IN ORTHOPAEDIC SURGERY Economic Incentives to Promote Innovation in Healthcare Delivery

The Author(s) 2009. This article is published with open access at Springerlink.com Abstract Economics influences how medical care is delivered, organized, and progresses. Fee-for-service pay-ment encourages delivery of services. Fee-for-individual-service, however, offers no incentives for clinicians to efficiently organize the care their patients need. Global capitation provides such incentives; it works well in highly integrated practices but not for independent practitioners. The failures of utilization management in the 1990s dem-onstrated the need for a third alternative to better align incentives, such as bundling payment for an episode of care. Building on Medicare’s approach to hospital pay-ment, one can define expanded diagnosis-related groups that include all hospital, physician, and other costs during the stay and appropriate preadmission and postdischarge periods. Physicians and hospitals voluntarily forming a new entity (a care delivery team) would receive such bundled payments along with complete flexibility in allo-cating the funds. Modifications to gainsharing and antikickback rules, as well as reforms to malpractice lia-bility laws, will facilitate the functioning of the care delivery teams. The implicit financial incentives encourage efficient care for the patient; the episode focus will facili-tate measuring patient outcomes. Payment can be based on the resources used by those care delivery teams achieving superior outcomes, thereby fostering innovation improving outcomes and reducing waste