Advertisement

Win-Win-Win Approaches to Healthcare Cost Control Through Physician-led Payment Reform

  • Harold D. Miller
    Correspondence
    Reprint requests Address requests for reprints to: Harold D. Miller, MS, Center for Healthcare Quality and Payment Reform, Suite 20-J, 320 Fort Duquesne Boulevard, Pittsburgh, Pennsylvania 15222. fax: (412) 803-3651.
    Affiliations
    Center for Healthcare Quality and Payment Reform, Pittsburgh, Pennsylvania
    Search for articles by this author

      Abbreviation used in this paper:

      FFS (fee-for-service payment system)
      Dr Miller is a national expert on value-based reimbursement and works closely with several national organizations to promote fair, valid, and innovative provider payment reform. As we move from fee-for-service to value-based reimbursement, it is helpful to understand the barriers and possible roadmaps to moving through the current difficult transition. Dr Miller makes a strong and cogent argument for having physicians lead this effort. The AGA has taken this responsibility seriously in designing various practice tools as part of the Roadmap to the Future of GI Practice.John I. Allen, MD, MBA, AGAFSpecial Section Editor
      Despite widespread agreement about the urgent need to control healthcare costs, successful solutions have been elusive. A major reason is that policymakers and health plans generally focus on only 2 options for reducing spending. One option is to cut patient benefits, such as refusing to cover certain services or increasing patient cost-sharing. The other option is to cut payment rates to physicians and other providers. The draconian cuts in physician payment threatened by the Sustainable Growth Rate formula have been the most visible, but low payment updates and periodic “revaluations” of payment also have had significant negative impacts on physicians and patients.
      It is not surprising that there has been so little progress on cost containment with such undesirable options. Fortunately, there is a third and far better option: redesigning patient care to eliminate unnecessary and harmful services and improve patient health. Tens of billions of dollars in spending could be saved every year by avoiding unnecessary tests, procedures, emergency department visits, and hospitalizations; by reducing infections, complications, and errors in the tests and procedures that are performed; and by preventing serious conditions and providing treatment at earlier and lower-cost stages of disease.
      The reason the third option has received so little attention is that better patient care cannot be legislated by Congress or mandated by federal agencies or health plans. Patient care can only be redesigned by physicians. However, physicians cannot redesign care to improve quality and reduce costs unless there are major changes in current healthcare payment systems.

      The Fee-for-Service System Is a Major Barrier to Higher-Value Healthcare

      The fee-for-service payment system (FFS) creates large and often insurmountable barriers to significant redesign of patient care. Under FFS the following occur:
      • Physicians are financially penalized for reducing unnecessary services and improving quality. Under FFS, physicians lose revenue if they perform fewer procedures or lower-cost procedures, even if their patients are better off. The Choosing Wisely campaign, which the American Gastroenterological Association supported from the beginning, will help patients and payers by reducing spending on avoidable tests and procedures, but implementation may also make it more difficult for many physicians to sustain their practices. Most fundamentally, under FFS, physicians do not get paid at all when their patients stay well.
      • Some high-value services are not paid for adequately or at all. Medicare and most health plans do not pay physicians to respond to a patient phone call about a symptom or problem, even though those phone calls can avoid far more expensive visits to the emergency department. Medicare and most health plans will not pay primary care physicians and specialists to coordinate care by telephone or e-mail, yet they will pay for duplicate tests and the problems caused by conflicting medications. A physician practice that does outreach to high-risk patients or hires staff to provide patient education and self-management support typically cannot be reimbursed for those costs, even if they help avoid expensive hospitalizations or allow diseases to be identified and treated at earlier stages.
      These barriers exist even for employed physicians, because most compensation systems are based at least in part on the number of FFS visits or procedures physicians perform.

