Reconciling Healthcare Quality and Cost Effectiveness
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Diagnosis-related Groups (DRG) – Reconciling Healthcare Quality and Cost Effectiveness in Saudi Arabia
Maybe there are no ways you could exactly dissociate quality of service from its cost. At least, the global service industry operates on this principle: the service delivered is a measure of the cost paid. Although, this is not true in all cases. For instance, matching the quality of care delivered with an appropriate cost is a domain problem plaguing healthcare delivery globally.
Today, budgetary limitations, bogus payment policies, and poor insurance coverage have forced healthcare providers to rethink and re-innovate methods of service costing. The key indexes prioritized for this process may overcharge patients, encourage overutilization of resources, and undercut quality. In Saudi Arabia, and many other parts of the world, the fee-for-service and the value-based reimbursement models remain the main methods of costing healthcare delivery. Understanding the specifics, failures, and offerings of both models may help us perfectly match cost with quality.
Healthcare in Saudi Arabia and the Salary Payment Model Healthcare expenditure in Saudi Arabia has continued to rise at an alarming rate. Budgetary allocation covering health and social development rose from $7.2B in 2005, to $42.4B in 2019 (Ministry of Health, 2020). This spending positioned the Saudi Ministry of Health as the largest public healthcare provider, covering over 60% of all inpatient care in the Kingdom. Despite the huge budget, a gap exists between the quality of care delivered and the cost incurred. Researchers have blamed this gap on the payment model used to compensate hospitals and providers.
The traditional payment model in Saudi Arabia, which is called the salary model, operates on a fee-for-service basis. Providers get paid for each unit of service delivered, such as surgical procedures or clinical imaging. Payments in this model are not bundled. So, insurance companies or third-party payors like the government are billed for every test, consultation, and procedure per visit. Regardless of patient outcome, fee-for-service rewards healthcare providers for volume are quantity.
The fee-for-payment model is customary in many developed countries across the globe. In France, about 94% of healthcare payments to primary care physicians are FFS-based (Thomas Rice, 2021). Most healthcare payments are also tied to FFS in Australia Canada and the United States. However, these countries are now gradually shifting to a value-based model, with a strong case of prioritizing quality over quantity (Jamili et al., 2023).
FFS is direct and not complex to implement, however, its problems are many. It tends to promote overabundance of care methods solving no unique problems. Since reimbursement is based on volume and number of visits, care providers are incentivized to fraudulently prolong care plans with excessive treatments. This creates barriers to quality care, hinders care coordination, increases the risk of waste and abuse, and overburdens the patient.
Value-Based Reimbursement: The Basics
In 2004, the UK started a strategic shift from the FFS model to the value-based (VB) model. As a pay-for-performance model, VB is designed to incentivize care providers to focus on holistic care. Reimbursement is based solely on the quality of care delivered, not the number of visits. This approach is centered around improving the healthcare experience and reducing costs. Globally, not many countries have fully transitioned into a VB model of healthcare payment.
In 2021, data from the Health Care Payment Learning and Action Network (HCP LAN) showed that 59.5% of healthcare payments from 63 commercial plans, Medicare, and five state Medicaid programs in the U.S. were tied to value and quality in some capacity (Revcycle Intelligence, 2022) McKinsey and CCompany also reported that private capital investment in value-based healthcare payment models quintupled between 2019 and 2021 in the United States alone (Zahy et al., 2022). Data like these signal the evolution of VB and its gradual adoption globally. At Lean, we are championing a drive to introduce the VB model of healthcare payment in Saudi Arabia.
REFERENCES
1. https://www.cms.gov/priorities/innovation/about/strategic-direction
3. https://revcycleintelligence.com/features/value-based-payment-fee-for-service-levels-hold-steady
5. https://doi.org/10.1016/B978-0-12-816072-5.00016-X
6. https://pubmed.ncbi.nlm.nih.gov/37928822/
7. https://doi.org/10.1186/s12913-023-09841-6
8. https://www.moh.gov.sa/en/Ministry/About/Pages/Budget.aspx
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