Waiting For Payment Reform?

Jack CochranThe 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.

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.

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40 replies »

  1. The other part of the equation is costs of providing services. What can be done to reduce these & not repeat tests & services within a reasonable period of time. Compromising patients needs is not a resolution. If payments are less, then cost reduction is a must.

  2. @Granpappy Yokum
    Yes, in this whimsical example, all the doctors work is of no value. The professional work has to have a measurable outcome for it to be rewarded. You, of all people, should know this. I mean duh! Thus a very complex case of Schistosomiasis mansoni that was never diagnosed or treated and that led to enormous surgical and hospital costs would never yield the physician any recompense. Only the hospital and nurses and dietary and housekeeping and financial services and pharmacy and administration and engineering services should continue to be rewarded (and landscaping), not someone who contributed no measurable value….for heaven’s sakes. You know this already.

  3. If you were serious about value-based payment, you would reward the doc a fortune who changed smoking behavior for a lifetime. You would do the same for the agent who increased exercise and weight loss. And, heading off to the future, we might find that certain epigenetic changes could be changed by the environment that would markedly increase longevity or total qalys. This doc who could do that would surely deserve a nice reward.

    Also, if you were serious, you would wait a long time before paying providers so that you would be sure of capturing what the true value of their intervention was. After all, this measurement means nothing until all the incremental effects of the treatment or intervention have been added up and integrated. Actually, this requires paying docs only upon the date of death of their patients. Ahhh, student loans go on for 70 years!

    And, following the dictum that you get more of something if you reward it, once the docs realize that quitting smoking or losing weight, exercising, fixing your epigenetic woes, etc. are the keys to becoming wealthy, this is exactly what they will specialize in, and we will never find a doc who wants to treat a cough or sore throat ever again…because the value in doing such a mundane exercise is so trivial.

    And, of course, the most value of all comes from choosing the right parents. Thus genetic counseling and prenuptial genetic transplants and manipulation would unequivocally deserve the most value. Oh, but wait, what about the docs who could get huge populations to get vaccinated and to brush their teeth with fluoride and stop wars?

    Shucks, if FFS charges were cheaper maybe we could forget all this nonsense.

    • What if the doctor works with the patient so that he loses weight and stops smoking and feels safe in his home and nails down all his loose area rugs and always wears a bicycle helmet and a condom, and then the patient gets run over by a school bus? Is the doctor’s work of no value?

  4. “The patient should be the arbiter of the physician’s quality of care. Contrary to what our government may believe, the average American has the intellectual capacity to judge. ”

    They seem to be able to judge in most other facets of purchasing goods or services, why not medical care?
    In essence with ACO’s, government and other large entities interposed between the patient and physician, we are NOT practicing patient-centered care, but organization-centered care.

    • “The patient should be the arbiter of the physician’s quality of care. Contrary to what our government may believe, the average American has the intellectual capacity to judge. ”

      How do we know? Judge what, that the doc is polite or is providing proper medical care? How would the patient know if medical practice is proper?

      • ‘How would the patient know if medical practice is proper?’

        The same way in which they evaluate lawyers, accountants, engineers, and others with specialized knowledge.

        • Why are they any more capable at lawyers, accounts, engineers? Hell, people don’t know how to pick mechanics and contractors.

          What is the “same way”? Is it valid for docs?

          • “So I let some “entity” decide for me if the doctor is good or bad?”

            No, not some “entity.” An “entity” that has a financial interest in minimizing the amount of medical care you receive.

          • Do you trust the ‘entity” that is named on his medical license? What entities do you consult to make your “own” decision, the neighbor entity, friend entity, relative entity – your dog?

          • The point is that, as much as some may dislike it, it is impossible to objectively measure the quality of a physician. We can no more do that than we can measure the quality of a lawyer, accountant, priest, painter, musician, chef, and so on.

            And the absolutely last source of advice we should accept is that of an insurer that profits by limiting our access to medical care.

  5. Today, Sept. 12, 2014 there is an op-ed in the Wall Street Journal by Mark Sklar M.D. It focuses on the crazy data entry requirements….presenting wasteful barriers to providing excellent patient care….I quote his suggested health care system solution (of course, it matches my often stated point of view)
    “The patient should be the arbiter of the physician’s quality of care. Contrary to what our government may believe, the average American has the intellectual capacity to judge. To give people more control of their medical choices, we should move away from third-party payment. It may be more prudent to offer the public a high-deductible insurance plan with a tax-deductible medical savings account that people could use until the insurance deductible is reached. Members of the public thus would be spending their own health-care dollars and have an incentive to shop around for better value. This would encourage competition among providers and ultimately lower health-care costs.

  6. In 2012, over 60% of doctors under the age of 40 identified themselves as working for a hospital system. This number is only expected to rise. Value-based systems only “thrive” in a culture of cooperation to maintain a large group, such as the systems lead by Dr. Cochran with the Permanente medical groups.

