Aligning incentives in the management of inguinal hernia: The impact of the payment model

The Affordable Care Act has stimulated discussion to find feasible, alternate payment models. Adopting a global payment (GP) mechanism may dampen the high number of procedures incentivized by the fee-for-service (FFS) system. The evolving payment mechanism should reflect collaboration between surgeon and system goals. Our aim was to model and perform simulation of a GP system for hernia care and its impact on cost, revenue, and physician reimbursement in an integrated health care system. The results of the 2006 Watchful Waiting (WW) vs Repair of Inguinal Hernia in Minimally Symptomatic Men trial was used as a clinical model for the natural history and progression of inguinal hernia disease Simulations were built using 2009 financial and clinical data from the Cambridge Health Alliance to model costs and revenues in managing care for a 4-year cohort of inguinal hernia patients; FFS, FFS-WW, and the GP-WW were modeled. To build this GP model, surgeons were paid a constant $500 per patient whether herniorrhaphy was performed or not. Compared with the actual combined physician and hospital revenue under the current FFS model ($308,820), implementing the FFS-WW system for 4 years for 139 hernia patients decreased hospital and physician revenues by $93,846 and $19,308, respectively. This resulted in a total savings of $113,154 for the payors only. In contrast, when using WW methodology within a GP model, system savings of $69,174 were observed after 4 years, with preservation of physician and hospital income. Collaboration to achieve shared savings can be accomplished by pooling physician and hospital revenue in order to meet the goals of all parties.