Do Value-Based Payments Lead to Higher Doctor-Satisfaction Scores?

Jack CochranRecently we wrote a blog post promoting the benefits of shifting from fee-for-service to value-based payments. We praised the recent decision by leaders at the U.S. Department of Health and Human Services (HHS) to accelerate that shift, and we were then and remain convinced this shift paves the way for better, more affordable care.

There were some strong reactions to the post.

Some people think capitated payments have been discredited, others believe the change from fee-for-service will change little. One physician told John Irvine, editor at The Health Care Blog, that he got the impression from our post that we were saying value-based payments would make physicians lives easier. “Really?” Irvine’s doctor friend said. “You’re making my life easier? Prove it.”

How Will the Practice of Medicine Change?

We didn’t actually use the word easier in the post though we did say that “increasingly, physicians seek liberation from the constraints of fee-for-service in order to focus on the overall health of their patients. Value-based payments allow doctors to do exactly that.” So we definitely hear what Irvine’s friend is saying — and we understand his frustration. Has there ever been a time when so many physicians have been worn thin — angry with the direction of our health care system?

Irvine invited us to respond to his friend and we thought we would do so by soliciting the thoughts of Scott Young, MD, executive director of Kaiser Permanente’s Care Management Institute and associate executive director for Clinical Care and Innovation at The Permanente Federation.

“Easier?” said Dr. Young. “No, value-based payments don’t make doctors’ lives easier. But I think it does make the practice of medicine more rewarding and fulfilling.”

Team-based Medicine
“At Kaiser Permanente,” he said, “we work in teams where we make every effort to fully maximize the capabilities of all our team members. And our doctors are salaried so we do not create unintended incentives. In our prepaid system people aren’t constantly worrying about this goal or that goal being at odds with the best patient care.

“Our doctors are unencumbered by external administrative oversight. They’re not worrying about coding, nor worrying what the relative value unit (RVU) count is going to be for this month.

“When you think about fee-for-service that is exactly what it is – you get paid a fee for a particular service whether that service worked, didn’t work, was indicated or not indicated. At Kaiser Permanente we are paid to take care of the person. It is a very different ethos.

“The vast majority of Permanente doctors I talk to are happy. Our approach makes sense to them. We take care of members in teams based on the best evidence. Our doctors do not have to worry about something being approved by a health plan. They don’t have to worry about all the other ancillary stuff. They are guided by the idea: what is the right thing to do for our members and patients?”

No, value-based payments don’t make doctors’ lives easier. But I think it does make the practice of medicine more rewarding and fulfilling.
– Scott Young, MD

At Kaiser Permanente, we are aligned with the accelerating trend toward value-based payments. This evolution is fueled most recently by the HHS announcement and we applaud that. We welcome the opportunity to help spread payment innovation in alignment with the Learning Action Network recently established by HHS.

The transition from fee-for-service will not be easy or smooth but it is happening ever more rapidly. There will be bumps in the road — some major — but in the long run this evolution will help our country progress toward the Triple Aim while at the same time freeing doctors to focus more on the needs of patients than on administration.

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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19 replies »

  1. clarification
    on the positive side, it looks like there a large number of patients and primary care docs involved…..my note above suggested there were only a couple primary care docs involved….poor writing.

  2. I haven’t found the Harvard study, but I did see a summary on the BCBS website.

    From what I saw the study is promising, but far from providing convincing evidence it will work elsewhere. It appears the study only involved patients in an HMO and every patient was linked to a single primary care doc….none in other types of plans. That is a big issue.

    I very much like the fact that the program involved paying doctors monthly…..monthly feedback and payment to the doc is an excellent way to get their attention.

  3. Charles, we don’t have FFS today. We have a hybrid. Our system for those privately insured is mostly third party payer and that has destroyed healthcare and the individual market. We need to permit the individual to purchase his own insurance and make the necessary tradeoffs. At that time he can choose FFS, capitation or whatever.

