Payment Methods and Benefit Designs
How They Work and How They Work Together to Improve Health Care
Robert A. Berenson, Suzanne F. Delbanco, Divvy K. Upadhyay, and Roslyn Murray
Payment reform promises to substitute value for volume. Yet, value- and volume-based approaches typically are implemented together. All payment methods have strengths and weaknesses, and how they affect the behavior of health care providers depends on their operational design features and how they interact with benefit design. Those seeking greater value for the health care dollar are also turning to innovation in benefit design, which typically involves the implementation of more than one approach, each with its own strengths, weaknesses, and impact on consumer health care behavior. While payment and benefit design each has received significant attention, the intersection between the two has received little.
The Urban Institute teamed up with Catalyst for Payment Reform to explore how established and proposed payment methods and benefit design options work. We also focused on how payment and benefit design can be blended to improve health care delivery. In addition, we propose new typologies that classify payment methods and benefit designs along relevant dimensions to provide a conceptual framework to add clarity and consistency to reform discussions.
The project was funded by the Robert Wood Johnson Foundation. Robert A. Berenson (principal investigator) and Divvy K. Upadhyay from the Urban Institute and Suzanne Delbanco (coprincipal investigator) and Roslyn Murray from Catalyst for Payment Reform staffed the project team. A broad-based technical expert panel advised the project team and reviewed the reports at different stages.
We have organized our work into five major reports that are available for download here. The reports have individual chapters that can be downloaded separately.
Payment Methods: How They Work
- Fee Schedules for Physicians and Other Health Professionals
- Primary Care Capitation
- Per Diem Payment to Hospitals for Inpatient Stays
- Diagnosis Related Groups-Based Payment to Hospitals for Inpatient Stays
- Global Budgets for Hospitals
- Bundled Episode Payments
- Global Capitation to an Organization
- Shared Savings
Benefit Designs: How They Work
- Value-Based Insurance Design (V-BID)
- High Deductible Health Plans (HDHP)
- Tiered Networks
- Narrow Networks
- Reference Pricing
- Centers of Excellence
- Alternative Sites of Care
Matching Payment Methods with Benefit Designs to Support Delivery Reforms
- The Patient Centered Medical Home—Advanced Primary Care
- Focused Factories—Specialty Service Expertise
- Accountable Care Organizations—Integrated Delivery Systems
A Typology of Payment Methods
A Typology of Benefit Designs