Center for American Progress Urges Federal Expansion of Episode-Based Payment Model to Drive Value-Based Care

The Center for American Progress (CAP), a Washington-based think tank, has recommended that the federal government expand its single-disease payment model to reduce healthcare costs and develop a value-based healthcare model.

CAP Recommends Accelerating the Promotion of Single-Disease Payment Models

“Single-Disease Payment” refers to the practice of grouping diseases with similar diagnoses, treatment methods, and medical costs into several disease groups, and implementing a fixed-amount payment system. The fixed amount is based on the social average medical cost for the same disease group in the previous year. If the patient’s actual treatment cost is lower than the fixed amount, the patient’s out-of-pocket portion is paid according to the actual incurred expenses. Any amount exceeding the fixed limit shall be borne by the hospital.

“Next, the federal government should add some additional mandatory statements to the single-disease payment medical model,” CAP suggested.

“The additional mandatory declaration will send a signal to stakeholders—including hospitals, physicians, medical device manufacturers, skilled nursing facilities, and home health agencies—that federal healthcare agencies will incorporate single-disease payment as part of their ongoing healthcare reforms.”

CAP claims that the single-disease payment model can reduce medical expenditure and improve the quality of medical services. A typical example is the plastic surgery and cardiac emergency care programs established in 2009, under which the single-disease payment for cardiac conditions covers acute care as well as 90 days of post-discharge care costs.

In most cases, a hospital’s financial responsibility ends upon patient discharge. However, single-disease payment models significantly extend the care continuum, holding hospitals accountable for patients who were previously treated in an assembly-line fashion. This shift from traditional fee-for-service to value-based healthcare payment represents a major transformation in medical reimbursement. Decades-old business practices, provider-patient relationships, payment structures, and core competencies are being reevaluated under these new payment models, and such systemic restructuring will take time.

Long-term care providers can accelerate the adoption of bundled payment models by proactively collaborating with healthcare institutions. Hospitals need to gather more data from their acute care patients to build confidence in consistently delivering effective medical services and achieving high-quality health outcomes. Long-term care providers can help hospitals address this challenge more effectively, while hospitals also rely on bundled payments to enable broader care pathways.

Patients will benefit from single-disease payment.

Single-disease payment is expected to provide better medical services for patients by coordinating medical resources. In a traditional healthcare fee-for-service model, hospitals lack the economic incentives to provide adequate care for patients following acute treatment and sufficient post-discharge support.

In the single-disease payment model, symmetric incentives are in place to ensure the effectiveness and cost-efficiency of the medical process; when healthcare institutions assume responsibility for the entire course of a patient’s treatment, patients receive more comprehensive care.

However, the immediacy, accuracy, applicability, risk profile, and economic incentives associated with data obtained from medical institutions participating in single-disease payment models will all influence whether such payment mechanisms achieve broader adoption. Nevertheless, regardless of whether medical institutions are fully prepared, single-disease payment systems will continue to expand their scope of application and enhance engagement among both healthcare providers and patients.

From the perspective of the healthcare system, pioneers investing in tools, technologies, and relationships related to single-disease payment models need to provide better solutions in this area and leverage their advantages to lead the market.

Furthermore, advanced analytics are crucial for single-disease payment models, which require the collaborative participation of diverse providers within an integrated healthcare delivery system to ensure the continuity and effectiveness of care. This domain demands in-depth expertise to assess the capabilities and vulnerabilities of participating medical institutions. Through the effective application of data analysis, these insights, combined with partner data, can facilitate the construction of high-efficiency healthcare networks.

Looking ahead, we will witness a shift from retrospective, historical data analysis to prospective, predictive data analysis. The former is a critical component of healthcare systems, enabling them to assess their current and historical status. The latter allows healthcare systems to avoid unnecessary costs and adverse medical incidents. With the proliferation of electronic monitoring devices, the applicability of real-time health data will continue to grow. Through a series of data labeling and analyses, machine learning and predictive algorithms will play an increasingly significant role in diagnosis-related group (DRG) payment models. Consequently, patients will derive greater benefits from DRG-based payment systems.