The ACP Advocate Blog

by Bob Doherty

Thursday, September 13, 2012

FFS: What fee? What Service?


The debate over fee-for-service physician payment often is misunderstood to be about the technicalities and relative merits of the RUC, relative value units, P4P and the SGR.  It isn’t—instead, it’s what the fee itself represents (and who decides), and what the service being provided actually is (and how it’s described).

Let me explain.  As I blogged last week, analysts across the political spectrum agree that the health care system needs to move away from fee-for-service, although the reality is that FFS is likely to remain as a component  of new payment models, albeit in a very different form.  They say that we have to change the process for determining the fee itself, and how we define the service being provided to a patient—to one that reward “value” not “volume.”  But how a physician, or payer, or patient defines value may be very different.  Consider the following:

What fee?  From the standpoint of many practicing physicians, the “fee”—to their chagrin-- is what the government allows them to charge, when what they really want is the ability to set their own fees.  Their mindset is that no one else is qualified to determine the value of their service.  No one else—not the government, not MedPAC, not the RUC, and certainly not a “relative value scale” originally developed by Harvard professors-- knows how hard they work, what it costs to run their practice, or how  much value that their own patients place on their care.  They would like to scrap the price controls, scrap the RBRVS, scrap the RUC, scrap the SGR, scrap limits on balance billing, and let every doctor set his own fee and let patients decide if they are worth it.

But from a payer’s perspective, the fee is a very different thing—they want to get the best value for the dollar spent.   Since third party payers are responsible for paying most of the fee, the payer’s interest is getting the highest quality it can at the lowest possible fee.  They accordingly use their purchasing power to drive fees toward the level that gets them the best bang for the buck.  In the case of private payers, they exercise their purchasing power through contracts negotiated with physicians. In many cases, the private payer has such a big share of covered lives that physicians have little choice but to agree to their fee schedule and contractual limits on balance billing.  In the case of government, regulation and rate-setting are how it uses its purchasing power to get the best possible deal for taxpayers. 

Government has other interests in deciding what the fee will be: trying to make sure that the payments are fair and don’t advantage some physicians or specialties or localities over others, protecting beneficiaries from excessive out-of-pocket costs, having some consistency in what the government pays, and using fee setting to achieve specific policy goals, like increasing Medicare and Medicaid payments to primary care physicians to get more to participate or adjusting payments based on performance.

From the patient’s point-of-view, the fee usually comes down to a simple calculation: how much do I have to pay out-of-pocket, can I afford it, is the cost predictable or am I going to be stuck with a huge bill?  Some of them may be able to pay more, but I don’t see a lot of patients telling their doctors please, please charge me more because I think you are worth it.  It’s not that they don’t think their doctors are great and worth every penny.   It’s just that it goes against human nature to pay more for something if you can get it for less—or have someone else pay for it!  Plus, most patients already are paying about as much as they can afford out-of-pocket, so they really aren’t interested in proposals (like getting rid of balance billing limits) that would allow doctors to charge them more.

What service?  From the physician’s point-of-view, the “service” is the expertise, skill, time and compassion she brings to a patient encounter. So the service rendered really isn’t an “office visit” or “colonoscopy” or a CPT code –it’s the physician herself!  

But from the payers’ perspective, the service is something that can be described consistently across clinicians, be documented, audited, reported and coded properly.   They want to be sure that the service being billed by Dr. Smith is roughly equivalent to that by Dr. Jones, so that their subscribers are getting approximately the same service for the same premium.  They want to be sure that the actual service rendered is the same as the code descriptor says it is.  They want to be sure that the physician can provide documentation to support the service that was billed. They rely on tools like the RBRVS and the CPT coding system to try to establish such consistency and auditability.  And the government, in particular, has a statutory mandate to reduce fraud and abuse so that taxpayers don’t pay for a service that is different than the one billed to the government (that’s called program integrity).

From a patient’s point of view, the service isn’t an office visit per se.  It is the doctor’s expertise—but it is also much more than that.  It is how much time the doctor spends with them.    It is whether they have to wait 45 minutes “because the doctor is running late.”  It is whether their doctor clearly explains what is wrong with them and what can be done about it.   It is when and how well the doctor communicates about a worrisome test result.   It is whether they are herded or heard when they ask questions.  It is whether their doctor helps them get well.  Their values can’t be readily captured by CPT code or a so-called relative value unit.

