Faculty from the University of MinnesotaâÄôs Division of Health Policy and Management have a history of high-level interactions âÄî such as having lunch with Federal Reserve chairman Ben Bernanke, as associate professor Dan Zismer did Thursday.

Perhaps thatâÄôs why the division was chosen to produce a report on how doctors are paid and how innovative payment strategies in the Twin Cities could inform changes in the structure of Medicare and other huge health care payers.

The Medicare Payment Advisory Commission asked Zismer and three others from the School of Public Health in fall of 2010 to do the research. The group spent seven months conducting interviews and analyzing data from 34 leaders in health care systems or physician groups from cities across the nation, including from Minneapolis and St. Paul. Many of the leaders came from integrated health systems âÄî large networks with many doctors, clinics and specialties that work together.

The model is familiar to Twin Cities natives because a number of providers in the metro area, including Fairview Health Services and Allina Hospitals and Clinics, are integrated. The MedPAC report doesnâÄôt name specific providers, but does offer local examples of experimental payment methods.

The findings are not devoid of physiciansâÄô and providersâÄô concerns, said Katie White, a research associate for the School of Public Health who helped with the report.

Research participants expressed concerns about having the data systems to back up these new ways of paying doctors. They also questioned how patients will be attributed to doctors so that the physicians can be considered responsible for them âÄî âÄúwho is your patient?âÄù in other words, White said.

Seasoned faculty

More than half of the faculty in the Division of Health Policy and Management has been there for almost two decades, said Ira Moscovice, head of the division.

In addition to sheer experience, the division provides empirically driven analysis of key health policy issues, Moscovice said. The data-based approach appeals to policy makers and bipartisan organizations like MedPAC.

âÄúWe call it the way we see it,âÄù he said.

Health care pioneers

Twin Cities providers are in a sense pioneering alternative payments like âÄúbundled arrangements,âÄù said Katie Burns, director of payment reform initiatives at the Minnesota Department of Health.

âÄúWhatâÄôs happening overall as a trend is that weâÄôre putting the burden back on the providers to save money,âÄù said Keith Halleland, a Minneapolis health care lawyer.

âÄúItâÄôs a valuable trend for the purchasers of health care,âÄù he said.

This summer, the state of Minnesota asked health care providers to propose methods of total cost saving in care management, Halleland said.

In the current health care system, if an injured patient requires knee surgery, he might visit an orthopedist, a surgeon and a physical therapist during the course of recovery. The costs of each of these players would become a separate bill, meaning the doctorsâÄô incentive would be to provide more services, like surgeries or therapy sessions, in order to make more money.

This is an example of the fee-for-service model. Providers in the Twin Cities are moving toward a different, pay-for-performance model.

The idea of âÄúbundled arrangementsâÄù that some Twin Cities providers are piloting, for example, is that all of the appointments and treatments associated with a knee surgery would be wrapped into a single bill, which the patient or his health plan would pay.

Under this experimental model, the provider would negotiate a fixed price for all knee surgeries performed that year, for example. Then, if physicians are able to improve health outcomes and save the hospital money, they would receive a pre-negotiated bonus.

Theoretically, Burns said, policy makers believe that this move from service-based payment to quality-rewarding payment will motivate everyone in the system to focus on outcomes.

Reports in recent years show that one-third of all health care is unnecessary or duplicate, Zismer said, so making health care providers accountable for the services they provide and the outcomes might be the solution to nationally ballooning health care costs.