The Health Care Blog recently featured our Open Letter to Primary Care Physicians,generating quite a bit of reaction. A commenter made the point that “we cannot expect” primary care physicians “to act differently until and unless they get paid differently.” [Emphasis added]
The comment refers to a doctor in solo practice and notes that “the first step is changing how you are paid, in one way or another. And there are many ways that work better than the current code-driven fee-for-service model.”
Does waiting for payment reform make sense? Or should primary care practices act now to change the way they practice in anticipation of payment shifts?
Moving Toward Value-based Care
Some physicians groups seem somewhat frozen – unsure exactly where health care payment is headed and thus waiting until there is a clearer signal.
But it seems to us that the payment reform signal grows louder and clearer and support for that contention comes in a recent research report* from McKesson, the international consultancy:
We can now say with certainty that healthcare delivery is moving in one direction: towards value-based care.
This is care that is paid for based on results – on measurable quality – as opposed to the traditional fee-for-service approach that pays for volume. McKesson notes that
The affordability crisis is causing unprecedented changes in the healthcare landscape, the most significant of which is the transition from the current volume-based model [fee-for-service] to myriad models based on measures of value.
To remain relevant and competitive, payers, hospitals, health systems, and clinicians must respond now to integrate value-based models into their existing systems.
The accelerated shift away from fee-for-service is one of the more important developments in the current health care universe. Among the most striking findings in the McKesson report include the following:
- “The reimbursement landscape is changing faster than many had anticipated, with payers and providers decidedly aligned on embracing payment with value measures.
- Remarkably, 90% of payers and 81% of providers are already using some mix of value-based reimbursement (VBR) combined with fee-for-service (FFS)…
- Providers using mixed models expect FFS to decrease from about 56% today to 34% five years from now…”
Those surveyed expect that by 2020 “payment with some form of value measurement will make up two-thirds of the market … up from one-third today.”
Michael Porter, professor at Harvard Business School, has been advocating a value-based approach for many years. In a Harvard Business Review article** he and a co-author wrote that “a fundamentally new strategy” in health care must be built upon the idea of
maximizing value for patients: that is, achieving the best outcomes at the lowest cost. We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We must shift the focus from the volume and profitability of services provided—physician visits, hospitalizations, procedures, and tests—to the patient outcomes achieved. And we must replace today’s fragmented system, in which every local provider offers a full range of services, with a system in which services for particular medical conditions are concentrated in health-delivery organizations and in the right locations to deliver high-value care.
A Wall Street Journal CEO Council report, which we cited in our recent book, called for a shift from fee-for-service to “explicitly gear our system around population health” and to “reshape financial incentives to meet the goal of population health, and build capacity and reimbursement systems to support it.”
Targeting the Triple Aim
Mark Bertolini, CEO of Aetna, a member of the CEO Council, summarized the case: “What happens in our system is if you get paid by a unit of service, you do more units of service. Our notion was to shift to population management. You assess the disease burden, the demography and the trends in the community and build a system and budget around that. You reward the system for improving the productivity and health of the population they serve…”
This speaks to the need for provider groups to target the Triple Aim, a construct originated with The Institute for Healthcare Improvement (IHI) and defined as
- Improving the patient experience of care (including quality and satisfaction);
- Improving the health of populations; and
- Reducing the per capita cost of care.
If this is the goal, then the simultaneous trend toward Accountable Care Organizations (ACOs) makes great sense. Kaiser Health News defines an ACO as “a network of doctors and hospitals that shares financial and medical responsibility for providing coordinated care to patients in hopes of limiting unnecessary spending. At the heart of each patient’s care is a primary care physician.”
The McKesson report notes that ACOS “are significantly closer to” value-based reimbursement than non-ACOs.
Forty-five percent of providers surveyed are part of an ACO. These providers are significantly more likely to feel that the transition to VBR will have a positive financial impact on their organizations compared to those not in an ACO.
Among value-based reimbursement models, the most widely used models are pay for performance (used by 65% of payers) and capitation, global payment, or total cost of care payment (used by 64% of payers).
Waiting to change practice patterns until payment changes may work for some provider organizations, but in this environment maintaining the status quo carries the very real risk of falling behind innovative trends that improve quality and affordability. Shifting from providing care under fee-for-service to value-based care is tricky business. It takes significant time and effort, and the changes involved can be disruptive to practices.
How have you and your colleagues dealt with this very significant challenge? Are you waiting for a clearer signal or are you acting now to change the way you practice in anticipation of a shift in payment mechanisms? What have you found to be helpful?
We welcome your thoughts.
*McKesson sponsored a study by ORC International, a research firm. The study focused on “the state of the transition from volume (fee-for-service) to value-based care.” McKesson notes that “the study included a 20-minute online survey of high-level executives within 114 payer and 350 provider organizations, representing a range of sizes and regions.”
Jack Cochran, MD, FACS, (@JackHCochran) is executive director of The Permanente Federation, headquartered in Oakland, California.
Charles C. Kenney is a former reporter and editor at the Boston Globe and author of several books on healthcare in the United States.
Cochran and Kenney are authors of The Doctor Crisis: How Physicians Can, and Must, Lead the Way to Better Health Care. Both write about physician leadership at kp.org/physicianleader, where this post originally appeared.