Wednesday, January 28, 2015

Are we about to see the death of fee-for-service?

For years, policy experts have been predicting the end of fee-for-service.  Yet it can be said of fee-for-service that, like Mark Twain’s alleged demise, reports of its death have been greatly exaggerated. (Actually, this is an often-used misrepresentation of what Twain actually said. After the New York Herald incorrectly reported that he was “grievously ill and possibly dying,” an “amused” Mark Twain wrote that “the report of my death has been exaggeration” — an error that was promptly corrected by the newspaper).

On Monday, though, the Department of Health and Human Services announced ambitious goals to mostly replace pure Medicare fee-for-service — that is, paying physicians and hospitals a set amount per unit of service — with value-based payments. Not over many years, but in three years.

 According to the announcement by HHS Secretary Burwell, the agency “has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.  HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.  This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”

If tying 90 percent of Medicare payments to quality or value by 2019 doesn’t count as the end of traditional fee-for-service, it comes pretty darn close to it.  (To be clear, even if Secretary Burwell’s goal is met, FFS won’t be completely eliminated.  Rather, 90% of FFS payments would be linked to measures of quality and value, so that the usual per-unit fixed payment would be increased or decreased depending on how well the “provider” does on the applicable performance measures.  Also, half of Medicare payments would go to innovative payment models, like Patient-Centered Medical Homes, Accountable Care Organizations, or bundled payments.  Even in these ‘alternative’ models, a good part of the payment will likely continue to be fee-for-service, but with opportunities to share in savings that the models are able to achieve, and with other performance-based payment incentives.  The more advanced models will require that the APMs accept financial risk, so if the performance metrics aren’t met, they lose money, but if they meet or exceed the metrics, they will come out ahead).

Yet there is no question that HHS’s goals are audacious ones that will fundamentally change, within a few short years, how most doctors and hospitals are paid.  And given the evidence that many physicians aren’t participating in, or not have been able to successfully participate in, the existing Medicare quality reporting programs, there is reason to worry that many of them will be left behind and not able to catch up, potentially exposing them to large performance-based payment cuts.

I have been advising physicians for years that they need to be ready for the end of fee-for-service—while explaining why physicians own professional societies, including ACP, are among those who have been advocating for such a shift to value-based payments.  When I wrote in this blog in May 2011 that “doctors call for an end to fee-for-service,” citing testimony from the  American Medical Association, American College of Physicians, American Academy of Family Physicians, American College of Surgeons, and American Osteopathic Association that called for a staged process that would result in the current Medicare FFS system being replaced with new, value-based payment models, I received among the largest number of comments ever on an ACP Advocate blog post.

In response to this week’s HHS announcement, ACP President David A. Fleming, MD, FACP issued an official statement on Tuesday that expressed support and agreement with the “ambitious but achievable” goals set by Secretary Burwell, while noting that “several critical steps will be required to achieve these goals” including:

1.   Congress needs to pass legislation to repeal the Medicare SGR formula and create a clear pathway to a new merit-based incentive payment program and alternative payment models including PCMHs and ACOs, as specified in the bipartisan, bicameral SGR Repeal and Medicare Provider Payment Modernization Act.
2.   HHS should work to harmonize and prioritize the measures used in the current Medicare reporting programs—PQRS, Medicare value-modifier, meaningful use, and e-prescribing—with each other and with the measures used by private payers, to reduce the burden of reporting based on inconsistent and sometimes conflicting and inappropriate measures.
3.   HHS should partner with professional medical membership societies to support and prioritize efforts to develop guidelines and measures relating to high value care, to simplify reporting, and to support physician practices as they transition to new payment and delivery models associated with value.
4.   HHS should ramp up and expand the programs funded by the Center of Medicare and Medicaid Innovation, including the Comprehensive Primary Care Initiative.
5.   HHS should continue to make improvements in traditional fee-for-service that will facilitate the transition to value-based models, including improving on the new Medicare payment policy for managing care of patients with chronic illnesses.
6.   HHS should continue to work on improving the functionality of electronic health records, including making changes in the meaningful use program.
7.   HHS and Congress should ensure that all performance measures are validated through the National Quality Forum, a "not-for-profit, nonpartisan, membership-based organization that works to catalyze improvements in healthcare.” The NQF "endorses consensus standards for performance measurement; ensures that consistent, high-quality performance information is publicly available; and seeks real time feedback to ensure measures are meaningful and accurate.” [Quotes excerpted from NQF website].
8.   HHS and Congress should ensure that all of the programs and agency initiatives involved in achieving Secretary Burwell’s goals recognize and support the critical role that primary care physicians will play in ensuring that payments are aligned with value.

HHS’s announcement appropriately establishes measurable goals of transitioning away from FFS to value-based payments by defined dates, but the agency can’t bring about the necessary changes on its own.

