Executive Summary -

Employers sponsoring group health plans face the ever-growing challenge of rising health care costs, and the increasing expenses they place on the plans and their enrollees alike. To respond to these pressures, employers have experimented with a variety of insurance design options and payment models, to varying degrees of success, mostly modest. However, research and field implementations show that episode-based payment arrangements present an opportunity to stem these rising costs, while increasing the coordination of care in the fragmented US health care system. In these models, plans and groups of providers agree to a flat fee for all services related to a single episode of care. The providers then work within that budget in a coordinated way to deliver cost-effective and quality care.