The point is that each of these three perspectives—the physician’s, the payer’s, the patient’s—on what is the fee (and who should decide) and what is the service that is being provided (and how is it described, billed, documented, and validated) reflects their own particular place in the health care system. As such, their interests will inevitably clash.  This is really what the fight over relative values, the SGR, documentation requirements, and balance billing is all about—each one trying to align fee-for-service with their own interests, the physician’s in being able to control his or her own fees, the payer’s in getting the most bang for the buck, the patient in getting care that is centered on their needs at a fee they can afford.   

Of the three, it is patient’s interests that ultimately must be paramount.  As policymakers drive physicians and the system to new payment models (including changes in fee-for-service), they need to ensure that the fee paid gets the patient the best value possible—great outcomes delivered efficiently, but at a rate that  ensures that there are enough skilled doctors to take care of them, not more, not less.  Policymakers need to recognize that from the patient’s point of view, the service being paid for isn’t an office visit, or procedures, or CPT code or RVU per se, it is high quality, patient-centered, compassionate care delivered by a highly skilled physician of their choice.  And policymakers need to recognize that a payment system that devalues a physician’s training, knowledge and skills, that forces them into delivering assembly-line care, and that drives the best out of medicine serves no one’s interest, but especially not patients’.

Today’s question: What do you think about my explanation of the different perspectives that physicians, payers and patients bring to the debate over fee-for-service?

5 Comments :

Blogger Steve Lucas said...

The economics of medicine are very complex, that is what makes any changes to the system so difficult as one person’s cost is another person’s revenue stream.

Doctors often view a patient’s cost as their co-pay. The reality is an office visit true cost must include travel time for the patient, travel time for a driver and time from work, often paid by the driver’s employer.

Doctors often place no value on a patient’s time feeling that if they are retired they have nothing better to do than sit around an office.

Additionally there is the feeling by many in medicine that a patient’s insurance premium is being paid by an employer or government. The reality is that in today’s world very few people have anything approaching 100% employer paid insurance.

Front line doctors suffer an economic disadvantage as they have a shortened working career and start that career with insane student loans. Patients have no recognition of the office overhead a doctor must support. Patients often view this as no different than going to the big box story and wanting better cheaper service.

Expanding outward the system only becomes more complex as we add the profit motives of insurance companies, hospitals, computer providers, pharma, and the list goes on and on.

One of my favorites is wheelchairs, which is representative of the whole patient supplied device industry. I can purchase a wheelchair for a fraction of the Medicare price. Medicare allows a patient to keep a wheelchair after a certain period, at no cost to the patient, making it cost effective for the patient to allow Medicare to overpay for this device since their ultimate out of pocket is zero.

Supporting the Medicare price is a whole industry of suppliers and a bureaucracy designed to do nothing but produce reams of paper tracking every wheelchair ever produced. In Canada once a wheelchair is given to a patient it cannot be returned, even if unused. The result is that Canada then pays for wheelchairs to be refurbished, then ships them to other parts of the world as part of their humanitarian effort.

The economic cloth we call medicine is so complex and has so many vested interest that any changes will be difficult, but changes must take place in order to save some part of the system. The only certainty I have is some people will loose economically, and they will fight these changes in ways we cannot imagine.

Steve Lucas

September 14, 2012 at 8:28 AM  
Blogger Jay Larson MD said...

The RVU system has been maintained by the AMA and subspecialty societies for over 15 years. As multiple new procedures were introduced, more and more RVU’s were billed for by procedure based physicians. The shift of revenue tipped towards procedures and away from cognitive visits. The insurances may want to get the most bang for their buck, but the only thing they control is the RVU modifier. I don’t know of any insurances that have moved away from the RVU system maintained by the RUC. This revenue shift contributed to redirection of medical students towards procedure based specialties. The lopsidedness has become so great that few medical students plan to pursue general medicine, especially outpatient general medicine. As the pool of outpatient internists shrunk and the revenue for office visits have fallen behind due to rising overhead, visit times with patients have dwindled. This then lowers quality of care. As the quality of care decreases, more procedures, hospitalizations, and ER visits are needed, driving this vicious spiral more and more out of control.