    Given the majority of doctors already work for large health systems, it would appear that someone is either preaching to the choir or trying to convince the hold-outs to switch now before they are left behind.

    In the current environment, it would be a huge financial bet for small and solo PCP practices to make to come on board with the EMRs and reporting requirements to function with even a narrow margin of profit. The rules have been written for the big guys, like hospitals, and not the small guys. And the President of one of the big guys’s medical system is trying to tell you to jump onboard.

    Unfortunately, for most practices to survive, they will have to align with somebody bigger for the protection from the other big groups, especially in areas with one insurance carrier monopolies. And if you decide to sell-out, make sure your attorney includes a Plan “B” (escape plan) so you don’t end up as an indentured servant to the hospital.

    • Right, and yet this study from Health Affairs (as reported in AAFP News) :
      “Specifically, the authors of “Small Primary Care Physician Practices Have Low Rates of Preventable Hospital Admissions” found that practices with one to two physicians had 33 percent fewer preventable hospital admissions compared with practices with 10 to 19 physicians; practices with three to nine physicians had 27 percent fewer admissions.”
      And this from Medscape:
      “The attorneys general (AGs) of 16 states warn that hospital employment of physicians, which is considered in many quarters to be the inevitable fate of medical practice, is driving up healthcare costs without necessarily improving the quality of care.”

  7. All this talk of pay models means patients will pay more or pay the same for less. Paul Slobodian has it right.

  8. “Value based care” – indeed, whose values? That is the first issue to tackle. This is America, where the “pursuit of happiness” is an individual right. You are not (?) advocating free “take it or leave it” healthcare, I presume, but healthcare at least in part financed through patient premiums. Value needs to be defined with a lot of patient input.

    “Measurable quality” – let me tell you a story. When our FQHC abandoned its standalone Diabetes Registry and bought an expensive EMR, we could no longer produce the data needed for renewal of our NCQA diabetes recognition. This year we finally have the ability to submit. But I didn’t qualify. Why? Because I was quick to adopt the revised lipid guidelines last year (http://acountrydoctorwrites.wordpress.com/2013/11/17/a-country-doctor-acquitted/). It turns out NCQA is still using the now defunct lipid testing requirement even for diabetics who are on medium-to-high intensity statin therapy. So, am I a bad doctor, or is NCQA recognition a poor measure of quality?

    “Shift the focus….to the patient outcomes achieved” – we need to be honest about what we mean by outcomes. Achieving numerical targets is foma (Vonnegut, 1963); most of what we do is not practically measurable in terms of outcomes. As I have pointed out before on THCB (https://thehealthcareblog.com/blog/tag/hans-duvefelt/) a pediatrician’s outcomes take a lifetime to become fully evident. We are already waiting a long time to get paid by the insurance companies!

    The tsunami is underway, and I can’t stop it, but the Emperor is at least half naked, folks, and many doctors on the frontlines (and probably a lot of patients) worry that we will be working harder and restricting individual patient choice of their healthcare priorities more and more as we feed the booming new industries that weave the cloth, take the measurements, cut and stitch these new invisible garments.

    • Value based care is centered on the patient. Here is view from Michael Porter of Harvard B School:

      Value — neither an abstract ideal nor a code word for cost reduction — should define the framework for performance improvement in health care. Rigorous, disciplined measurement and improvement of value is the best way to drive system progress. Yet value in health care remains largely unmeasured and misunderstood.

      Value should always be defined around the customer, and in a well-functioning health care system, the creation of value for patients should determine the rewards for all other actors in the system. Since value depends on results, not inputs, value in health care is measured by the outcomes achieved, not the volume of services delivered, and shifting focus from volume to value is a central challenge. Nor is value measured by the process of care used; process measurement and improvement are important tactics but are no substitutes for measuring outcomes and costs.


      • “value in health care is measured by the outcomes achieved”

        When I’m treating a patient with diabetes or hypertension or hyperlipidemia, what are the outcomes that will be measured and that will determine my paycheck?

        • Under the Alternative Quality Contract from BCS of MA – -which a vy large # of provider organizations in MA have signed on to, providers are paid a basic per member budget. In addition, physician groups are paid bonuses for achieving a wide variety of quality metrics. Control of patients with diabetes is one of the many quality measure. So if you take excellent care of your panel of patients with diabetes — all up to date with BP, A1c, etc. — then your group receives a bo0nus payment.

