EOC schemes limit options and access

July 15, 2015

Yet another financial penalty imposed upon healthcare providers/systems

Dr. Nora Janjan


Following the Comparative Effectiveness Research priorities identified by the Institute of Medicine after the passage of the American Recovery and Reinvestment Act of 2009 (“the Stimulus Bill"), episode of care (EOC) payment systems will be applied to the most common and costly healthcare interventions.

The EOC payment plans place all financial risk on the healthcare provider instead of the insurer, which includes state and federal government. The EOC initially affects TennCare, which likely is in response to a 16.2% increase in Medicaid enrollees in Tennessee after passage of the Affordable Care Act (ACA) significantly expanded Medicaid eligibility criteria.1

More: The perinatal episode of care model

The EOC provision also eliminates financial responsibility for patients with certain commercial health insurance plans. That likely reflects the problems associated with the high-deductible insurance plans offered under the ACA exchanges that were adopted by many private-sector employers. Except for emergency room care, healthcare expenditures are reduced 14% in the first year because patients cannot afford to pay the upfront deductible costs. However, the cutbacks in healthcare utilization with high-deductible health insurance ultimately have resulted in serious medical and financial consequences.2,3


"The EOC payment plans place all financial risk on the healthcare provider instead of the insurer, which includes state and federal government."


The EOC plans are yet another financial penalty imposed upon healthcare providers/systems. Beyond the penalties are the significant cuts in reimbursement and skyrocketing regulatory costs under the ACA. Forty-eight rural hospitals, which serve more elderly and poor patients, have closed since the passage of the ACA in 2010, and 283 more are in danger of closing.4 EOC reimbursement schemes will further accelerate the closure of “safety net” hospitals in urban as well as rural areas.

The ACA and the enacted EOC reimbursement scheme are intended to transform the delivery of healthcare in America. Lower reimbursements (especially for Medicaid patients), significant financial penalties, and high-deductible insurance plans are among the strategies to restrict healthcare use and transfer the cost of care to providers and the healthcare industry.

Access to healthcare was promoted as the goal of universal health insurance coverage under the ACA. Ironically, although the uninsured rate dropped from 14.4% in 2008 to 13.4% in the first quarter of 2014, approximately 30 million adults still were uninsured at the end of 2014.5 Schemes like the EOC provision change the doctor-patient relationship by setting up providers/healthcare systems, not the state and federal governments, as the culprit in limiting options for and access to care. Ultimately, the American healthcare system will crash, leaving in its wake a national healthcare service controlled by the federal government. Tragically, the health outcomes of Americans will decline.


1.   Kaiser Family Foundation. Total Monthly Medicaid and CHIP Enrollment. http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/

2.   California HealthCare Foundation; Rand Research. High-Deductible Health Plan Study: Five Takeaways. http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/H/PDF%20HDHPStudyFiveTakeaways.pdf

3.   Helms AD. A growing risk: High-deductible health plans can ruin finances. http://www.charlotteobserver.com/news/business/health-care/article17398751.html

4.   Gugliotta G. Rural hospitals, beset by financial problems struggle to survive. http://www.washingtonpost.com/national/health-science/rural-hospitals-beset-by-financial-problems-struggle-to-survive/2015/03/15/d81af3ac-c9b2-11e4-b2a1-bed1aaea2816_story.html

5.   Millman J. Who is still uninsured under Obamacare--and why. http://www.washingtonpost.com/blogs/wonkblog/wp/2014/11/12/who-is-still-uninsured-under-obamacare-and-why/

Dr Janjan is Senior Fellow, Healthcare Policy at the National Center for Policy Analysis, Dallas, Texas. She is also an Editor-in-Chief of the journal ONCOLGY.