Reimbursement Scenarios

8/9/2019 Reimbursement Scenarios

1/14

1

The New Model of Primary Care: Reimbursement Scenarios

Introduction

The U.S. Health Care system is a system fraught with problems. Despite spending more on

health care than any other nation in the world, the U.S. lags behind in health care indices. The

American public has grown increasingly wary of a system that produces optimal care for a few,

but leaves many without any care at all. Additionally, the current fee-for-service system has

allowed for an epidemic of sorts in the area of over-treating and over-prescribing patients. This

has done little for the efficacy of overall care, not to mention the costs the must be borne. As a

result, a fundamental rethinking of the system needed to occur.1

In 2002, 7 national family medicine organizations (the American Board of Family Practice, the

Association of Departments of Family Medicine, the Association of Family Practice Residency

Directors, the North American Primary Care Research Group, the Society of Teachers of Family

Medicine, the American Academy of Family Physicians, and the American Academy of Family

Physicians Foundation) initiated the Future of Family Medicine Project. The goal of this project

was to address some of the changes that were occurring within the health care sector (a

fragmented health care system, exorbitant costs, a deficient fee-for-service payment scheme).2

In essence, FFM was created to rationalize, reinvent and you could even say save primary care.

Five task forces were created to address the following issues: Patient Expectations, Medical

Education, Professional Development, Communications, and Leadership. A final task force was

initiated in 2004 to formulate and recommend an appropriate financial model that will ensure

that the New Model will be sustainable and successful.3

This paper will briefly explain the

concept of the Medical Home/New Model and identify the financial reimbursement models that

have been suggested to date.

What is the Medical Home/New Model of Primary Care

"primarycare, the backbone of the nation's health care system, is at

grave risk of collapse."

The American College of Physicians 4


2/14

2

The idea of the medical home was first coined in 1967, in reference to the centralization of

pediatric medical records. The concept has since been taken and amended by the American

College of Physicians and the American Academy of Family Physicians to express centralized

comprehensive primary care.5 As a result of the previously mentioned task forces, The Future of

Family Medicine proposed the New Model, a drastic and complete overhaul of the GP system;

a restructuring in both the organization and thought process behind providing primary care.

Essential in this rationale is the following:

The underpinnings of the New Model rest on the idea that access to comprehensive,

coordinated, continuous and personalized care will result in better outcomes (improved health,

better disease management, lowered costs, and equalization of care). It is often referred to as to

as a patient-centered medical home, a personalized one-stop shop of sorts where a patient can

come in, receive a variety of services from a coordinated team who personalizes, educates and

manages care all while lowering total costs. The focus in this model is based on value and

outcome as opposed to the volume-based care (perpetuated under the FFS approach) patients had

been receiving. This was very good for specialists, but it has drained primary care of nearly

every resource and ensured a departure from its ultimate goal the prevention and management

of illness.6,7 Thus, in 2008 the National Committee for Quality Assurance (NCQA) published

guidelines to ensure that more primary care practices become certified as Medical Homes and

pilot projects have begun around the country to test out the implementation, efficacy andreimbursement systems that best serve the New Model.5

Financial Considerations and Reimbursement Mechanisms

The last task force assessed the reimbursement strategy for implementing the New Model from

both a micro- and macroeconomic perspective. From a micro-economic perspective, the New

y A personal medical home for eachpatient

y Patient-centered carey A team approach to carey Elimination of barriers to carey Advanced IT systems (EHRs)y Redesigned, functional officesy Whole-person orientation

y Community based carey Emphasis on quality and safety

(measure-improve-measure)

y Enhanced financial efficiency(operational improvements andnew revenue flows)

y Commitment to family medicinesbasket of services


3/14

3

Model will have consequences on both cost and income, with the possible addition of more

clinical staff to support the multidisciplinary team approach, the revising or upgrading of IT

systems, and redesigned offices. In the long term, implementation of Electronic Health Record

