This week we’re blessed with two excellent new reports on health spending asking, do we get what we pay for?

The answer is, well, sometimes — particularly when you follow the perverse incentives that lead you on the money trail of waste, ineffectiveness and, worst of all, poor health outcomes.

PricewaterhouseCoopers‘ Health Research Institute and the Center for Studying Health System Change offer their views on this topic with slightly different lenses.

In You Get What You Pay For, PwC examines 20 health systems and finds that managing costs is the top ranked factor for reengineering payment systems throughout. Costs are put ahead of quality, efficiency, or meeting demand. While prospective payment (a la DRGs) has been adopted in 20 countries belonging to the OECD, 2/3 of those countries believe their payment methods will change as they’re not stemming cost increases.

“Better informed patients” are seen as an optimal way to manage demand — not increasing out-of-pocket payments, at least not as a strategy on its own.

Quality data is emerging in many countries outside of the U.S. such as England, Germany and Spain, but as in the U.S., consumers aren’t paying much attention to that data.


(Note: PwC studied Australia, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Italy, Malaysia, the Netherlands, Norway, Poland, Singapore, Slovenia, Spain, Sweden, Switzerland, the United Kingdom, and the United States. In their research and data aggregation process, PwC used an internal wiki which helped capture the learnings of PwC consultants throughout the world.)

In CSHSC’s report, Getting What We Pay For: Innovations Lacking in Provider Payment Reform for Chronic Disease Care, the focus is on the growing burden of chronic disease and the failure of existing payment systems — especially fee-for-service — in addressing continuity and coordination of care. The researchers found that without broad-based reform to align incentives that address chronic care, market barriers will prevent meaningful change. Barriers include fragmented care delivery, lack of payment for non-physician providers and services supportive of chronic disease care, potential for revenue reductions for some providers, and a lack of a viable reform champion. That champion could take the form, the Center says, of employers and plan sponsors. They do not hold out hope for Medicare in the short run as Medicare demonstration projects have a long cycle from beginning-to-end and to results reporting. And while there are many private sector pilots, these lack the scale required for meaningful change.

Health Populi’s Hot Points: PwC points out that payment incentives among stakeholders in a health system must be designed to change behavior and improve health outcomes. What informs those incentives is information — the flow of data between patients, payers, and providers. We can’t ask consumers to take on the “empowered, informed” role without arming them with information. Ditto for providers, who practice in the proverbial dark when it comes to the patient outcomes they’re individually achieving. Health care is an information-based industry.

Yet getting to where we need to go in this PwC vision is still a long way off. I listened to Dave Garets, the President and CEO of HIMSS, present first quarter 2008 data on hospital adoption of EMRs. It’s not a positive picture in light of President Bush’s goals of most Americans having access to their personal EHR by 2014, according to Garets. And the momentum achieved thus far could slow down even more in the next few years as hospitals plan to allocate more resources for “revenue cycle” applications. Those are the tools that will help hospitals manage financial viability.

After all…costs are the #1 problem in the system, according to the smart folks at PwC. We are in a vicious cycle. What we need is a disruption to that cycle. Where will it come from?