This report analyses the failures of the most prevalent payment systems globally, ranging from fee-for-service and block grants to the current attempts to pay for performance in the US, UK and elsewhere. In the quest for ‘bundled payments’ that cross organizational boundaries and ‘accountable care organizations’, health systems are now looking for the next step forward: paying for outcomes rather than activities; paying for value rather than reimbursing costs.

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Doctors walking in the lobby

The evidence that this route is feasible and highly rewarding (in all meanings of the term) is clear. Dramatically, however, existing payment systems tend to systematically work against providers and professionals taking this route. If we do not systematically fix this problem, we cannot expect to bend the cost curve without seriously endangering quality and access.

This report not only argues that doing this is possible: it also lays out the concrete principles which will help policy makers and payers to achieve the ‘Holy Grail’ of contracting value. By taking these core principles at heart, the seemingly insurmountable complexity of the issue is reduced considerably. Examples will illustrate how outcomes can be measured, and value can be made the core of a contract between payer and (groups of) providers. The greatest challenge is actually embarking upon this road. In the quest towards better healthcare for (relatively) lower costs, many deeply entrenched interests will be need to be overcome. Yet given the sheer scope of the pressures on our systems, there is not much of a choice

Contracting value: Shifting paradigms

Healthcare systems are facing pressure to cope with rapidly aging populations, a higher prevalence of chronic diseases and ever rising expectations.

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