If we as a profession want to put patients first, then the first thing we need to do is to improve quality of care, which will then lower the need for hospitalizations, ER visits and procedures. We are seeing this happen in Patient Center Medical Home demonstration projects. But for the PCMH to survive, they need more revenue and there’s the rub. Where will that come from? Will that come from patients by paying higher copays and monthly premiums? Will that come from cost savings to insurances from less hospitalizations and ER visits. Will revenue shift from proceduralists back to congnitive physicians? I watched this mess develop over the past couple of decades and I look forward to the mess getting cleaned up (if it ever does).

September 17, 2012 at 2:23 PM  
Blogger Yul Ejnes, MD, MACP said...

Bob, I think that you do a good job of presenting the different parties' perspectives but I would expand on the patient perspective a bit. The patient expects more than what you describe. They also expect the doctor to take care of anything that happens between the visit that they (or someone else) paid for and the next visit, whether or not those services are related to the reason for the most recent visit. And this work is expected at no additional cost. At least that's how it is in "primary care" practices. The problem is that there is an increasing amount of such non-encounter-based work and it cannot be accounted for in an encounter-based system.

One can futz around with adjustments to RVU's, balance billing, and other ways to make up for the non-face-to-face work via higher encounter-based payments, but it really avoids the issue that this non-visit-based care deserves recognition and payment. The high-end retainer practices address this in a way that makes sense but has its own shortcomings. The "a la carte" approach of billing for every phone call, document review, and non-face-to-face medical decision would be most accurate and most faithful to the principles of fee-for-service, but burdensome to administer. A risk-adjusted care coordination payment would allow us to separate the issues of fair payment for face-to-face encounters, which would still be addressed by a FFS system, and fair payment for the physician's care independent of visits, which today's FFS system ignores.

September 17, 2012 at 8:52 PM  
Blogger Steve Lucas said...

Dr. Ejnes makes an excellent point. I have watched doctors become social workers assisting patients with care issues. Doctors often have to sign off on transportation.
Doctors also have to confront patients about issues the patient has seen on TV, where they can receive a new treatment, test, or product for free, if the doctor will only do the paperwork.

All of this produces overhead, but no income.

Steve Lucas

September 18, 2012 at 3:52 PM  
Blogger rcentor said...

Yul makes an important point. Patients want access, and not just office visit access. A golfing buddy complained to me that he could not talk to his pulmonologist on the phone. He said that he offered to pay for the phone all, because it was much more efficient and time saving. But the pulmonologists practice did not have a way to accept money for a phone consultation.

The problem that I hear with FFS comes from the lack of recognition that the best care includes much time not spent in the examining room. Our current billing system has also markedly increased overhead.

Retainer systems fix these problems for internists, and they need not be exorbitant fees. Some models exist with panel sizes of 1000. These cost in the range of 60-70 dollars per month. The patient gets phone, email and text access, plus same day visits. The physician gets enough time to spend with each patient.

The biggest problem with fee for service is the implicit message that doctors interpret. We understand that the faster we see each patient, the more patients we can see and bill.

From a payor perspective, from a patient perspective and especially from a cost perspective this is the wrong message. Our payment system discourages a longer visit, and leads to more consultations and testing.

We cannot just look at payment in an isolated way. We must look at these unintended consequences.

Most internists do believe that a PCMH or retainer type approach will allow them to provide much better care. Perhaps we will have more internists return to doing both outpatient and inpatient care. Of course that would decrease the number of transitions and the problems that they cause.

So we really should move from FFS to another system. But as we design a new system, we must take human nature into account. We must imagine how someone might "game the system", because all our experience tells us that if they can, they will.

September 21, 2012 at 9:27 AM  

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About the Author

Bob Doherty is Senior Vice President, American College of Physicians Government Affairs and Public Policy; Author of the ACP Advocate Blog

Email Bob Doherty: TheACPAdvocateblog@acponline.org.

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