(EHR) systems may reduce costs by decreasing the need for administrative staff and increasing

the physician-patient contact time. As previously described, the New Model comprises

numerous elements, each of which can affect practice costs and revenues. The Task Force paper

goes into great detail, itemizing costs for every parameter necessary to ensure successful

transformation of a practice into a Medical Home. Up-front training needs, number of services

performed, service intensity (revenue/procedure), physician time/service, clinical staff

time/service, office expenses, administrative staff costs, and malpractice premiums were all

assessed. Such transition costs were estimated to run from $23,442 - $90,650 (for a 5 physicianpractice), however, compensation could increase by 26% percent. Additionally, enhancing

reimbursement models could lead to a further compensation of up to 61%.2,3

Reimbursement Models

Under the New Model, average physician compensation can be increased by $42,800. This

would raise salaries from $167,500 to $210,300, assuming physicians increase patient volume

according to time saved under the New Model.2 However, on the Macroeconomic level, there

are elements of the New Model which would not be reimbursable under the current fee-for-

service system (e-consultation and chronic disease management). As a result, alternate

reimbursement models need to be considered.

The way the current reimbursement system is set up, consultations via the Web or e-mail are not

reimbursable. Yet, if these were incorporated into the current FFS system, physicians would

actually lose money (as it would be reimbursed at a lower rate and decrease office visits). A

study by Iglehart indicates that reimbursement for electronic services even reduces health care

spending by $3.69/patient/month.8 Likewise, the reimbursement scheme for chronic disease

management in primary care is poorly set up; physicians are either not reimbursed at all or

reimbursed via a framework provided by private insurers, which typically entails payment being

limited to patients who have been registered as chronically ill, with the insurer paying the initial

visit and reimbursing for each chronically ill patient on a monthly basis (usually $15/patient).9 If


4/14

4

this framework were extended beyond private insurance, assuming that 10% of a physicians

patient load will have one or more chronic illness, this allows for a substantial reimbursement

(assume a physician with a patient base of 2030, reimbursed at 15%/chronically ill patient, this

will increase compensation by $14,834).3 See Table 1 (indicated Table 11 from Task Force 6

Report) for a breakdown of payment changes to go into effect under the New Model in the

Appendix.

There is much uncertainty regarding which reimbursement system should be utilized under the

New Model. At the moment, pilot projects are being initiated to test out best practices for

implementation of the New Model as well as which reimbursement system is most optimal. The

only clear consensus is that the financial rewards system at the primary care level must be

amended. Below, is a brief presentation of the models currently being discussed. For review,

please see Figure 1 in the Appendix, which highlights the spectrum of reimbursement systems in

health care.10

Financial Incentive Models within FFS

The most traditional model for U.S. policymakers is to amend the current Fee-For-Service

model. The belief is that creating incentives in the form of bonuses to the current FFS system

will allow for quality improvements in primary care. Physicians should be eligible for thefollowing financial incentives:3

y Quality bonuses based on implementation of tools to increase the quality of medical care(EHRs and chronic care management for example)

y Performance-based fee schedules which will adjust reimbursements based on thephysicians adoption of quality improvement initiatives (as indicated on patient

satisfaction surveys)

y Reimbursement for care planning which will allow for primary care physicians to bereimbursed for managing chronically ill patients.

y Quality grants will help alleviate the up-front costs involved in implementing some fo thequality improvement initiatives (websites, EHRs)


5/14

5

y Compensation at risk, where the payer will withhold a portion of the physicians incomeuntil years end, when quality improvement steps have been met

Using the Bridges to Excellence program as a standard, a physician under a FFS model with

alternative bonus will receive the following: up to $50/patient (capped at $20,000) upon

implementation of quality improvement initiatives such as EHRs, patient education and care

management programs.3,11 To address specific health concerns, bonuses for diabetic and cardiac

care can also be instituted ($80/patient/year and $160/patient/year respectively). Thus, a typical

physician, with 7% of their patient list having diabetes and 3% having cardiac conditions, who

implements all office quality improvements under the New Model, would be eligible for bonuses

up to $44,200. 3,4

A 24-month pilot project to transform a New York healthcare care delivery network, Taconic

Independent Practice Association (IPA), into a patient-centered medical home recently

commenced which will be using the FFS reimbursement model with 2 bonus incentives one for

