Human Capital & Careers

J&J, Aetna CEOs Hit Fee-for-Service System

The chief executives of two health-care giants want the industry to move further toward payments based on quality of care.
David KatzNovember 14, 2017

Running counter to the Trump administration, which is moving to stall changes to the fee-for-service system for paying doctors, the chief executives of two of the world’s largest health-care companies say they favor health-care providers being paid according to medical outcomes rather than on a per-procedure basis.

In separate keynote discussions at a Financial Executives International conference in New York City on Monday, Mark Bertolini, the CEO of Aetna, and Alex Gorsky, his counterpart at Johnson & Johnson, argued that a key to fixing the U.S. health-care system would be to move away from health-care providers being paid for each procedure, office visit, or test they perform. Instead, the providers would receive a single fee for an entire “episode” of medical care, with the fee varied according to the quality of service provided.

In contrast, the Trump administration is making regulatory moves designed to minimize the effects of Obama-era regulatory changes aimed at de-emphasizing the fee-for-service approach, The New York Times reported Monday.

Gorsky said that to make the Affordable Care Act more sustainable, it might help to “move from a health-care system right now that’s predicated on reimbursement for a particular procedure to one that’s focused more on an outcome or an episode of care.”

To be sure, he added, such a transformation would be difficult, because fee-for-service systems based on diagnosis-related groups and similar complex models have been entrenched for decades, and the livelihoods of doctors and the survival of many health-care institutions depend on them.

Nevertheless, “getting them to migrate in a way that doesn’t compromise patient care but does make it more efficient, effective, and creates overall value is really important,” Gorsky said.

Aetna’s Bertolini expressed his distaste in more vivid and personal terms. “Health care is a rat’s maze. They refer you here; then you get a test, and you don’t know how much it costs; and then you get a bill 30 days later and it’s got all this gobbledygook,” the CEO of the big health insurer told the gathered finance professionals.

“Every time I sign up for my health care, I have someone else do it for me, because I just can’t take it,” Bertolini said. “It’s too hard. It’s too confusing. It’s got to be easier.”