There is growing realization and agreement that in order to achieve the most efficient, effective, and sustainable improvements in quality and reductions (or slowing the growth) in costs of the healthcare system, the penalties and disincentives in current healthcare payment systems need to be eliminated or modified, in addition to adding rewards or incentives.

When Starbucks, one of the biggest employers in Seattle, realized that costs for treating back injuries were far higher at Virginia Mason Health System than they were at competing providers, the coffee retailer asked Aetna Inc. to drop the institution from its network. Because dropping providers can limit a health plan’s marketability, Aetna instead helped Virginia Mason analyze the reasons for the big cost difference. The heart of the health system’s problem was much higher use of MRIs and neurological consults, even for patients whose back pain could be readily explained by an injury. So, Virginia Mason worked with the insurer to make physical therapy the first treatment option. Almost immediately, the health system began seeing faster recovery times for patients (which, in the case of occupational injuries, meant less time on workers’ comp) and dramatically lower costs for employers because physical therapy costs so much less than MRIs and neurological workups. However, the steep reduction in MRIs and neurological consults also took a toll on Virginia Mason’s finances. Instead of generating several thousand dollars for treating a back injury, it saw its income drop to a few hundred dollars on each case, which was not enough to cover its costs. Neither Aetna nor Starbucks ever intended to put Virginia Mason out of business, so they did something that instead was a win-win. They restructured payments to reward appropriate care. Instead of staking claim to the entire savings, Starbucks and Aetna took only a portion and directed the rest toward increased reimbursement for physical therapy, which, up to that point, had been a money loser for Virginia Mason.

Ref: nrhi.org