NCQA certification and another tied to outcomes measured by aggregate administrative data.12

Mixed Reimbursement Model

Another approach in funding the New Model is to focus on a hybrid of reimbursement models,

using FFS as a primary form and fixed annual payments for each patient to fund the cost of

changing over to the New Model. For example, the fixed amount could be $10/patient. Given

that a physician has 2,030 patients, this amounts to $20,030 in net revenue. Additionally,

bonuses could also be added for dealing with chronic diseases (as described in Bridges to

Excellence) as well as overall performance bonuses using various measures (use of generic

prescriptions, patient satisfaction surveys, Health Plan Employer Data and Information Set

measures, etc). Utilizing these incentives, physicians could substantially increase their income

under the New Model by working the same number of hours, but treating more patients.

Compensation could increase by as much as $110,300, depending on bonuses earned.3,4

This incentive system has been effective in the UK, where GPs traditionally were compensated

according to a mixed model of capitation (40%), salary (30%), capital and information

technology (15%) and FFS, including quality-based incentives (15%). 13 In 2004,


6/14

6

reimbursement was amended to ensure an even greater emphasis on the quality incentive system,

involving 146 indicators across 7 areas of practice.

Comprehensive Payment for Comprehensive Care

Perhaps the most unique reimbursement model to date has been proposed by Dr. Goroll, who has

simply done away with the concept of a volume-based pay system.14 According to Gorolls

reimbursement scheme, payment would be not unlike capitation, but tied to performance

(achieving societal health goals) and needs/risk-adjusted. This form of reimbursement would

fully replace FFS under the Resource-Based Relative-Value Scale (RBRVU) system and allow

for a comprehensive investment in primary care practices to ensure proper implementation of an

advanced medical home.

14

The base payment would exceed the currently inadequatepaymentsfor primary care evaluation and management services. Additionally, it wouldprovide

the resources necessary to establish multilevelteams and implement the measures needed to give

physicians more time with patients, improve coordination, and ensure evidence-basedcare. It is

also suggested that 15-25% of the comprehensive payment be performance/outcomes-based and

paid as a bonus on a monthly basis.6,15 This bonus payment wouldallow for a significant

increase physician income that would be commensurate with the value created. Strong risk

adjustmentof these payments would normalize the amount paid with the actual burden of care

assumed. While Goroll admits this reimbursement model is similar to capitation, it avoids the

pitfalls of inadequate payment, excessive financial risk, shunning of complex patients,

withholding of care, and cost reduction as the only reward outcome. 7 See Table 2 for a

comparison of payment compensation types under each different reimbursement system.15

Estimates indicate physician payment could increase by as much as 40%,with total personal

health care expenditures increasing by only 3%. In 2009, Capital District Physicians Health Plan

(CDPHP), via TransforMED, instituted a 30-month pilot project to transform its primary care

practices into patient-centered medical homes. The aim was to determine the best payment

model which could improve patients access to care, coordinate this care and improve patient,

staff and physician experiences. The model chosen for this project was the risk-adjusted

comprehensive payment model. According to Terry McGeeney, CEO of TransforMED, There


7/14

7

are no productivity issues under this payment model because physicians are not paid based on

how many patients they see a day, 17,18

Prometheus Payment

The PROMETHEUS payment model, similar to the comprehensive payment for comprehensive

care model, addresses the shortcomings of FFS by injecting mechanisms that instigate value-

driven care. After compiling national claims data, the PROMETHEUS developers found that a

large percentage of total costs (up to 40%) involving chronic patients were attributed to

