University at Buffalo School of Management

Autumn 2020 Buffalo Business 13 Acceleration of value-based care One of the primary causes of America's ever- escalating health care costs—and our poor health outcomes—is the way we reimburse doctors and hospi- tals. Our fee-for-service system of paying for each visit, each test and each hospital stay encourages more volume. This half-century-old system started to be disrupted with the passage of the Affordable Care Act and its introduction of value-based care models, which put health care providers on a budget and allow them to share the risk—and the rewards—of maintaining high-quality care within financial guidelines. The pandemic showed in stunning fashion how ineffective fee-for-service reimbursement can be. All parts of the system were crippled as in-person volume dropped. What is needed now is a commitment to those value-based models, where physicians and hospitals are rewarded for keeping people healthy, regardless of where care is delivered. The death of fee-for-service medicine is long overdue—and the pandemic may just have dealt it the final blow. The growth of public insurance options America is unique in our reliance upon employ- er-based health insurance, which covers half of the population. The system has been supported by a $280 billion annual federal tax subsidy, which exempts employer-paid premiums from federal income and payroll taxes. This spring, nearly 40 million Americans applied for unemployment insurance because of the pandemic, and many of them had lost their health insurance. At the same time, publicly supported health insur- ance is growing: Medicaid for the poor and subsidized health exchange policies for those above Medicaid eligibility guidelines. While it is doubtful COVID-19 will mark the demise of employer-based health care, it is fair to assume non-employer options will continue to grow in the years ahead. More industry consolidation— and higher prices In every industry, the pandemic will eliminate small businesses and marginal companies that lack the capital to sustain their revenue loss. In health care, that means the continued growth of large regional oligopolies in health care delivery and national oligopolies in health insurance. Unfortunately, study aer study has shown this kind of consolidation leads to substantial price increases, as larger health systems and insurance companies use their size for market leverage in contract negotiations. I am convinced that one of the major reasons for America's disproportionate death rate in the pandemic lies in our uncoordinated, dysfunctional health care system. We rightly applaud the doctors, nurses and allied support staff as heroes—but our heroes are fighting this war with a creaking, ineffectual support structure. It will change permanently—and in many ways for the better—as COVID-19 subsides. Larry Zielinski is executive in residence for health care administration in the School of Management and brings 35 years of industry experience, including terms as president of two health care organizations, to his role. 4 5 6

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