The Demise of Fee-for-Service in Massachusetts

A wonky-sounding component of the Massachusetts government - the Special Commission on the Health Care Payment System - is fomenting a quiet revolution.

On May 8 the Commission proposed taking down the hallowed system of fee-for-service reimbursement. If Massachusetts follows the recommendation the state will "transition to a payment system where global payments to provider networks are the predominant form of reimbursement."

The core concept in the Commission's recommendations is something we should all be taught in childhood - how to live within a budget. We in the U.S. have been notably lax about budgeting, as evidenced by our recent trend into negative levels of savings.

The Commission's proposals aren't new. What's important is that they are coming from a state commission in a state whose leadership is likely to follow its advice:

• The health system should be organized into “Accountable Care Organizations (ACOs), which include doctors, other community-based providers, and hospitals collectively capable of providing a full range of services. Relationships among providers can vary (ownership, virtual/contractual). "
• "Global payments should be adjusted for risk and other factors and incorporate common performance measures. "
• "Since some Massachusetts providers will face challenges moving away from fee-for-service, a careful transition must occur and offer adequate infrastructure support for providers. The transition will occur over a period not to exceed 5 years, though some providers may transition sooner. "

If Massachusetts proceeds with this plan - and I expect that it will - it could have significant national implications. The state has received a great deal of attention for its health care reform plan. To date, however, Massachusetts has succeeded in insuring most of its citizens, but has flopped in its efforts to contain costs. Unless Massachusetts gets a better grip on health care costs its reform program will die. Having gone this far the state doesn't want to see its efforts crash and burn. It has concluded - correctly - that fee-for-service reimbursement must go.

(For a previous posting on health care costs in Massachusetts see here)