Potentially Avoidable Complications (PAC), meaning had the Medical Home (and a financial

system that supports value) been instituted sooner, costs could have been significantly decreased

and patient outcomes could have improved. PROMETHEUS bases its payment primarily onepisode of care payment, using the Evidence-informed Case Rate (ECR) which creates a

patient-specific, severity-adjusted prospective budget for patients with chronic conditions. By

capitalizing on aspects of various models, PROMETHEUS, like many other models, suggests

that the hybrid approach is the best way to move forward in the evolution of health care payment

reform, with residual visit-based FFS payments, bundled episode-based payments and thin

capitation to support transition to the New Model. According to PROMETHEUS, preventative,

non-emergent, non-chronic and low technical care can be treated via FFS. With ECRs (diabetes,

coronary artery disease, hypertension, asthma, heart failure, and COPD), a patient-specific, risk-

adjusted global budget is established which should cover all services recommended by clinical

guidelines. Interestingly, the budget to a given ECR is also tied to a PAC allowance, meaning

that a physician must work to decrease the cost associated with PAC, both individually and in a

coordinated manner. And lastly, the cost of reengineering and sustaining the physician workplace

into a patient-centered medical home (i.e. the New Model), is suggested to come in the form of

thin capitation, rewarding based on a per-member-per-month (PMPM) fee. PMPM serves to

alleviate the upfront costs of transforming the physician practice while also working towards the

future reduction of PACs. Such a model is hypothesized as driving high-value while protecting

providers from probability risk, and allowing consumers the freedom of choice in physicians. 19

Summary


8/14

8

Central to the demise of primary care in the United States are defunct payment systems, from the

gatekeeper role of the 1990s to the current Fee-for-service model, these reimbursement systems

have been illogical choices for the field of primary care. As a result, patients are neither

satisfied, nor treated accordingly and generations of medical students have steered clear of

residencies in the field, opting for more lucrative specialties where fee-for-service is greatly

rewarding. In spite of long hours and a high patient load, primary care doctors earn

approximately a third of what radiologists, cardiologist and orthopedic surgeons earn.7 As Dr.

Starfield points out, Right now, were spending about 70 times more on the production of

specialists than we are on the production of primary care physicians. 20 The disadvantages of

FFS in primary care was further documented when the NRHI Summit Panel concluded that the

current FFS systems do not pay for many elements of Primary Care.

10

As one physician stated ina recent roundtable interview, for every hour of face-to-face time, I have another hour, at least,

of time that I spend thats unreimbursed. So, if Im there for 13 hours, Im getting paid for about

6 of the hours Im spending. So I do think that there should be a, you know, a substantial sort of

lump of, This is what youre being paid to manage these people. 20

Due to the current dissatisfaction amongst providers, the general fragmentation of the health

sector and the sheer crisis primary care is now facing, there have been a number of proposals

regarding a reimbursement overhaul. One model, the evolutionary approach, continues with theFFS scheme with the addition of management pay for the coordination of care. This model,

however, fails to address the problem with FFS (the rewarding of procedures and visits).

Additionally, cost control or quality of care issues may not be fully resolved under this model.

Another model, a hybrid, value-based payment system, incorporates pay-for performance into a

fee-for-service set up. However, concerns have been raised that this method still doesnt address

the problem associated with the inadvertently placed focus on procedures and processes.10 More

promising systems are the comprehensive payment for comprehensive care and the Prometheus

system, which both use a hybrid of payment modalities and reimburses in a comprehensive

fashion based using evidence and outcome-based practices.

In any case, it is clear that that the reimbursement systems of the future must comprise of a

mixture of models as is illustrated in other countries, yet with the components to address both


9/14

9

quality, specific preventative measures (Bridges to Excellence) and patient demographics to curb

chronic conditions and the costs associated with these conditions (ECRs and PACs). 13

Additionally, for primary care reform to achieve its goal, other issues must be addressed, such as

the revision of malpractice liability insurance laws, the limitation of the strength and autonomy

imposed by the AMA (which has a definite bias towards certain models using the RBRVS

system, rewarding a piecework payment system), as well as convincing subspecialties, who will

likely fight to keep in place models that allow them more referrals, not necessarily for the

betterment of the patient.6

It doesnt take a mathematician to conclude that the U.S. on the brink of a national health care

disaster and primary care is at the epicenter of this crisis. A fundamental change must occur andit must begin with payment reform. While we are still in the very early stages of transforming

practices to Medical Homes and experimenting with reimbursement models, I would like to

conclude with the following simple graph, shown below, which clearly indicates that a hybrid

model is the best model necessary to raise income levels.2


10/14

10

References

1. Bodenheimer, T. 2006. Primary Care Will It Survive? New England Journal ofMedicine. 355(9) pg. 861-862.

2. Spann, S.J. 2005. Is the New Model of Family Medicine Financially Viable? FamilyPractice Management. May 2005. www.aafp.org/fpm

3. Spann, S.J., et al. 2004. Task Force Report 6. Report on Financing the New Model ofFamily Medicine. Annals of Family Medicine. 2(3) November/December. pg. S1-S21.


