Yale School of Management

Incentives Key to Healthcare Transformation

Navigating the healthcare system in a post-Affordable Care Act world may be tricky, but Dr. Robert S. Galvin said that one rule remains constant: incentives matter. Galvin, CEO of Equity Healthcare, moderated the executive panel at the 2014 Yale Healthcare Conference on April 11, which examined whether the accountable care organizations encouraged by the ACA can actually deliver the changes envisioned by the reform.

Panelists agreed that while there is now significant, widespread waste, it will be difficult to root out because entrenched interests benefit from the status quo. "It's not that easy to get rid of waste when it's someone's revenue," Galvin said. Incentives for both cost savings and greater ease of healthcare delivery will play a key role in encouraging reform, panelists said.

Dr. Robert S. Galvin, Dr. Gary L. Gottlieb, Elizabeth Curran, and Francois de Brantes speak at the Yale Healthcare Conference. Photo: HCI3 via Twitter

Dr. Gary Gottlieb, president and CEO of Massachusetts-based Partners Healthcare, said that a move away from fee-for-service payments, in which physicians are paid based on the number of treatments prescribed, has allowed his company to focus on creating cost-cutting "medical neighborhoods." Under the concept, patients are encouraged to seek routine care at local hospitals instead of major metropolitan and academic medical centers, a shift designed to keep patients out of the emergency room. Instead, primary care physicians provide routine care, freeing up specialists to focus on more chronic and severe cases.

"We've taken the pressure to reduce the cost trend and really embraced our own mission to provide better care," Gottlieb said. "We want those community hospitals to be hubs with primary care teams. Then, people know that if God forbid they need something more, they will then have access to those academic medical centers or to those specialists."

Reform also shifts incentives for insurers. The relationship between insurers and providers has been traditionally transactional and sometimes adversarial, but Elizabeth Curran, head of national network strategy and program development at Aetna, said that the reform requires health plans to partner with providers. Both need to reorient their focus to find new ways to cut costs, Curran said. Through efforts such as digitizing medical records, providers and insurers can reduce redundancies and increase efficiency, she said. "When the data are available and the incentives are aligned, health systems can manage utilization very effectively," Curran said.

But even with improved incentives, it remains unclear which payment structure will ultimately yield the greatest results for improving outcomes, said Francois de Brantes, executive director of the Health Care Incentives Improvement Institute. Healthcare reform is essentially still a hypothesis and with the new regulations, providers and insurers are only beginning to see what will work and what won't, he said.

"We have to question whether or not large systems will always deliver the greatest value to payers and purchasers, but time will tell," de Brantes said. "Incentives are where it all needs to start and the rest will organize around it."

The Yale Healthcare Conference, a day-long conference organized jointly by students from the School of Management and Yale's health professional schools, featured panels and breakout sessions for scholars, students, and health industry professionals examining current issues facing both the industry. The 10th annual conference focused on ways providers and insurers can provide greater value amidst the uncertainty affecting the healthcare system.