After 50 years of marriage, Uncle Sam and FeeFee (fee-for-service) are getting a divorce. Uncle Sam is trying to move the $2.9 trillion U.S. health system to a new partner, PayFee (pay-for-performance). FeeFee is out, PayFee is in.
Everybody saw it coming. It was a long relationship but it had been going south for years. As the medical arms race took off, Uncle Sam’s family grew to over 68 million beneficiaries and the old passion started to fade away. “We’ve grown apart, ” Uncle Sam told FeeFee. “I’ve changed and you’ve gotten more and more needy.”
The “Quality” Siren
Uncle Sam couldn’t resist the allure of PayFee and her siren song of “quality.” They would share in the payment risks, and in fact, the new couple had already set up house and talked openly about how happy they were together and how much money they were already saving.
Health and Human Services Secretary (HHS) Sylvia Burwell informed us of the planned split on January 26, 2015 as she announced “a timeline to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care.”
The Divorce
Within four years, all but 10% of traditional Medicare payments are to be linked to new quality and efficiency standards, including most of those still billing by the old fee-for-service method.
By 2016, 30% of payments will be tied to alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements, rising to 50% by the end of 2018. HHS also set a goal of tying 85% of all traditional Medicare payments to pay-for-performance by 2016 and 90% by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.
Physicians and Hospitals Respond
“This is a bless-your-heart day, ” Doug Henley, M.D., the executive director of the American Academy of Family Physicians, told Burwell when she announced the Obama administration’s plan.
The American Medical Association (AMA) wasn’t so sure. The AMA, you may recall was never a fan of Medicare. When President Truman first proposed Medicare in 1945, the AMA denounced it as “the first step in a plan for the socialization not only of the medical profession, but all professions, business and labor.” So much for a measured response.
Robert Wah, M.D., the AMA’s current president reportedly said the association is looking forward to hearing more details behind the percentages as well as the plans to reach the targets.
American Hospital Association (AHA) Executive Vice President Rick Pollack said that the group wants to learn more on how these new goals will be phased in.
The American Academy of Orthopaedic Surgeons(AAOS) was unable to provide us with a comment.
Coaxing Private Payers
To push private payers to join in the new marriage, Burwell announced the creation of the Health Care Payment Learning and Action Network. Through the network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs. The network will hold its first meeting in March 2015.
A coalition of large providers and payers including, Partners HealthCare, the Boston health system that oversees Brigham and Women’s and Massachusetts General hospitals; Ascension, the nation’s largest Catholic and nonprofit health system; Aetna, a national for-profit insurer; and Health Care Service Corporation, which operates five state Blue Cross plans, have all committed to changing their financial incentives to move the bulk of their payments to pay-for-performance by 2020. The coalition, proposed by Richard Gilfillan, M.D., a former Medicare official and the chief executive of Trinity Health, is called the Health Care Transformation Task Force. It hopes to help find some kind of consensus on payment models so doctors and hospitals don’t have to negotiate multiple arrangements with Medicare and each private insurer.
New Payment Models
The Affordable Care Act created new payment models that move payment systems toward rewarding so-called “quality.” These models include ACOs, primary care medical homes, and new models of bundling payments for episodes of care. In these new models, providers are given a lump sum for the care they deliver and have a financial incentive to get rid of duplicative or unnecessary X-rays, screenings and tests.
Some of these new models also have resulted in insurers being cut out as the middle man. In Seattle, Boeing Company contracted directly with a local ACO to provide care for its employees for a fixed fee. No insurance company was involved.
The move to embrace pay-for-performance has moved quickly. In 2011 Medicare made almost no payments to providers through alternative payment models, but today such payments represent approximately 20% of Medicare payments, according to HHS. The goals announced by Burwell represent a 50% increase by 2016. To put this in perspective, in 2014, fee-for-service payments were $362 billion.
Happy New Marriage – So Far
But what about the kids, the 68 million beneficiaries covered by Medicare and Medicaid? Will they be better off?
