One federal payer buys an essential floor through four payment methods matched to cost structure rather than to who owns the building: a reference fee schedule, capacity payment for standby capability, capitation with reinsurance, and hospital global budgets. Delivery stays plural and regional — private practices, nonprofit systems, public hospitals, tribal systems, and a standing public arm of federally chartered Regional Health Authorities, aggregated from entities that already run multi-site operations. Every county is assigned to exactly one Authority, so deserts are attached rather than built. Inside the floor there is no prior authorization, no network denial and no balance billing. A regulated supplemental sits above it, separately priced.
Healthcare has four cost structures and each fails under the wrong payment method. One federal payer therefore uses four, and any provider of any ownership form participates under whichever fits each service line.
Reference fee schedule for variable, discretionary professional and ambulatory services. Capacity payment for fixed-cost standby capability. Capitation with mandatory outlier reinsurance for longitudinal primary care. Global budgets for hospitals in concentrated markets.
Fee-for-service invites over-provision. Capitation invites under-provision. Neither is safe alone, and a system built on either one spends its life fighting the incentive it created.
Standby capability is the clearest case. An ambulance service in a county with low call volume and long drives has costs whether or not it runs a call. Paying only per transport underfunds it, which is why rural EMS runs on volunteers and roughly 4.5 million Americans live more than 25 minutes from an ambulance station. That is a payment-design failure, not a market outcome.
Reference fees use a national service definition with regional input adjustment and public maximums. Site-neutral payment removes the premium a hospital can charge for care an office could deliver.
Capacity payment buys named capability — hours, staffing, equipment, transfer agreements, drills, quality reporting. It does not pay for an empty building, and readiness funding sits alongside per-transport payment rather than replacing it.
Capitation uses a demographic base with a restricted, audited condition set, mandatory outlier reinsurance above a per-patient threshold, a standing coding-intensity adjustment, and blended payment, so neither stinting nor upcoding has a clean payoff.
Global budgets give predictable annual revenue adjusted for population, service mix, social risk, quality and access. Maryland and the AHEAD model are the live precedents.
Within the fee-schedule sector, services accrue points and the dollar value per point is set retrospectively against a fixed sector budget, so excess volume dilutes every clinician's realization. That makes the sector collectively self-policing without a prior-authorization apparatus.
- Public arm
- Salaried delivery under a global budget is the strongest anti-over-provision instrument in the architecture.
- Capacity payment and transport
- The rural bundle is funded through capacity payment, not through higher visit fees.
Four methods means four rule sets, four audit regimes, and a permanent arbitrage surface between them.
True, and accepted. Cross-method dumping is made visible by publishing lane-level risk-adjusted total cost of care. Visible is not the same as impossible, and the administrative cost of running four regimes partially offsets savings claimed elsewhere.
Honesty about gaps. Distributed Healthcare has more unresolved specification than other Engines because operational complexity is higher; the items below are flagged for v10.2 specification or for outside expert review.
- Capacity-payment rate-setting across thousands of heterogeneous facilities needs cost-report infrastructure that does not exist in usable form.
- The floating point value transfers volume risk to clinicians and may be the first mechanism traded away in negotiation.