Rewarding for value

Although value-based payment models are built on the concept of reducing healthcare costs, the ultimate goal is to improve care-and that focus could deliver a needed boost to the economics of primary care.

That’s the message leading physicians’ organizations are sending when it comes to transitioning to value-based payment models. Is a lot still uncertain about these new systems? Yes. Will it take time and lots of adjustment to get them to work? Of course. But in the face of the current state of the healthcare system, with its unsustainable fee-for-service model and skyrocketing costs, does another choice exist?

“[The Centers for Medicare and Medicaid Services] is trying to move away from the basic fee-for-service payment system that rewards you for doing more and more complex stuff but doesn’t have any component in it that recognizes quality or value. If you talk to doctors who are savvy about the system, they will tell you about times they tried to do things for their patients and they get punished under the current payment system for that,” says Stuart Guterman, vice president of the Commonwealth Fund. Doctors and hospitals usually end up hurting themselves financially when they try to do best by patients under the current system, he adds. And that’s bad for everyone all around.

Recognizing value “is one of the initiatives that Medicare is undertaking, and many private insurers are doing similar things to reward good care so doctors who do best for their patients actually get rewarded instead of punished,” Guterman continues.

The plan is to save money long term by keeping patients healthier through quality care, Guterman adds.

“So you get that doctor off that treadmill where [he or she] just [has] to see more and more patients to make a living, instead of allowing the doctors to focus on the care they would like to be providing,” he says. “The challenge is to make sure that it actually encourages the kind of behavior that doctors want to be pursing and the kind of care that doctors want to be giving.”

Healthcare costs will only continue to spiral out of control unless the nation moves from a volume-based to value-based purchasing system, according to a recent study released by the National Commission on Physician Payment Reform.

Value-based payment models reward quality of care though payment incentives and transparency. Providers are held accountable for the quality and cost of their services through a system of rewards and incentives. The incentives are set up to discourage inappropriate, unnecessary, and costly care.

U.S. healthcare spending totals about $8,000 per person annually, the group says, adding that, as a proportion of the federal budget, Medicare costs have increased from 3.5% in 1975 to 15.1% in 2010-with a predicted jump to 17% by 2020.

“This enormous investment has not produced a commensurate improvement in the nation’s health,” the report authors note. “In fact, the health status of Americans pales in comparison to other nations, with the United States ranking 37th in health status.”

The Affordable Care Act references the word “value” more than 200 times, so it’s not surprising that this new method of measuring success is on the way. Healthcare costs now consume 23% of the federal budget, and Medicare costs are expected to increase from the 16% of the federal budget they take up today to 20% by 2016, according to data from the Deloitte Center for Health Solutions. Meanwhile, value-based payments are expected to reduce Medicare spending by about $214 billion over the next decade.

The National Commission on Physician Payment Reform study blames factors such as fee-for-service reimbursement for healthcare spending problems, along with too much reliance on technology and expensive care and using too many high-cost specialists.

“Our nation cannot control runaway medical spending without fundamentally changing how physicians are paid, including the inherent incentives built into the current fee-for-service pay system,” the report authors continue.

The study report made a total of 12 recommendations on health spending reform, including the elimination of the sustainable growth rate and big changes to the current fee-for-service system. The report authors also call for a 5-year transition to any value-based system.

The report’s additional recommendations for transitioning to value-based payment models include increasing payment for evaluation and management services, reducing pay disparities between primary care physicians (PCPs) and specialists or for the same service provided in different treatment settings, and promoting bundled payments.

The American Academy of Family Physicians (AAFP) says the report’s findings are largely in line with its own position statements on value-based payment models and reiterates its call for the re-evaluation of primary care.

The American College of Physicians (ACP) suggests that physicians implement new Medicare initiatives in 2013 if they have not done so already. The ACP says that a three-physician practice that has $1.425 million in total annual revenue and a 20% Medicare/payer mix could save more than $19,000 per physician in the practice by doing so. Early adoption allows a practice to capture every possible bonus payment while avoiding costly penalties, according to the organization.

For value-based payments, that means starting to think about them now if you haven’t already.

Payment rates under the Medicare physician fee schedule for larger group practices with 100 or more physicians will be subject to a value-based payment modifier (VBPM) starting in 2015. The requirement will extend to all physicians, regardless of practice size, by 2017. If you think that’s a long way off, remember that the VBPM is based on performance from the previous 2 years, meaning the 2017 VBPM will be judged using 2015 performance.

Meeting the requirements

Medicare is working toward putting more focus on the PCP as the center of the healthcare system, Guterman explains. And every PCP should be aware of the many new programs coming into effect, such as increases in PCP payments from Medicare and Medicaid.

“There’s a strong desire to change what we pay for, from more and more complicated to better and more appropriate,” Guterman says. “The question is, how do you do that? The doctor has to decide what’s better, but [the system] can take steps to help make sure you are rewarding doctors for the care their patients should be getting.”

To be certain that it is making payments for the aspect of care it wants to reward, Medicare first must have a way to measure physician success.

The first way to do this is through process measures, Guterman says. More emphasis is placed on the doctor’s process up front, because it’s much easier to tell what a physician did rather than to tell whether what he or she did improved the patient’s outcome, he explains.