          Here is link to site where you can find a white paper on the contract as well as Harvard study of the conrtact’s effectiveness. The site also notes that among the provide rorgs signed on to the contract are — among others —

          Beth Israel Deaconess Physician Organization
          Boston Medical Center
          Children’s Hospital Boston, Children’s Physician Organization and the Pediatric Physician Organization at Children’s
          Lahey Clinic

          Mount Auburn Cambridge Independent Practice Association and Mount Auburn Hospital
          New England Quality Care Alliance and Tufts Medical Center

          Partners HealthCare

          • “In addition, physician groups are paid bonuses for achieving a wide variety of quality metrics. Control of patients with diabetes is one of the many quality measure. So if you take excellent care of your panel of patients with diabetes — all up to date with BP, A1c, etc. — then your group receives a bo0nus payment.”

            Those aren’t outcomes, which is what I was asking about. Seems like for most of medical care, outcomes are just about impossible to measure and we’re left with just a bunch of inadequate false end-points to evaluate.

            Not to mention that there’s a large and growing body of evidence (for example http://www.bmj.com/content/342/bmj.d108.short?rss=1) that shows that P4P programs such as you describe don’t improve quality of care or reduce costs.

        • A patient whose diabetes is carefully managed and under control is a healthier patient, I think. In this case, the outcome is health. The contract I referenced is intended to keep patients healthy and it has had some real success. I urge you when you have a moment to review some of the articles written about it — through the link I sent. Google AQC and you also get some interesting reading.

    • Good read. Slightly over-cynical (rich coming from me) but the gist is correct.

      Once you define value by money it will be more cost efficient to do slightly less with slightly less resources.

  9. Paul wrote “All of these pay for value systems share the fatal flaw of leaving the patient out and I have yet to see where the patient has the financial incentive to seek out value and quality.”
    Great point.
    The status quo needs to be changed not only by insurers and providers, but, probably most importantly, from the consumer himself.
    What if the consumer had a type of a defined contribution health plan in which claims reduce his balance, and lowered his pre-funded deductible, thus raising his premium?
    Then, he would have a direct incentive to monitor his care, at least up to his defined contribution health balance account.
    Don Levit

    • Paul and Don you might want to look at the Alternative Quality Contract from BCBS of MA. So far some vy good quality metrics and certainly not leaving the patient out.

      • I took a look at the BCBS alternative contract model. My observations:

        1. “A team of physicians, finance experts, and measurement scientists worked to develop a contract model” …..I am sure the people who developed this are very smart and very well intentioned, but as all top down social engineering of complex systems they can’t anticipate all the unintended consequences.

        2. “This arrangement empowers physicians and hospitals to
        provide the care they believe is needed to improve
        the health of their patients. They are liberated from
        many of the constraints of traditional payment models
        giving them the flexibility to, for example, have e-ma
        il exchanges with patients (e-visits), offer group visits
        for patients who share a common chronic illness, or
        provide follow-up home vi
        sits for patients after
        hospitalizations”…….getting away from the fixed payment codes and allowing these kinds of things is great! For me, I would rather just have control of my health care dollars and pay the doctor/hospital group for whatever services make sense to me….group visits, educational interventions or even email exchanges….or pay my concierge doctor group a lump sum payment should I think I decide I want and need that extra access.

        3. “The incentives are
        linked to clinical performance measures related to
        process, outcomes, and patient care experience” ….Michael Porter’s quote you posted explicitly criticized process measures….which inevitably get in the way of physician judgement on what the individual needs as the doc gets dinged if he doesn’t follow the guideline…and patient satisfaction measures are fine, but fraught with problems for determining doctor payment.

        4. “The Commonwealth Fund has commissioned a study led
        by Michael Chernew, M.D., Ph.D., from Harvard
        Medical School, and Robert Mechanic, Senior Fello
        w, from the Heller School for Social Policy and
        Management, Brandeis University, to evaluate the
        AQC. The study will incorporate claims data from
        calendar years 2005 through 2010”…..fine, a good thing….but I am skeptical…….experience tells me this kind of social engineering of complex systems will not work…no matter how well intentioned and even seemingly well thought through. but I hope this works!

        • Paul I appreciate your thoughts. Well reasoned and stated. The alt quality contract is imperfect but far less so, in my opinion, than traditional fee for service. The people who created the contract at BC of MA are deeply committed to improving quality and affordability as are many of the docs in the organizations working under the contract. I am optimistic in part because so far it has worked well and because I am not sure I see anything much better out there. Thank you again for your comments.

  10. All of these pay for value systems share the fatal flaw of leaving the patient out….one way or another restricting the patient from services…..and I have yet to see where the patient has a financial incentive to seek out value and quality. They all depend on the government/insurer system designers devising systems with all their data analysis tools….good luck.

    Then there is the example of the long established high deductible plans linked to health savings accounts….which are highly valued by most who have them. These plans would work even better if doctors regained the basic freedom to establish their own pricing for procedures or creatively bundled units of care…..that patients could choose or not as they perceive value. Patients ought to be able to choose whether to participate in an ACO style capitation system or high deductible HSA style plan.

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