    What we need to look at are the incentives. The incentive of capitation is to delay treatment (‘delay in treatment means profit’) or not do it at all. This doesn’t have to be done on all patients, just a few that rack up huge bills or certain things that are common to most people. You haven’t been transparent about Kaiser. The physician partners earn money from denying care!. You can’t dispute that and that is where your problem starts.

    If the choice was voluntary then my only concern would be that the capitated plan didn’t dump patients on the private sector. Of course I would want some type of regulation just like we do for FFS and I would require a great deal of transparency along with a level playing field.

    I skipped discussing value based payments, not because I don’t want to discuss it, but because the comparison is FFS vs Capitation. Value based payments are merely a payment mechanism that is in its infancy. I also skipped the question of what produces access, quality and low cost. The market place has been proven over and over again to be the best at providing these desires. I also skipped equity, a nice word used in place of ‘fairness’, but we all know that ‘fairness’ is something that dictators impose on the rest of us.

    At no time have I ever argued against competition in a voluntary setting where there is a willing buyer and a willing seller.

  4. Allan also would help if you went back and looked at the totality of the Harvard study of the AQC.

  5. Allan the fight between ffs and value based payments, as you call it, is the reality in the United States today. That seems pretty clear. Also clear is that most of the care in our country today is ffs. Has that payment system helped produce high quality? Access? Equity? Affordability? I refer you once again to the Alternative Quality Contract results where the payment is set up to encourage quality and strongly discourage witholding treatments and services. As you say and I agree neither payment method is without warts. I agree with you wholeheartedly that both methods should be out there in the marketplace and let’s let the market — purchasers and consumers – -decide. You say you believe that but you seem to me to be arguing against exactly that sort of competition.

  6. Why do you make the fight between capitation and fee for service? Why don’t you recognize that people should choose the method that works best for them? Put them both out in the marketplace and let them compete and both will improve. Make both of them fully transparent. Neither is without its warts.

    “In fee for service the health of the patient is not tied to payment. In some capitated arrangements there is a direct connection. ”

    Since you represent Kaiser tell us how that works out if denial of treatment means that 50% of that money saved goes to the physician partners? Do you not see the terrible problems that can lead to?

    In true fee for service there is a connection to benefit and value, only the patient is in the position to decide benefit and value with advisors helping him make this decision while these advisers can be hired or fired at any time by the patient.

    “Researchers at Harvard Medical School…”

    Let’s look at what Ware had to say. “Conclusions.–During the study period, elderly and poor chronically ill patients had worse physical health outcomes in HMOs than in FFS systems”

    I suggest it is all in the incentives and I would not force a patient to trust an institution or a physician for institutions and physicians have their own needs that have to be met. For example an HMO cannot spend more on its patients than it takes in in revenue. Therefore it requires cost cutting. What happens when the cost cutters (physician partners) have an incentive not to treat and can actually leave no paper trail while doing harm? That is dangerous. But the same physician in FFS might do too much due to the same incentives. However, then, there is mostly a paper trail and generally marginal benefits.

    “Docs at KP feel a sense of freedom from the FFS drudgery.”

    Docs outside of KP that are acting in truly FFS environments feel a sense of freedom from being chained to economic credentialing.

  7. Lots of questions and mostly reasonable skepticism here. My default question is what work best for the patient and I think the answer is a payment system where providers are compensated for keeping people healthy; for high quality management of their various medical conditions. In fee for service the health of the patient is not tied to payment. In some capitated arrangements there is a direct connection. Researchers at Harvard Medical School looked at the Alternative Quality Contract created by BCBS MA and found an improvement in quality and affordability. Their NEJM article stated that “Compared with similar populations in other states, Massachusetts AQC enrollees had lower spending growth and greater quality improvements after four years.” Links to study findings and video of authors discussing the research.

    There are other benefits to value based payments as Dr. Scott Young notes above. Docs at KP feel a sense of freedom from the FFS drudgery. If value based payment promotes the health of the patient and improves the professional satisfaction level of a doctor, then we’re making progress.

