The end of fee-for-service

Regardless of all the payment reform talk, fee-for-service is not going away soon.

Only 11 percent of commercial health-care payments to doctors and hospitals is tied to performance or designed to cut waste, according to a new National Scorecard on Payment Reform by Catalyst for Payment Reform (CPR). That means 89 percent of payments are made on the traditional fee-for-service basis, without quality or other performance components.

Among payments tied to value, just 60 percent involve providers’ taking on a share of the risk, meaning they stand to lose money if they do not meet certain quality and efficiency measures or if they exceed a budget. The rest are in programs such as pay-for-performance, which offer incentives for providing high-quality care, but do little to discourage overuse or inappropriate care.

CPR, an employer-founded nonprofit focused on creating greater value in health care, is aiming to have at least 20 percent of health-care payments be value-oriented by 2020. However, UnitedHealthcare says as much as 60 percent of its business could be value-based by 2022.

The risk of compensation exposure is tied to what roles physicians occupy in the health-care system. About 50 percent of surveyed medical directors say their compensation are tied to patient stays, safety and satisfaction, according to the MGMA, while only 4 percent of physician pay is linked to quality metrics.

Value-based purchasing (VBP) links information on the quality of health care, including patient outcomes and health status, with financial data. It focuses on managing the use of the health-care system to reduce inappropriate care by rewarding the best-quality providers.

A UnitedHealth Group report estimates payment reform could save anywhere from $200 billion to $600 billion over 10 years. However, physicians clearly are not on board.

According to a Harris Interactive survey, 6 out of 10 physicians believe the fee-for-service system encourages them to deliver “an appropriate amount of care” and that capitation puts too much risk on the provider. Only about 1 out of 3 believe fee-for-service encourages excessive or expensive care.

Physician engagement is critical in the process. However, 9 out of 10 physicians say their greatest financial concerns about VBP are receiving inadequate reimbursement and being penalized for circumstances out of their control.

According to an MGMA survey, physician practice executives said working with payers to implement new payment models was an intense challenge in 2013. That concern ranked only behind rising practice expenses.

Most practices said they wanted to explore new Medicare payment models, but were reluctant to do so because of the ever-present threat of the SGR cuts.

The whole concept of pay-for-performance incentives has been called into question. There is some evidence that such incentives reduce creativity and motivation in tasks as complex as practicing medicine, and that they may redirect attention away from tasks that are not being measured. A Robert Wood Johnson Foundation essay argued that pay-for-performance schemes need to capitalize on the inherent desire by most physicians to provide excellent care while striving for a mastery of skills, professional purpose and autonomy.

A Cochrane Collaboration review of studies found no evidence that pay-for-performance financial incentives improved patient outcomes or quality of primary care.

Remarkably, about 1 out of 4 physicians said they did not know whether they were participating in any pay-for-performance programs.

Health-care executives sense the obvious resistance.

Paul R. Goldberg, CFO of Jersey City, N.J.-based LibertyHealth: “The medical staff is always the hard part of the process. Doctors aren’t seeing anything (economic) on their side related to this (VBP).”

Peter J. Holden, president and CEO of Jordan Hospital in Plymouth, Mass.: “I told (the physicians) front and center that if you don’t learn and you don’t embrace and you don’t exert influence on what’s coming, you could be one class away from painting houses.”

John Hensing, Phoenix-based Banner Health’s executive vice president and chief medical officer, said that a physician’s age often influences his or her reaction to VBP. “If you’re 60 years old, ride it out. If you’re 50 years old, fight it. If you’re in your early 40s, you say, ‘What does the future hold for me, and what am I going to do about it?’ And if you’re just starting out, you may say, ‘That’s the way things have always been.'”

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