Observations from the Field

Abstract

D e f i n i n g a n d m e a s u r i n g q u a l i t y w i t h o u t paying attention to cost is not feasible in the real world, where the issue is what quality can be achieved at a defined cost. Purchasers of health benefits have clearly shown that they can effectively use prepayment ("capitation" of the plan) to leverage wider benefits (e.g., preventive services and drugs), at lower cost both to themselves and their subscribers, while imposing extensive requirements for documentation of performance, including structural, process, and outcomes quality indicators. No other funding mechanism has been able to achieve this level of value, or "cost-adjusted quality." Indemnity financing has all but disappeared. Even if we could agree on the definitions and measurements of quality, comparisons of prepayment and indemnity are no longer relevant. Prepayment by purchasers clearly extracts greater value from plans, end of story! When health plans, in turn, purchase services, they link financial and nonfinancial incentives, like various risk arrangements (e.g., capitation), benefit designs, copayments, network structures, bonus incentives, and utilization controls, in order to change the behavior of both providers and patients. The research that was reviewed by the conference participants fails to demonstrate an unequivocal increase or decrease in the