Health Care: Payment by Results?

I am speaking at the U.K. Parliament next week about how to get better outcomes from addiction treatment. Like virtually all other forms of health care in the U.K. and U.S., addiction treatment is under pressure to deliver better outcomes without an increase in budget.

A number of projects (such as this one) have successfully improved aspects of the process of addiction treatment, e.g., reduced waiting times, increased use of evidence-based counseling methods and incentivized staff to retain patients longer in care. However, these process improvements have rarely translated into significant product improvements. That is, patients are seen more promptly, their treatment is better planned and organized, they stick around longer and they are more satisfied with their care, but their likelihood of recovering from addiction stays roughly the same.

In response to my recent post on hospital readmissions, some commenters suggested that psychiatric and addiction medicine are different than the rest of health care in that factors outside of treatment (e.g., housing, social class, family stress) rather than care quality explain most of the variance in how well patients do over time. But “hard medicine” is largely in the same boat: A study of Medicare’s quality of care measures for how hospitals dealt with heart attacks, chronic heart failure and pneumonia found that even dramatic differences in the quality of care during hospitalization relate only weakly to post-discharge death rates.

Many scholars committed to health care quality improvement would argue that it is hard to measure quality of care precisely and reliably, which leads to underestimates of the strength of the relationship between process and outcomes of care. They would also point out that the relationship between quality of care and outcome might be non-linear and hence go undetected in studies that employ conventional statistical approaches (e.g., correlations). For example, maybe genuinely lousy care damages health but given some baseline level of care adequacy, further improvements make little difference to outcome, creating the illusion that quality doesn’t matter in simple correlational studies. These are fair points and it would be foolhardy to give up on quality improvement just because the work is difficult.

But it would be equally foolhardy to not simultaneously try to improve the outcomes of health care in ways other than manipulating the process of care. The U.K. government has answered the challenge by leapfrogging questions about the process of addiction treatment to directly reward providers based on patient outcomes. “Payment by results” has been used in the NHS in a number of areas, but this is its first application to addiction treatment. In a small group of experimental areas around the country, addiction treatment providers will be paid based on their patients’ outcomes (e.g., drug use, employment, overall health and well-being) with the nature and process of care left up to the providers’ best judgment. There are a bevy of details to work out, including how to set the payment such that treatment programs will not shun hard-to-treat patients, but the basic concept has real promise.

Will it work? I don’t know, which is exactly why I am glad the experiment is being conducted. Bagehot is correct that boffins are ascendant in Whitehall these days, as two parties long out of power bruit the ideas they developed when they were in the political wilderness. The payment by results experiment in addiction treatment is among a number of demonstration projects that will put these new ideas to empirical test (The brainy Minister Oliver Letwin is a key player). Being experiments, some will generate negative results, but the spirit of innovation is encouraging given the pressing need to wring more health benefit out of every penny we invest in health care.

[Cross-posted at Same Facts]

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Keith Humphreys

Keith Humphreys is a professor of psychiatry at Stanford University. He served as a senior policy advisor at the White House Office of National Drug Control Policy from 2009 to 2010.