So far, Uncle Sam says the experiment is working as Medicare has seen combined total program savings of $417 million due to existing ACO programs. The government also claims that the programs have “helped reduce hospital readmissions in Medicare by nearly 8%—translating into 150, 000 fewer readmissions between January 2012 and December 2013—and quality improvements have resulted in saving 50, 000 lives and $12 billion in health spending from 2010 to 2013, according to preliminary estimates.”
As we have reportedly extensively, providers and payers say they are able to squeeze out costs to the system, not by cutting back on patient care, but by eliminating “defensive medicine” tests and procedures, holding physicians to strict protocols that eliminate mistakes and reduce adverse event costs. The Institute of Medicine estimates we spend $210 billion annually on medicine that doesn’t make us any healthier.
Surgeons Skeptical
But many specialty physicians, like surgeons, remain unconvinced the new marriage really delivers on the promises of “quality.” They say new care models have shown limited progress in controlling costs and little evidence of being able to sustain cost savings. If hospitals and insurers, who are out to make a buck, like it, physicians who are duty bound to do what’s best for the patient, are skeptical. But as physicians become employees of health systems and those systems are being acquired by insurers, they have less clout on business and financial decisions.
The cost savings are there, but evidence of improved patient outcomes is sketchy.
It’s been over 20 years since the country’s first pay-for-performance programs were started (1992) and researchers have started to look back to see if they lived up to their promise.
Aaron Carroll, M.D., of Indiana University School of Medicine wrote on July 28, 2014 in The New Health Care, that we’re seeing disappointingly mixed results of improved patient care. Sometimes, he said, it’s because providers don’t change the way they practice medicine; sometimes it’s because even when they do, outcomes don’t really improve.
Carroll cited one study in particular which appeared in Health Affairs and looked at the effects of a government partnership with Premier Inc., a national hospital system. Initially, the study found the 260 hospitals in the pay-for-performance project improved patient care more than the 780 not in the project. BUT, five years later all those differences were gone.
A New Role – The Specialist Primary Care Doc
The effect on physicians and their practices is even murkier.
According to the 2014 Annual Fee Schedule Survey from Physicians Practice covering 1, 616 medical practices, 20% of respondents thought the shift away the from fee-for-service will be good for their practice, with 23% saying it will be a detriment with 44% “not sure” of the effect. That is a 10% increase from the 2013 survey.
Specialists find the changes the most disruptive because they are largely paid based on how many services they perform. Primary physicians, on the other hand, expect a new system will compensate them for work they haven’t historically been paid for doing, such as monitoring their patients’ health between office visits.
“It’s not clear to me in this proposal how they [specialists] would be included or even participate, ” Lou Goodman, the president of the Physicians Foundation, based in Columbia, South Carolina, said in a phone interview with Bloomberg.
Centers for Medicare and Medicaid Services (CMS) says it wants to experiment with ways to pay specialists and plans to start with oncologists.
According to Bloomberg, Tennessee Oncology, a group of cancer doctors based in Nashville, is testing an arrangement with the insurer Blue Cross Blue Shield of Tennessee in which oncologists act as primary care physicians for people with advanced cancer, monitoring their health, trying to prevent expensive emergency room visits and hospitalizations.
Even the group of McAllen, Texas, physicians who found themselves the subject of an unflattering New Yorker story a couple of year ago are getting into that act. They formed an ACO and saved Medicare $6 million in their first year. They got to keep $1.6 million after paying back a government loan.
This year, the McAllen group is targeting overuse of hospital services, including emergency rooms. “Hospitals won’t like that too much, but that’s the way it goes, ” said Ken Oates, the group’s administrator.
Specialists like orthopedic surgeons get paid for the quantity of work and reducing the use of health-care services is a problem for them.
But if they can reduce admissions, ER visits, procedures and imaging, Goodman says “the specialists should be paid to be available whether they perform a service or not. That’s a complicated concept. I haven’t seen any government programs that do that.”
Embrace the New Marriage
Uncle Sam is clearly moving ahead with PayFee. The kids are deciding whether they like this new arrangement. And everyone else, particularly providers, are being forced to start making changes to their current compensation models.
If they don’t adjust, they could be stuck paying expenses based on a fee-for-service model but being reimbursed on a pay-for-performance model.
In short, between FeeFee and PayFee.
