Warranties on health care services could boost quality

Noting that warranties are common in many industries but have been rare in health care, a report published online yesterday in Health Affairs suggests that their use in the health care sector could lead to better care quality and higher profit margins. A paper published today on the Health Affairs Web site argues that warranties could improve the care that patients receive while offering medical care providers a chance to improve their profit margins.

The paper describes the Prometheus Payment model, developed by a nonprofit corporation of the same name with the support of grants from the Commonwealth Fund and the Robert Wood Johnson Foundation. If the model were applied to payments for the treatment of patients suffering from acute myocardial infarction (AMI), or heart attacks, providers would have to reduce their rates of potentially avoidable complications to roughly two-thirds of current rates in order to be consistently profitable, according to lead author Francois de Brantes and coauthors.

Under the Prometheus model of “evidence-based case rates,” or ECRs, to care for a patient diagnosed with a specific condition, providers are paid a global fee covering all services recommended by well-accepted clinical guidelines or expert opinions. To encourage providers to work together to coordinate care, the global fee covers all inpatient and outpatient treatment delivered by physicians, hospitals, laboratories, imaging centers, pharmacies, and other providers. So that providers are not motivated to avoid treating older and sicker patients, the fee is “risk-adjusted” to account for factors such as age, sex, the presence of chronic illness, and prior acute events.

According to the authors, the concept of a warranty has filtered into the self-pay portion of health care for services such as corrective eye and general cosmetic procedures. They write, however, that the concept has taken much longer to appear in the third-party payer system, highlighting Danville, Pa.-based Geisinger Health System’s ProvenCare initiative. Under the initiative, the system charges a flat rate for elective coronary artery bypass grafting surgery; the rate includes all preoperative, operative, and postoperative expenses up to 90 days after the surgery. Geisinger has since expanded the model to a number of other services.

Click here for the Press Release.

(SOURCES: Journal of Health Affairs, http://healthaffairs.org, accessed July 8, 2009; Advisory Board Daily Briefing, http://advisory.com, June 17, 2009)