Managed Care - April 2008 - (Page 52) a health regimen. This internal risk blind to the provider may increase the odds of exercising the option. Therein the system gains when provider and patient work together to reduce this internal risk. Under this scheme, when patients are doing well, the physician may judge that the options for hospitalization may not be needed. The physician may sell these hospital options to generate positive cash flow. As the term of a contract nears its end, a physician may judge a given patient’s performance and resell the option to another entity for an accrued cash flow. Physicians may compete against each other based on their ability to produce outcomes. The market would reward physicians who lowering the risk of hospitalization or other poor disease progression end-point measures. In this scheme, health outcomes and economic outcomes should converge positively — a focus on health outcomes delivers better economic outcomes. Finally, there would be competition among patients. Given the na- ture of the contract, physician and patient agree on the option contract’s terms and price. A contract may have provision for premium increase on a given patient if the patient fails to comply with the regimen and experiences an exacerbation leading to hospitalization. Therefore, option prices may increase for riskier patients. Less risky patients may compete against the more risky by getting the same insurance at a lower price. VALUE-BASED COMPETITION Given the arrangement of tying option price to risk and its subsequent bundling price, this scheme offers an opportunity for the entire system to reward practices that decrease risk. The U.S. health care system currently demonstrates poor patient compliance, rising costs of care, and poor clinical outcomes. An individual’s ability to resell options that are unneeded because of lowered risk presents an incentive to improve compliance with a medical and health regimen. The scheme also promotes value-based competition such that entities that reduce risk and achieve outcomes at lower cost are rewarded. The flexibility of organizations to write their own option contracts and to bundle them allows for simplicity at point of care. Finally, the system capitalizes on local knowledge. Clinicians understand the outcomes of their own practice, given a patient’s underlying disease risk, lifestyle, and profile. Decisions that providers make are rewarded and punished based on the short-term cash flow of the medical option economy. The options scheme might require adopting efficient pricing models for practical implementation by health organizations. Existing pricing models for current financial options and derivatives are too complicated for the average clinician and patient to use. The legal implications of such a scheme must be developed to protect the private property inherent in the option ownership. Finally, empiric work must measure what in theory should result in improved clinical and economic outcomes. Try Our New Digital Edition rt Ma .36 al- d? a W cee uld uc Co M S PB How to Use the Digital Edition To navigate through the issue, use the control bar at the top of the screen. Turn the pages as you would do with the print edition. To access more help click on the red question mark in the bar. Opens the Tools menu. View a list of all articles. Zoom in and out on the current page. Click the word “Zoom” to open the zoom configuration window. Switch to single-page view. Open the magnify window. Navigate to the previous or next page. Navigate to the cover or back page. Search the full text of the issue for a word or phrase. Print pages. Save an offline version to your computer. Save the direct link to an article to bookmark or email Care M A N A G E D ALSO: APRIL 2008 The digital edition of MANAGED CARE is now available. 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