      Pay-for-Performance, Value-based Purchasing, and Shared Savings Will Not Solve the Problem

      Unfortunately, the typical “payment reforms” being pursued today do not fix these problems with FFS. Most health plans have tried to give physicians “incentives” to improve quality or control costs through pay-for-performance or value-based purchasing programs. However, these programs have had very little impact for a simple reason; the barriers described earlier are not solved by adding a small bonus or penalty on top of the existing FFS system. Tying payment to a large number of quality measures will have little impact if physicians are forced to lose money to implement better care.
      The shared savings system being used by Medicare and many health plans has been promoted as an innovative solution, but in reality, it is just a new form of pay-for-performance built on top of the same broken FFS system. Shared savings systems provide no up-front resources or flexibility to enable physicians to redesign care, and if physicians reduce the number of services they deliver, they still lose revenues. A shared savings payment can reduce the size of the loss, but a smaller loss is still a loss. Moreover, shared savings payments are temporary, and unless physicians can keep finding new ways to reduce spending, they will be left in the same FFS system with lower total revenues than before.

      Accountable Payment Models Can Help Improve Quality and Lower Costs

      Fortunately, there are “win-win-win” approaches to paying physicians that can help improve quality and reduce healthcare spending without forcing physicians to take financial losses themselves. These accountable payment models have 3 key characteristics.
      • They give physicians the flexibility to deliver the care patients need without worrying about whether the payment for one type of service is lower than another or whether they will lose revenue by performing fewer procedures.
      • They give physicians accountability for ensuring that changes in care result in spending that is lower than it would otherwise have been, but this accountability is limited to the kinds of spending the participating physicians can control or influence.
      • They separate insurance risk and performance risk, so physicians are not penalized financially for taking care of sicker patients or patients with unusually complex conditions.
        • Miller H.D.
        From volume to value: better ways to pay for health care.
      Accountable payment models can benefit both physicians and payers for a very simple reason; the vast majority of healthcare spending does not go to physicians. In Medicare, physician fee schedule payments represent only 16% of total Medicare spending. However, physicians prescribe, control, or influence most of the lab tests, images, drugs, hospital stays, and other services that make up the other 84%. If physicians can redesign care for patients in a way that reduces spending on all of the other services by a mere 3%, the physicians could be paid 5% more and still reduce total Medicare spending by 2%.
      Accountable payment models are created by using 1 or more of the following 3 building blocks
      • Miller H.D.
      Transitioning to accountable care: incremental payment reforms to support higher quality, more affordable healthcare.
      :
      • Bundled payment: Instead of paying all providers separately for each service associated with a procedure, a bundled payment is a single amount for the procedure that the providers can divide up on their own. For example, under bundled payment, if a physician helps reduce the hospital's costs in a procedure (eg, by more efficient scheduling), both the physician and the hospital can earn more while offering a lower total price for the procedure. A facility-independent bundled payment would allow the physician to be paid more if he or she does a procedure in a lower-cost setting.
      • Warrantied payment: Under a warrantied payment, the physician is paid more for a successful procedure than today but is no longer paid more for the costs of treating avoidable complications related to the procedure.
      • Condition-based payment: Bundled and warrantied payments can help improve the quality and efficiency of care for a particular procedure, but they do not remove the financial disincentives for reducing unnecessary procedures. A condition-based payment solves that problem by paying for care of the patient's health condition, regardless of what procedure is used. If the physician and patient agree that the patient's condition can best be managed with a lower-cost procedure or no procedure at all, the physician's payment would not be reduced the way it would be today.
      By using different combinations of these building blocks, an accountable payment model can be custom-designed for different types of procedures and patient conditions within each specialty. This could not only enable individual physician practices to improve care and control costs, it would help Accountable Care Organizations be more successful.
      These approaches—a single payment for a complete product or service, with a warranty to correct defects at no charge—are how most other industries are paid, and it makes sense to use them in healthcare too. Moreover, they can be implemented by small physician practices, not just large health systems. The earliest known example of someone offering a warranty in healthcare was not a large health system but a solo physician. A study found that the physician received more revenue while reducing total spending by eliminating unnecessary services and reducing complications.
      • Johnson L.L.
      • Becker R.L.
      An alternative health-care reimbursement system: application of arthroscopy and financial warranty—results of a 2-year pilot study.

