Health outcomes should be rewarded rather than the amount of activity

Reward systems have to be developed that encourage best practice. This can only be done if we know what “best practice” is, and this can only be identified by benchmarking and comparing, perhaps on the basis of a form of episodic payment for defined illnesses, with clinically- (and patient-) determined optimum outcomes. We should spend more time asking patients about their satisfaction with particular treatments on the basis of whether, if they had known how they would feel, say, six months after the treatment, they would have agreed to having it done. Clinicians should be encouraged to develop benchmarking criteria allowing hospitals, and clinicians themselves, to compete to see which achieves the best outcomes, and given proper financial rewards for that achievement.

Ideally we would see the development of integrated health-delivery systems, involving primary-care doctors and allied-health professionals, specialists, diagnostic facilities and, as a last resort, hospitals working within a financial incentive structure that effectively rewarded all parties for ensuring patients received the best possible treatment in the least costly environment, while also ensuring that patients who need to move through the system of diagnostics and hospitalisation do so in a smooth and well managed fashion. These systems could be corporations in which all the players may or might not have a direct financial interest, or collections of individual operators sharing in the financial outcomes based on health outcomes at year’s end.

This could all be done within the private sector, though there is a case to be made for having some publicly funded integrated health-delivery systems as a reference point to ensure competition met minimum government-determined standards.

So how would the system be funded? More important than funding is the development of appropriate financial incentives that I suspect are outside the capacity of governments (or political parties). So in my ideal system I would have pooling arrangements along the lines of existing health funds. To ensure income did not disfranchise lower-income individuals from access to the best performing providers I would provide government subsidisation of contributions (at least to the extent government was itself saving money) but after that allow them to choose between competing funders. Funders would be able to contract with all or some integrated-delivery systems or individual providers, or both, but would have to provide a full range of services — virtually the total health-care needs of individuals, including access to emergency services, transplants, etc. In this way the funder has a very strong interest in ensuring that the most beneficial outcome is achieved at the most appropriate cost, and questions of cost-shifting between payers disappear. The payer (and, if the financial incentives can be got right) provider has a further interest in encouraging individuals to take action to reduce their own health risks. To ensure payers included the best performers (rather than the lowest cost) benchmarked results of providers (with appropriate risk adjustment) would be provided to consumers to allow them to determine which provider they wished to access, and to which funding agency they wished to contribute.

Critics will no doubt call this “US-style managed care” but it is not. The emphasis of any such system is providing the right financial incentives to encourage improvement, excellence, and optimum outcomes. That will only work if both providers and consumers see it as worth while.

The views in this article are those of the author and not necessarily those of the Australian Health Insurance Association.