Five payment models: the pros, the cons, the potential

Among the leading strategies to reform health care is the development and implementation of new payment models. The goal is to change the way physicians, hospitals, and other care providers are paid in order to emphasize higher quality at lower costs--in other words, to improve value. In an effort to build on its health care reform activities that began in 2005, the Minnesota Medical Association convened a work group in 2010 to develop recommendations on how payment reform can best be advanced. Among the work group's output was a comparative review of five payment models with respect to how they can support a value-driven health care system. This article summarizes the pros and cons of the five models--fee for service, pay for coordination, pay for performance, episode or bundled payment, and comprehensive care or total cost of care payment. It also offers the work group's recommendations for how these models might be applied in a reformed health care system.