Phasing out Fee for service

The NEJM published yet another piece addressing the payment system in health care. It is based upon a report issued by the "The National Commission on Physician Payment Reform", which  was created by the Society of General Internal Medicine (SGIM) to assess how physicians are paid, and how pay incentives are linked to patient care.Their summary recommendations were the following:

1. Over time, payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives.

2. The transition to an approach based on quality and value should start with the testing of new models of care over a 5-year time period, incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade.

3. Because fee-for-service will remain an important mode of payment into the future, even as the nation shifts toward fixed-payment models, it will be necessary to continue recalibrating fee-for-service payments to encourage behavior that improves quality and cost-effectiveness and penalize behavior that misuses or overuses care.

4. For both Medicare and private insurers, annual updates should be increased for evaluation and management codes, which are currently undervalued. Updates for procedural diagnosis codes should be frozen for a period of three years, except for those that are demonstrated to be currently undervalued.

5. Higher payment for facility-based services that can be performed in a lower-cost setting should be eliminated.

6. Fee-for-service contracts should always incorporate quality metrics into the negotiated reimbursement rates.

7. Fee-for-service reimbursement should encourage small practices (those having fewer than five providers) to form virtual relationships and thereby share resources to achieve higher quality care.

8. Fixed payments should initially focus on areas where significant potential exists for cost savings and higher quality, such as care for people with multiple chronic conditions and in-hospital procedures and their follow-up.

9. Measures to safeguard access to high quality care, assess the adequacy of risk-adjustment indicators, and promote strong physician commitment to patients should be put into place for fixed payment models.

10. The Sustainable Growth Rate (SGR) should be eliminated. Repeal of the SGR should be paid for with cost-savings from the Medicare program as a whole, including both cuts to physician payments and reductions in inappropriate utilization of Medicare services.

11. The Relative Value Scale Update Committee (RUC) should make decision-making more transparent and diversify its membership so that it is more representative of the medical profession as a whole. At the same time, CMS should develop alternative open, evidence-based, and expert processes to validate the data and methods it uses to establish and update relative values.

Don't get me wrong. The way we pay for medical services has created all sorts of problems and deformations in the health care markets. However, these recommendations simply invite a different set of top down perversions.   Whether services are paid piecemeal or bundled is best decided by those at the point of service. At this point one of the biggest problems for someone who in entrepreneurial is that participation in Medicare simply gives one little or no leeway in terms of redefining and rebundling of services.

Recalibrating fees from the top down is simply a form of perpetuating the same administrative pricing boondoggles we now suffer from. Using political processes to define prices never works. What is being entertained is simply changing who will hold the political cards.

There are two reforms which are essential. The first is to move as much of the payments away from third party mechanisms as possible. Until there is a realization that third party payment is the central problem we are no going to make much headway into fixing the worsening mess.Catastrophic health issues should be backstopped with insurance. However, much of medicine does not happen in this realm.

Second, the regulatory environment needs to be changed. To get to where people have access to what enhances their health, we need to broaden our view of who can deliver services and how they can be delivered .We need to move away from an archaic encounter based model and deploy new technologies to allow for asynchronous encounters and exchanges which empower patients to receive value at steeply lower costs.

None of this is captured by the SGIM document.