Mayo’s “value index” payment system – a notable health care reform proposal

Mayo Clinic

Nearly four years back, the doctors running the Mayo Clinic took on the task of getting Medicare to give incentive to the most efficient hospitals and slash payments to the least efficient ones – and, they leaped out of southern Minnesota to join Washington’s discussions pertaining to health care reform!

The strikingly radical payment formula, called “value index,” proposed by Mayo, is essentially a combined ‘creation’ of hospitals from the Midwest and Pacific Northwest.

With as much as $250 billion in yearly Medicare hospital expenditure at stake, the Mayo payment proposal underlines that rather than having a standard payment for any particular procedure at any hospital, Medicare should pay for “value” – after assessing aspects like the patient outcomes, service, safety, and total costs over time.

During the last one year or so, the “value index” arguments put forth by the Mayo Clinic doctors has become the key focus area for an ever-increasing column of converts – the most notable among them being President Barack Obama, who has frequently summoned Mayo Clinic’s name during the course of his speeches on health care.

In case a final health bill actually comes through, it will probably include a payment method similar to the “value index” system suggested by Mayo – that of rewarding efficient, high-quality providers and cutting payments to the less efficient ones; thereby reducing waste, improving quality, and resulting in substantial savings.