Global Payments to Health Providers

Global Payments to Health Providers - Health Cost Containment

Updated March 2013

Cost Containment header

The following NCSL Issue brief has been distributed to legislators and legislative staff across the country.

Global Payments to Health Providers -  PDF File
Colorado Supplement: Global Payments to Health ProvidersPDF File
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Cost Containment Strategy and Logic

A global payment—a fixed prepayment made to a group of providers or a health care system (as opposed to a health care plan)—covers most or all of a patient’s care during a specified time period. Global payments are usually paid monthly per patient over a year, unlike fee-for service, which pays separately for each service (Figure 1). In most cases, a global payment encompasses physician and hospital services, diagnostic tests, prescription drugs and often other services, such as hospice and home health care. Under a global fee arrangement, a large multispecialty physician practice or hospital-physician system receives a global payment from a payer (e.g., health plan, Medicare or Medicaid) for a group of enrollees. It is then responsible for ensuring that enrollees receive all required health services. Global payments usually are adjusted to reflect the health status of the group on whose behalf the payments are made. Entities that receive global payments sometimes are known as accountable care organizations (discussed in a separate brief ) and can include both formally and loosely organized health care systems. Global payment provides an incentive for providers to coordinate and deliver care efficiently and effectively to hold down expenses.

Summary of Health Cost Containment and Efficiency Strategies - Brief #2- Global Payments

State/Private Sector Examples  Strategy Description Target of Cost Containment Evidence of Effect on Costs
Massachusetts, PACE programs, Patient Choice Car System A fixed prepayment made to a group of providers or health care system (as opposed to a health care plan) for all care for all conditions for a population of patients. Lack of financial incentives for providers to hold down total care costs for a population of patients.
Inefficient, uncoordinated care.
Insufficient attention to management of chronic conditions.
Need for greater focus on prevention and early diagnosis and treatment.
Research indicates global payments can result in lower costs without affecting quality or access where providers are organized and have the data and systems to manage global payments.

In the News
  • State Innovation Model (SIM) Awards Announced. The Center for Medicare and Medicaid Innovation (CMMI) at the Centers for Medicare and Medicaid Services (CMS) announced its selection of states to participate in the State Innovation Model (SIM) Initiative.  Under this initiative, CMMI is providing up to $300 million to 25 states to design and test innovative multi-payer payment and delivery models for Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).   SHADAC is part of a team led by NORC at the University of Chicago that was selected by CMMI to provide consultation and technical assistance to states under the SIM Initiative.  Learn more about individual state awards.  Released March 2013.
  •  Examination of Health Cost Trends and Cost Drivers (Pursuant to G.L. c. 118G, § 6½(b))- Massachusetts Attorneys General Report for Annual Public Meeting, 6/22/11. This report reference the global payment structure in Massachusetts and findings that the Massachusetts system does not cut health care costs.
About this project

NCSL’s Health Cost Containment and Efficiency Series will describe two dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher.

NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado
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