Aligning Consumer Cost-Sharing with Episode of Care (EOC) Provider Payments

The Integrated Healthcare Association is coordinating an episode of care payment project for knee and hip replacement surgery, which will be expanding into other diagnostic and surgical procedures. he Integrated Healthcare Association (IHA) is coordinating a bundled episode-ofcare (EOC) payment project for knee and hip replacement surgery, which will be expanding into other diagnostic and surgical procedures. It bears many similarities to, though also some differences from, Medicare’s Acute Care Episode (ACE) payment demonstration for orthopedic and cardiac surgery. As organized to date, the IHA project changes the way hospitals and physicians are paid by health plans but does not alter the structure of the patients’ cost-sharing obligations. This omission represents a meaningful limitation of the project. The IHA now is re-examining consumer benefit design in light of the move towards EOC provider payment. This Issue Brief describes the need for benefit re-design in the context of the movement towards EOC payment methods. It gives examples of benefit options specifically for the types of high-cost acute care procedures that are the focus of the IHA initiative. These options include coinsurance with a high annual out-of-pocket maximum, reference pricing, and “Centers of Excellence” contracting. The Brief concludes by considering the extent to which payment reform and benefit redesign can supplement one another and also be used as substitutes for one another.