  8. The article specifically lists KP physician satisfaction as evidence that value based payments work. Is there a link to what exactly these value measures are that KP has been using all this time?

  9. i am curious about kaiser primary care docs and W2 compensation. If they are salaried and in the office for 40 hours per week and make at least 275K plus benefits then i am all in.

  10. I’m with Allan on this:
    “I think developing a relationship with a patient that voluntarily pays for a service makes a doctors life more fulfilling and makes makes better doctors.”

    As far as I know medicine is the only significant industry that works on a third party payor system. lets get rid of the third party, and go to a direct care medicine system and you will see care improve and cost drop….you will also see a bunch of parasitic middle managers drop off the system.

    When i was in a capitated system i would get letters stating i was doing too many chest xrays. once our capitated system ended i would get letters stating i need to utilize xray more. go figure

  11. Medscpape reports a coming shortage of PCPs in the next 20 years. Following physician-oriented blogs, I sense a huge frustration with the current system and where things are going. This is not just about doctor’s pay. It is about a system where multiple parties want to control health care and the patient’s outcomes, basically coming in between the patient and physician, while in the meantime making the physician ultimately responsible.
    It seems in the act of trying to ensure healthcare/sick care to all Americans,
    we are creating more and more layers between the ultimate 2 parties with the most to gain or lose, the physician and the patient.
    Paul makes a very good point as well, we are creating more incentives for administrators than physicians.

  12. “The transition from fee-for-service will not be easy or smooth”

    The twin utopian reform dreams of EHR and value based payment will be very very expensive…..to the huge long lasting benefit of consultants, social engineers (govt, think tank, academics) and the companies like Epic that
    cash in on all this.

    I’m with Allan on this:
    “I think developing a relationship with a patient that voluntarily pays for a service makes a doctors life more fulfilling and makes makes better doctors.”

  13. Well I guess you could advertise a terrific value if you did very little for patients at a even littler cost. Then the value would be spectacular.

  14. Allan, great points.

    Maybe Kaiser should be pushing for salaries in these national policy discussions instead of value because it matches what they are actually doing.

    I hope the physician bonuses are based on more than just savings. Some indices of patient improvement have got to be in there. Otherwise, it would be so hypocritical and un-cool.

  15. “And our doctors are salaried so we do not create unintended incentives.”

    If the physician partners control the care and they get 50% of the money saved from denial of necessary care it is hard to believe there are no negative incentives.

    “Our doctors are unencumbered by external administrative oversight.”

    Are they? Do the physician partners use economic credentialing in one form or another? Economic credentialing is administrative oversight.

    “No, value-based payments don’t make doctors’ lives easier. But I think it does make the practice of medicine more rewarding and fulfilling.”

    I think developing a relationship with a patient that voluntarily pays for a service makes a doctors life more fulfilling and makes makes better doctors.

  16. I don’t think a capitated system will gell with the national culture. It works in the UK for a myriad of reasons.

    Imagine paying a radiologist who reads 30 CT scans a day the same as the radiologists reading 15. Good lord, woe betide such an unfair system!

    Fee for service is convenient accounting at its core. If it will be replaced it will be replaced by another fee for a measurable unit. That unit, over time, will become devalued.

    The future of healthcare payment is remarkably easy to predict. Confusion, more confusion and then much of the same!

    If anyone sees a vacancy for a Sybil, please let me know.

  17. Why is having physicians on salary considered to be value-based payment?

    If the treatment “didn’t work,” i.e. was of no value, is the physician’s salary held for x period of time?

  18. Nice post, gentlemen. This of course begs the philosophical follow-up question:

    What is happiness? And how do we measure it for doctors?

    Based on my admittedly limited sample of 20 or so Kaiser doctors, I think Scott is on to something. These are happy people. They are happy to be practicing medicine. And happy to be working with KP.

    In a perfect world, it would be interesting to understand that happiness more scientifically.

    I think the real problem is in places where people don’t get how to do this kind of medicine and are using a formula without understanding what it does and what needs to be done to manage it . .

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