Secondly, patient satisfaction will be measured. “Patients need to be able to say they were able to communicate with their doctors,” Guterman says.

Third, Medicare will examine how much it spends on the doctor’s patients.

Because all of these measures will be used to determine whether the physician is providing value, Guterman says, doctors obviously will need to report a lot of information. But physicians who are on board-or will be soon-with associated programs such as the Physician Quality Reporting System (PQRS), meaningful use of electronic health records, and Patient-Centered Medical Homes will be ahead of the game, Guterman says.

Cost information easily can be found in Medicare claims, but quality data are more difficult to come by, he adds. PQRS participation is one of the requirements that must be met to earn performance rewards in the value-based payment model. It allows Medicare to get all the data it needs to see whether additional payment is warranted, Guterman says.

“It’s difficult, but it really needs to be done. But it’s heartening to know a lot of doctors are adopting these programs,” he adds.

The carrot or the stick?

Guterman says that clear penalties do not exist, unlike some other federal initiatives that levy fines after a certain period of non-compliance. Instead, those who don’t buy in to the value-based payment model simply will lose out on additional income their practice could be earning, he says.

“It’s certainly important to improve care and make sure doctors are rewarded for providing good care, but there’s also great alarm about the rate of [healthcare] spending and rate of increase in this country,” Guterman says.

Many ways to approach increasing costs exist, but the most productive way is to improve care, he adds.

“It’s a combination of ‘We’re not going to pay for stuff that’s not going to help people’ and ‘We’re going to more if you help more,” Guterman explains. “The thing is that, unfortunately, negative feedback sometimes is more effective, but you have to have a combination because you want to have this be not a punishment but a reward for doing something right.”

How big that reward will be depends on the physician, says Jeffrey Cain, MD, FAAFP, president of the AAFP.

The fee-for-service approach is increasingly expensive because it encourages procedures. It rewards for outputs of units, and the system no longer can afford to contain this, Cain says.

“Payers, including the government and employers, find that [model] unsustainable for their ability to offer healthcare,” he adds, explaining why the move is in the direction of a model that pays for outcomes and details instead.

Physician offices that already have moved to team-based care models will increase their percentage of reimbursement under a value-based payment model. The shared savings approach to payment has limited life, Cain cautions. The plan is to pay for a broad package of services that will include hospitals, PCPs, specialists, and more. How the value will come down to providers has yet to be determined because it will be divided up among all the providers in the package, he says.

Pay-for-performance, or value-based payment models, all involve moving away from getting paid for what you do to getting paid for a whole package of care, Cain says.

Guterman says: “There’s a lot of debate about pay-for-performance and value-based purchasing and whether it’s effective. We pay for performance now; we just pay for the wrong performance. We pay people for increasing volume, and we’re willing to pay more for the wrong things. If we’re spending this much on healthcare, shouldn’t we be paying for the things we want to have happen?

“We do need to find the best way to do these things,” he adds. “I don’t think there needs to be a case made that it’s better to pay for things you don’t want. We just have to figure out the best approach.

Cain says: “This is a new model, and the details are going to matter a lot, [but] the details are yet to be determined. And that’s the challenge,” considering value-based purchasing will begin for practices with 100 or more physicians by 2015 and for all by 2017.

But physicians have been through a lot of reforms already-many that didn’t work. And the difficult part in all of this will be to gain the trust of doctors “so they know this isn’t just another effort to take money out of their pockets, but a way to help get the flexibility to allow them to do what they are trained to do,” Guterman says.

On the bright side, more data will be available within the physician’s office, and doctors will have a better understanding of costs for equipment.

“If the quality is the same but the price varies two- or three- or four-fold, value-based purchasing will give you the tools to choose the highest quality and lowest cost for your patient,” Cain says.

The new model will result in better preventive and chronic care because value-based purchasing will be able to incent the things that PCPs already do or want to do but can’t get rewarded for.

Many physicians fear this model will mean additional work on top of seeing patients, but they should look at as a way of being rewarded for the things they are already doing or want to be doing in their practice, Cain says. Incentives will exist for communicating with hospitals, coordinating care for specialists, managing diabetes in patients between visits, and more.

“It does mean letting go of an old model, but in the old model, they’re frustrated,” he says.

Doctors see more patients per day and per week now, but the incentive will be to make sure patients are staying healthier and out of the hospital.

“Instead of seeing how many people can be moved through your office per day, it will be about how you can best manage the patients in your practice,” Cain says.

The new system has risks, too, Cain adds. It needs to involve transparency for improved quality of care and utilization of performance measures using evidence-based guidelines, he says. Some ethical and legal questions certainly will arise, too. For instance, how does a physician profile or risk-adjust? How is increased value determined? How do you incent for having a healthy population versus one with more chronic disease?

These questions have yet to be answered, but Cain says they won’t hold value-based payments back.

“It’s coming. This is coming our way. It does seem risky because it’s moving away [from the current system]. But it’s moving away from a dysfunctional model,” Cain says. “It is incenting and valuing where there is added value, and the [AAFP] believes that will be a benefit to practices, patients, and the country.”