient
specialist services
Capitation
Prospective lump-sum payment
per patient covering a variety of
services
Common mode of payment for
GPs in a number of countries
Salary
Remuneration of salaried
professionals
Predominant mode of payment
for doctors in public hospitals
Global Budget
Prospective lump-sum payment
independent of number of
patients covering a variety of
services
Mode of payment for public
hospitals in a number of countries
Payment per case (DRG)
Prospective Activity-based
payment per patient; patient
classified into groups based on
certain disease characteristics
Mode of payment for hospital
inpatient cases in many countries
Source: OECD Health Systems Characteristics Survey, 2012

3. • Document current remuneration methods in payment
systems in OECD countries (OECD working paper
forthcoming).
• Analyse whether payment systems support good health
care delivery along a the pathway of a chronic condition
(diabetes)
• Identify innovative approaches to pay health providers in
OECD countries
• Analyse challenges in implementation and conditions for
successful payment reform
• OECD publication planned in summer 2015
• http://oecd.org/els/health-systems/paying-
providers.htm
OECD Project - Paying providers for
health care

4. Incentives for some common payment
mechanisms
Payment
method
Volume Cost Efficiency Quality
Fee-for-service
Capitation +
Salary/Block
budget
DRG (case-
based payment)
+

5. Conflicting incentives..?
Payment
method
Volume Cost Efficiency Quality
Fee-for-service
(physician)
Block budget
(provider)
Develop other
approaches
to pay providers

6. Frequently called “value-based” payment
New innovative modes of payment
Payment mechanism Description Examples
Population-based payment
“Periodic” lump-sum payment
(virtual budget) per
inhabitant/enrollee for a range of
services delivered by a number of
different providers
Medicare ACO USA, Integrated
Care Model in Germany, PPP
model in Valencia region of Spain
Episode-based payment
Lump-sum payment for all services
delivered by one or more providers
for patients with a particular
condition
Hip and knee surgery Sweden,
Netherlands (diabetes,
Parkinson’s Disease)
Pay-for-performance
Additional payments to reward
quality improvements as measured
by structural, process or outcome
indicators
Portugal (primary care), Norway
(Quality based financing for
hospitals)

7. • Accountable care organisations
• Responsibility for quality, care and spending for a wide range of
health services for defined population
• Care provision across sectors
• Financial performance measured against benchmark
• Risk sharing (one-sided or two-sided)  shared savings and shared
losses
• Embedded in FFS or capitation
• Quality targets
• Country examples
• Medicare and Private ACO in USA
• Hospital centred model in Spain
• GK Model embedded in Integrated Care contracts in Germany
Population-based payment

8. • Mixed results
 Some studies show improvements in some aspects of health care
quality
 Savings
 As a reward, receive savings -- mostly from reduced hospital
admission
 But: High IT and management costs
• IT infrastructure essential
• Provider acceptance important  some ACO provider-
driven
• No limitation to choice for patients
• Targeting population at risk
Key findings

9. • Episode-based payment aims to encourage better
coordination between providers and improve quality
of care
• Patient groups by disease/intervention (diabetes,
Netherlands), Parkinson’s Disease (Netherlands),
(hip and knee surgery in Sweden)
• Pilot phase or incremental introduction and
typically voluntary participation
• Impact show some positive effects:
• Costs (-), complications (-), health outcomes (less
clear), patient experience (+).
Episode-based payment for specific
diseases/intervention

10. Sweden episode-based payment for
hip and knee surgery
Before 2009
• Waiting up to two years for surgery
• No systematic quality control from county
Changes in organisation of care
• Accreditation of providers and “patient free
• choice” of provider
• Providers changed how they worked
• Benchmarking, process mapping and
• standardisation
• New manuals and checklists
• Certification of personnel
• Extra post-op visits to
Payment changes
• Episode-based payment to cover care up to five years post surgery for patients
Episode-based payment - it works(?)
Results:
- Waiting times reduced
- 26% reduction in complications from
surgery
- 20% reduced cost for county council
(Stockholm)
- Patient/provider experience (+)
National collaboration (SVEUS)
-- 8 conditions (spine surgery,
obstetric care, bariatric surgery, stroke,
diabetes, osteoporosis, breast cancer)
bring together wide group of
stakeholders to change how services
are delivered and to change
reimbursement ( pilot 2013 - 2015)

11. • P4P schemes usually account for a small
percentage ~0.5%-20% of total provider payment
• Introduction has tended to focus on driving
quality and outcome improvements
• Some schemes have been introduced gradually
and then up-scaled (e.g. CAPI/ROSP in France),
others have been rolled out with full coverage (e.g.
QOF for GPs in UK; QBF for public hospitals in
Norway). Some are voluntary (e.g. Portugal,
France) others mandatory
• Impact of change in payment on performance is
unclear
Paying for Performance

12. Portugal primary care reform
Organisational changes
• Alternative organisational model for primary care –
small multi-disciplinary teams
• Founded on a voluntary basis, by self-motivated
professionals
Financial changes
• USF Model A – financial incentives applied to the
team (for example development of key
infrastructure, or completion of specified training).
• USF Model B – financial incentives for team and for
individual professionals. Performance incentives (up
to a defined ceiling of 30% of salary for GPs, and
10% for nurses.)
Pay for performance dimension
• Pay for performance included across indicators
including appropriate monitoring of pregnancies and
infants; monitoring of diabetic patients and patients
with high blood pressure.
P4P – performance improvement
thanks to payment change?
2013 comparison of diabetes and
hypertension management,
between primary care models
Proportion of controlled
diabetics:
Traditional health care centres:
41,5%
USF Model A: 61,6%
USF Model B: 70,3%
Proportion of hypertensive
patients with controlled blood
pressure
Traditional health care centres:
37,8%
USF Model A: 53,8%
USF Model B: 65,2%

13. • Payers for health should play an active role to
reward improving quality of care.
• Integration and coordination of services should
not be undermined by administrative complexity.
• Shared financial risk models may improve quality
of care but should have proper support structures
to encourage and not dissuade providers.
• Patient outcome measurement show potential to
better inform reimbursement in some areas of
health care delivery.
• Arms length evaluation embedded as part of the
policy reform.
Going forward

14. Contact: divya.srivastava@oecd.org emily.hewlett@oecd.org;
michael.mueller@oecd.org
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Website: www.oecd.org/health
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Thank you