It will need to partner with physicians and their professional societies, because it is physicians, not the government, who bring value to health care.  It is physicians, not the government, who can learn from each other about what works best to improve outcomes.  It is physicians, not the government, who know best what should be measured, and how, and what should not.  The government can do much to facilitate physician-led improvements in care, not just by setting goals and providing funding, but also by simplifying reporting requirements, harmonizing and prioritizing measures, eliminating poor or redundant measures, easing counterproductive regulations like meaningful use, and by helping physicians do what they are intrinsically motivated to do, which is to provide the best possible care to their patients.

So the real test of HHS’s new goal of replacing FFS with value-based payments is not just whether 50, or 60, or 90 percent of payments are based on value and quality in the next few years, but whether the changes required really help sustain the most important component of the value equation, which is the value that caring physicians provide to their patients each and every day.  This transcendent value—the hallowed patient-doctor relationship—may be hard to measure, but it is the foundation of good medical care.   As organizations like ACP work with the administration and Congress to advance the goals of value-based payments, we need to do everything possible to ensure that this, the most important value, is not forgotten along the way, as we try to measure everything else that can be measured, whether it improves care or not.

Today’s question: What do you think of HHS’s goals to transition away from FFS to value-based payments over the next three years, and ACP’s response?


Jay Larson MD said...

I can understand having value based payments for PCP's and those doing cognitive medicine because we can report on outcomes such as BP control in hypertensive patients, diabetes control, tobacco cessation counseling etc. What I don't get is how the proceduralists will get paid. Will a radiologist reading 1500 studies per month with 2% error rate get reimbursed the same as a radiologist reading 2000 studies per month with the same error rate? How will a dermatologist doing Moh's surgery get reimbursed verses one that does not do Moh's. For those currently benefiting from the FFS system, I can't help but to think there will be a backlash such as physicians dropping out of Medicare, limiting access to care.

southern doc said...

"BP control in hypertensive patients, diabetes control, tobacco cessation counseling etc"

None of those are outcomes.

Robert J. Sobel, M.D. said...


I said it fairly succinctly in 2011. I'll stand by all of that. I still see this as a ruse by big entities (government and hospitals and big insurance) to further consolidation. All the trends bear out that this is happening, whether intended or not.

Regulations are needed, but hardly applied to quality bureaucracies. We are measured by patients everyday. The public domain is a free for all of opinions. Some government website resource is hardly going to change things. Paying percents here and percents there based upon a faceless calculus coming out of Washington is not the solution.

I still cannot condone your complicity with these trends. Protecting independent private practice, like protecting patients with chronic diseases, whose care is put at risk by bureaucratic travesties day in day out, will only occur if you put aside these fantasies of bureaucratic quality and focus on what we really need.

We do not need new regulations. We should build upon what works. We should end needless duplication and undue complexity. How about one pharmacopeia that only needs one set of rules? How about new drugs and old drugs price regulated? That is a calculus with which I can live. You know why of course? The status quo for Medicare on doctors IS price regulation. It applies in some ways to labs and some technologies, but it allows consolidated entities a lot of leeway. It also has no relevance to today's drug therapy.

How long have we heard the 10% mantra. You know it isn't true. Look at the Part B outlier physicians. All of those billions (check me on a good estimate) are pharmaceutical income. I wonder how many other misconstruals are out there with the data. The second and third trillion of our health-care pie are not coming from fee for service primary and other cognitive care.

Give me back usual and customary in a even playing field, private insurance world. Get there by focusing on eliminating the bureaucracies we don't need (brand-generic, pharmacy benefit, wellness redundancy and patient coercion)and returning laws to the more sane regulations of prior times (no publicly traded, for profit insurance entities; limits on hospital employment of physicians; even, God forbid, limits on advertising).

You are way off base with this focus on destroying fee for service. HMO all over again. It takes you too many paragraphs to explain. You'll always have anecdotes and weird data to try to justify, but it will never outweigh the flexibility and simplicity of fee-for-service. No primary care small practices can live in these domains, and physicians in bigger entities will have little leverage against mid-level providers and the consolidated domain administrators. Cook-book medicine will prevail. Quality and safety bureaucracies will neither save us money nor live up to their goals. Financial incentives live in every arrangement you can construct. The perverse ones are far more numerous in risk transfer than in fee for service.

PCP said...

ACP and AMA have failed physicians for decades.
Their advocacy is indefensible. One simple Question.
SGR on medicare B, why none on the other components in 1997? I've never got a rational answer to that.
If that is not the ultimate straight jacket for the then predominantly private practice profession, then I'm not sure what is. Medicare A, C and the rest grew unrestrained over nearly 20 yrs, while we were bruized and battered, going cup in hand like beggars every year to get a subinflationary adjustment 'victory'.
Is it any wonder that Hopsitals(A), Insuerers(C) etc. are gobbling up physician practices with their deep pockets, is it any surprise thatnthey will form and run ACA, etc and partake in these investments in bundles payment models, forever altering the landscape for the profession relegating doctors to the employee status.
Now with FFS under a final assault from all directions, and with it all, a massive shift of control of care delivery to organizational/corporate behemoths, that pretend to care, whilst always looking to their bottom line.
It will very soon be time for Physicians to unionize and bargain for appropriate workers rights and benefits etc.
All of this will finally and forever relegate these useless 'representatives' of the profession's interest to the footnotes of history. They will have highly deserved their irrelevance.