      Opportunities for Gastroenterologists

      How might accountable payment models be designed to support high-quality, lower-cost gastroenterology services?
      • Episode payments for colonoscopy: A single payment could be made to a gastroenterology practice for most or all of the costs associated with a colonoscopy, including complications caused by the procedure. If the practice can reduce total costs, eg, by using a lower-cost facility, using anesthesiologists less frequently, reducing complication rates, etc, the gastroenterologist could be paid more but charge payers less. Quality measures would help the gastroenterologists manage under the warranty and also assure patients that the lower cost does not mean lower-quality care. Some practices are already doing this,
        • Ketover S.
        Bundled payment for colonoscopy.
        and the American Gastroenterological Association has developed a model colonoscopy bundle that can help additional practices to analyze their own costs and establish a bundled payment price that will enable them to deliver high-quality care at a lower cost to payers while maintaining or improving operating margins in their own practice.
      • Condition-based payment for colon cancer prevention: Instead of being paid on the basis of number of colonoscopies performed, a gastroenterology practice could be paid for successful colorectal cancer screening of a population of patients. The practice could focus resources on screening the highest-risk patients while eliminating unnecessarily frequent colonoscopies. The practice could also collaborate with oncologists to manage the total costs of colon cancer screening and treatment for a population of patients, so that physicians could be paid more by reducing the frequency of late-stage colorectal cancer treatments through earlier detection.
        • Lee J.K.
        • Levin T.R.
        • Corley D.A.
        The road ahead: what if gastroenterologists were accountable for preventing colorectal cancer?.
      • A gastroenterology medical home for inflammatory bowel disease: A gastroenterology practice could receive a single monthly payment for a patient with inflammatory bowel disease instead of fees for individual office visits. The practice would be able to proactively manage care for the patients to reduce the rate at which the patients experience problems. The monthly payment would be adjusted up or down on the basis of the rate at which the patients use an emergency department or require surgery for complications related to their inflammatory bowel disease.
        • Kane S.
        Establishing an inflammatory bowel disease practice in an accountable world.

      Physician Leadership Is Essential

      Many physicians are understandably skeptical about payment reforms because they have often been designed by government agencies or health plans in ways that impose inappropriate financial burdens and risks on physician practices. However, instead of resisting payment reform, physicians need to roll up their sleeves and work with purchasers and patients to design accountable payment models with the proper balance of flexibility and accountability. Some of the issues that physicians need to help to address include the following
      • Miller H.D.
      Ten barriers to payment reform and how to overcome them.
      :
      • How to objectively define conditions so that payment can be triggered by the condition rather than by a procedure but without encouraging overdiagnosis;
      • Which complications are preventable and therefore appropriate for a warranty;
      • How care processes can be redesigned to reduce costs without compromising patient safety; and
      • Which patient characteristics and comorbidities require extra services, so that payments can be appropriately risk-adjusted.
      The time for action is now. The urgency of controlling costs virtually guarantees that some kinds of changes will be made in payment systems; physicians need to take a leadership role to ensure that reforms are designed in ways that can be successful for each specialty. Instead of being seen as part of the problem of high healthcare costs, physicians should be recognized as leaders in developing solutions that are good for patients and preserve the successful practice of medicine.

      References

        • Miller H.D.
        From volume to value: better ways to pay for health care.
        Health Aff (Millwood). 2009; 28: 1418-1428
        • Miller H.D.
        Transitioning to accountable care: incremental payment reforms to support higher quality, more affordable healthcare.
        Center for Healthcare Quality and Payment Reform, Pittsburgh, PA2013 (Available at:)
        • Johnson L.L.
        • Becker R.L.
        An alternative health-care reimbursement system: application of arthroscopy and financial warranty—results of a 2-year pilot study.
        Arthroscopy. 1994; 10: 462-472
        • Ketover S.
        Bundled payment for colonoscopy.
        Clin Gastroenterol Hepatol. 2013; 11: 454-457
        • Lee J.K.
        • Levin T.R.
        • Corley D.A.
        The road ahead: what if gastroenterologists were accountable for preventing colorectal cancer?.
        Clin Gastroenterol Hepatol. 2013; 11: 204-207
        • Kane S.
        Establishing an inflammatory bowel disease practice in an accountable world.
        Clin Gastroenterol Hepatol. 2012; 10: 1301-1304
        • Miller H.D.
        Ten barriers to payment reform and how to overcome them.
        Center for Healthcare Quality and Payment Reform, Pittsburgh, PA2013 (Available at:)