THE authors provide a thorough and thoughtful discussion of health system reform and payment policy theory, and relating those topics to Medicare payment actions over the last two and a half decades (eg, IPPS, OPPS). More important, the article provides a good grounding in the policy theories (performance risk, insurance risk) that should take us to the next level for re-aligning payment incentives. The article is strongest in laying the foundation for more fundamental reforms including bundling payments (increasing performance risk) or variations on capitation through Accountable Care Organizations (involving performance risk as well as degrees of insurance risk). These are the types of longer-term reform that have the greatest potential for increasing efficiency and effectiveness in the delivery system.

I suggest a different view however on recommendations regarding price discounting or best practice pricing. While these may be examples of expedient options for reducing payment, they do so without contributing constructive tools that will help transition the industry to achieve the broader vision of health reform. For example, there are a multitude of socioeconomic, access, and individual factors that contribute to rates of hospital readmissions. Hospitals have an appropriate role and responsibility for reducing hospital readmissions. However, they cannot do it without a coordinated and concerted effort of policymakers, communities, and other providers. Singling out and penalizing organizations that are already operating under extraordinary stressful financial conditions will ultimately weaken safeguards for vulnerable populations. The challenges of health reform will be most successfully achieved when we have aligned incentives and payment mechanisms across settings and provider types and match service availability to patient needs.