Misdirection in physician payment reform

Physician Payment Reform In A Post-SGR World: Challenges Remain

By John O'Shea
Health Affairs Blog, September 3, 2015

On April 16, 2015 President Barack Obama signed the Medicare Access and CHIP Reauthorization Act (MACRA) which, among other things, finally repeals the Sustainable Growth Rate (SGR) mechanism of updating fees to the Physician Fee Schedule (PFS).

The passage of MACRA, however, raises new questions about where the U.S. health care system is headed in the post-SGR world of payment and delivery reform.

Reasons For Caution

These policy changes and announcements follow widespread calls to move from the current volume-based fee-for-service (FFS) payment system to a value-based system that pays for patient outcomes rather than individual services. Value-based health care should be the goal of any health reform initiative. However, even with SGR out of the way, there are major challenges to achieving that goal, including the lack of an agreed-upon, patient-centered definition of value; a shortage of meaningful performance metrics; and a deficiency of accounting systems capable of reflecting the true cost of delivering care.

Policymakers and others involved in payment reform should also remain acutely aware that the multitude of reporting requirements associated with participation in APMs will add substantially to the already heavy administrative burden on physician practices.

Alternative Payment Models

The future course of payment reform currently centers on efforts to make fee-for-service increasingly less attractive than participation in an alternative payment model (APM). However, moving providers out of FFS assumes that they have a viable place to go. At this point, it is not clear that they do.

Value-based purchasing (VBP), the concept behind APMs includes a broad set of performance-based payment strategies that attempt to use financial incentives to influence provider performance.

MACRA provides for a significantly modified FFS payment system, the Merit-Based Incentive Payment System (MIPS), which is essentially a P4P program. In addition, the legislation encourages the development and implementation of APMs and offers incentives for providers to move into these models.

Although there are a number of individual examples of successful initiatives, the overall early results, as well as possible conceptual flaws, make the long term viability of these models uncertain.

Pay For Performance

Although P4P programs are among the oldest APMs, the success of these models is impeded by serious gaps in the current quality measurement system. According to a 2014 RAND report that looked at 49 studies examining the effect of P4P on process and intermediate outcome measures, the overall results of the studies were mixed, and any identified effects were relatively small.

A basic flaw in the design of existing P4P models is the reality that meaningful patient-centered outcome measures remain elusive.

Accountable Care Organizations

Accountable Care Organizations (ACOs) are health care organizations that tie provider reimbursements to quality and cost metrics related to the total care of an assigned population of patients.

Although ACOs are still relatively new, their ability to generate savings to share with participants is so far not encouraging, as shown by the early results among the most experienced providers in the Pioneer ACO program.

Even the most inefficient system has a finite amount of waste; although it may be relatively easy to address “low hanging fruit” early on, achieving sustained savings over time will prove increasingly difficult.

Bundled Payments

In the Bundled Payment model, a single payment is made for services delivered during an episode of care related to a medical condition or procedure.

Although the cost of each bundle may be reduced, without any control over the volume of bundles provided, overall spending may not go down. Bundled payments also need accurate risk adjustment to avoid both the underuse of appropriate care services as well as the tendency to “cherry pick” low-cost patients.

Patient-Centered Medical Homes

Although early limited evaluations and anecdotal experience with the Patient-Centered Medical Home model have suggested the promise of cost savings and higher patient and provider satisfaction, results from a large multipayer medical home pilot was associated with limited improvements in quality and no reduction in hospital usage, emergency department visits, ambulatory care services, or total costs over three years.

Impact On The Practice Of Medicine

By and large, physicians not only want to provide the best quality health care to their patients, they also want to know they are doing so. But physicians currently labor under an increasingly burdensome and often meaningless number of reporting requirements that take time away from patients and fail to help them improve the quality of their care.

According to a commentary in The New England Journal of Medicine in 2014, “the quality-measurement enterprise in U.S. health care is troubled.” Physicians, hospitals, and health plans view measurement as burdensome, expensive, inaccurate, and indifferent to the complexity of care delivery. The measures also fail to give patients the information they need to make good decisions.

The recent CMS report that 40 percent of Medicare providers will face 1.5 percent cuts for failing to submit data to the Physician Quality Reporting System underscores the fact that many providers, especially those who see few Medicare patients, likely view the cuts as a cost of business to avoid the administrative hassle.

Yet, in spite of these cautionary signs, public and private payers are tying larger amounts of provider payments to a growing number of largely meaningless measures, as if doubling down will somehow fix the problem.

Given the plethora of payment and delivery reform initiatives currently underway or in development, there is relatively little discussion about the long-term goal of payment reform or the impact of these initiatives on the practice of medicine. There are at least two areas of particular concern: the administrative burden on physicians, and the push toward greater consolidation.

Nearly half (46 percent) of doctors reported that they felt burnout in 2014, and a main reason cited was increasing administrative burden, including the multitude of reporting requirements. These findings cannot be dismissed, since burnout has been positively linked to increases in medical errors and has been cited as a reason why doctors leave practice.

Another consequence of both the administrative burden and financial risk of participation in APMs is likely to be an increase in the already considerable trend toward practice consolidation. This trend has been shown to increase health care spending without increasing quality or efficiency and runs counter to the goals of APMs. Many small, independent practices will lack the resources needed to comply with the myriad of reporting requirements involved in APM participation; they are also less likely to be able to absorb the potential losses in a model that involves down-side financial risk.

Moving Forward On Physician Payment Reform

The Administration’s aims regarding value-based payments and the expanded use of APMs come with very little detail on how they will be realized; thus, it is difficult to comment other than to say that given the current state of performance measurement and the early results from existing APMs, the timeline seems overly aggressive.

Although the pursuit of better value in health care is a laudable aim and should continue, setting goals and establishing timelines is not enough. Linking more and more physician income to meaningless quality measures or mandating participation in undeveloped APMs will do little more than add to the already considerable non-clinical burden that physicians face and may force many physicians to abandon private practice in favor of employment, thereby accelerating the current trend toward consolidation. Worse yet, physicians may choose to leave practice altogether.

John O’Shea, MD, is a practicing surgeon and Senior Fellow in the Center for Health Policy Studies at the Heritage Foundation in Washington, DC. He served as a senior health policy advisor to the U.S. House Committee on Energy and Commerce, where he helped draft the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) that replaced the Sustainable Growth Rate (SGR) formula for reimbursing physician services in the Medicare program.



By Don McCanne, MD

It is indeed a rare event when we can agree with a health policy fellow from the Heritage Foundation. John O’Shea has spelled out the deficiencies and potential harms of the current directions in physician payment reform.

The goal is to drive quality and control costs. Although Dr. O’Shea does not tell us how he would do that, it is likely that he would disagree with our approach. We would adopt a single payer national health program which, by design, increases quality while improving value in our health care spending.