Harrison said...

I kind of agree with you.
But then again not.
I agree with you that all the advantages have gone to the insurers and the hospitals. And they largely control the industry as it is taking shape.
Doctors are increasingly regulated to the roles of employees.
We still have leadership roles in both insurance companies as medical directors and in hospitals, on the boards and as advisory to the controlling boards.
But we do not directly control.

I don't agree that the AMA and the ACP have thrown us under the bus.
They were both slow to get into the PAC game.
But even in that game they reflect their membership by being advocates for patients more than anything.
Every argument that they make on the political stage is mostly aimed at taking better care of patients.
The support of the ACA was to help improve patient access to the health care system.
And the ACA has been successful in that effort.
It was not misplaced advocacy.

But you are right that the ACP and the AMA (I think) have not really pushed to save fee for service medicine.
Although the ACP very much supports independent practice (again, I think), it seems to do so with the caveat that it may be necessary for individual practices to be plugged into bigger systems to help with buying power and negotiating power.

Our local IPA announced this year that they are starting an arm of our practice where they will have an 'employed' physician model. This is because doctors in practice like me, have a hard time recruiting.
We did manage to recruit a new partner just last year.
But the cost to my personal salary for 2014 still has me reeling.
And I'm not sure 2015 will be that much better.
Because we need to keep up the salary base in order to get back the investment, and not lose all we put in to the recruitment and growth. And we are too small to be able to do it again any time soon.
We would compromise overhead.
And well,....we can't do that and survive.

Of course I can fall back on being a local hospitalist.
And make twice as much.

And of course that doesn't make a bit of sense.
A job I use to supplement my income by doing a weekend or two rounding each month... would pay me twice as much as I make even with moonlighting if I were simply to give up my outpatient practice and do full time, and not more than full time, hospitalist work.


But then I wouldn't have my own practice.
And I would let staff go.
And I would leave many patients without a primary care physician.
Or at least without me as their primary care physican.


I don't know how I got off on that tangent.

But I don't blame the AMA and the ACP for this.

It just is.


PCP said...


1) Who is claiming to represent us in DC?

2) Hospitals and Insurers are in control due to their deep pockets. We can barely make an investment, as you so eloquently point out.

3) Perhaps you are not aware but 'leadership' roles are hardly that. These organizations select their 'leaders' and medical 'directors' based on who sings their tune. If you speak up for patients safety, or medical staff, you will be keenly listened to and then sideloned or quietly replaced. You are a paid puppet. In that setting there is no check and balance on the profit motive. No separation of conflict of interest. Not that hard to find a consenting voice in any medical staff.

4) The utter injustice perpetrated within FFS, in so many ways to primary care is unconscionable.
SGR on Medicare B for atarters. The RUC composition within our profession. The Facility fee fiasco, the cost based reimbursement fiasco within the FQHC, CHC, IHS, pitiful medicaid rates etc etc. the list of practices goes on and on. And now the final death knell, killing autonomy.
5) I'm not sure what the articles of incorporation for your IPA aay, but not sure how long that 'i' stays. Sounds like the goundwork is being laid for 'epa', where 'e' is for employed!

6) Once again, don't blame the hospitals for paying hospitalists for their work, they are likely getting far more out of their services than they pay. They are in the position to do that because of the generous reimbursements. What is valued grows and what is devalued withers on the vine. Our system of capitalism and our country the US is exceptionally good at achieving that result. No need to tell you where I think we place Physician driven primary care.

Sorry but 'it just is' requires more root cause analysis.

John said...

"ACP President David A. Fleming, MD, FACP issued an official statement on Tuesday that expressed support and agreement with the “ambitious but achievable” goals set by Secretary Burwell"

Thanks so much for advocating for your fellow physicians, Dr. Fleming. I didn't hear about tying new payments to reversing the SGR -- did I miss that? Maybe ACP leadership doesn't feel that is "ambitious and achievable" enough.

A starry-eyed response to the imposition of yet another untried payment model on physicians! It brings to mind a recent comment by a political science professor about our government leaders: “Sometimes people try to keep an open mind. And when you have too open a mind, your brains can fall out.”

Bob Doherty said...

Uh John, please re-read my post. First on Dr Fleming's list was
1. Congress needs to pass legislation to repeal the Medicare SGR formula and create a clear pathway to a new merit-based incentive payment program and alternative payment models including PCMHs and ACOs, as specified in the bipartisan, bicameral SGR Repeal and Medicare Provider Payment Modernization Act.

Unknown said...

I agree with Dr. Sobel. Thanks, ACP, for throwing your fee-for-service physicians under the bus. But, given your long standing support for a single payer system, its no surprise that you would support what is essentially capitated Medicare for all. Of course, quality will be defined by who can spend the least. Remind me please, how you are advocating for my interests? I seem to have forgotten.