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Healthcare? Revolution? Really?

stethoscope moneyWe may be taking part in a revolution and not even realize it! The way healthcare is provided in the United States has been changing. In the past, Americans participated in fee-for-service healthcare. You might think of it as healthcare a la carte. Hospitals and doctors were reimbursed for each test and treatment, which created incentives to do more rather than less, and may have caused the system to perform less efficiently.

The Economist recently reported, as a result of the Affordable Care Act, hospitals and doctors are being paid by results. Instead of getting a fee for each service, they receive a flat fee for all services performed:

“There are also incentives for providers who meet cost or performance targets, and new requirements for hospitals to disclose their prices which can vary drastically for no clear reason… The upshot is there are growing numbers of consumers seeking better treatment for less money. Existing health-care providers will have to adapt or lose business. All sorts of other businesses, old and new, are seeking either to take market share from the conventional providers or to provide the software and other tools that help hospitals, doctors, insurers, and patients make the most of this new world.”

A key to making the transition from fee-for-service to alternative healthcare payment models will be providing doctors with support and guidance as they adopt new systems. A Rand study evaluated episode-based and bundled payments, shared savings, pay-for-performance, fees/taxes, and retainer-based practices as well as accountable care organizations and medical homes. The study found, “There was general agreement among physicians that the transition to alternative payment models has encouraged the development of collaborative team-based care to prevent the progression of disease.”

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

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