11/14

11

4. The impending collapse of primary care medicine and its implications for the state of thenations health care. Washington, D.C .: American College of Physicians, January 30,

2006 (http://www.acpononline.org/hpp/statehc06_1.pdf)

5. Backer, L.A. 2007. The Medical Home: An Idea Whose Time Has Come Again.Family Practice Management. September 2007. pg. 38-41. www.aafp.org/fpm

6. Bodenheimer, T. 2007. Interview with Dr. Allan Goroll. Primary Care e-Letter. Centerfor Excellence in Primary Care. Issue 11 San Francisco.

7. Mohl, B. 2009. Back in the Game. CommonWealth. Pg. 80-91.

8.

Iglehart, J. 2002. The woeful neglect of health care workforce issues. Health Affairs.Millwood. 21: 7-8.

9. Future of Family Medicine Project Leadership Committee. 2004. The future of familymedicine: a collaborative project of the family medicine community. Annals of Family

Medicine. 2: S3-S32. www.annfammed.org

10.Network for Regional Healthcare Improvement. 2007. Working Draft: CreatingPayment Systems to Accelerate Value-Driven Health Care Issues for Discussion and

Resolution at the 2007 NRHI Summit. Version 3.1 pg. 3-74

11.Bridges to Excellence: Rewarding Quality Across the Healthcare System. Website.http://www.bridgestoexcellence.org/bte.

12.TransforMED. http://www.transformed.com/TaconicIPA.cfm13.Smith, P. and Nick, Y. 2004. Quality incentives: the case of UK general practitioners.

Health Affairs (Millwood). 23:112-118.

14.Goroll, A.H. 2008. Reforming Physician Payment. New England Journal of Medicine.359(20) pg. 2087-2090.


12/14

12

15.Goroll, A.H., Berensen, R.A., Schoenbaum, S.C., Garnder, L.B. 2006. FundamentalReform of Payment for Adult Primary Care: Comprehensive Payment for

Comprehensive Care. Journal of General Internal Medicine. 22(6) pg. 410-415.

16.Fairchild, D.G. and Wilcox, M.C. 2007. Comprehensive Coordinated ComprehensiveCare: The Devil is in the Dollars. Journal of General Internal Medicine. 22(3) pg. 424-

425.

17.TransforMED. http://www.transformed.com/CDPHP.cfm18.Nash, B. 2009. Presentation: The Medical Home Building a Patient-Centered Practice.

The 4th

National Pay for Performance Summit. San Francisco.

http://www.pfpsummit.com/past4/agenda/index.html#day1

http://www.ehcca.com/presentations/pfpsummit4/nash_pc2.pdf

19.de Brantes, F., Gosfield, A.G., Emery, D., Rastogi, A. and DAndrea, G. 2007.Sustaining the Medical. Robert Wood Foundation.

http://rwjf.org/files/research/prometheusmedicalhomes.pdf

20.Lee, T., Bodenheimer, T., Goroll, A., Starfield, B. and Treadway, K. 2008. ProspectivesRoundtable: Redesigning Primary Care. http://www.nejm.org/perspective/primary-care-

video/

Appendix

Table 1 (indicated Table 11 from Task Force 6 Report)3

Breakdown of payment changes under the New Model.


13/14

13

Table 2 Comparison of Comprehensive Payment System with Others Reimbursement

Types15

Figure 1. The Spectrum of Payment Methods in Health Care10


14/14

14

1. Fee for Service (FFS). A provider is paid a fee for each specific service rendered.2. Per Diem. A provider is paid a fee for each day of care, covering all servicesrendered during that day.3. Episode of Care Payment (ECP). A provider is paid a fee for all servicesrendered during a single episode of care, i.e., from initial diagnosis of acondition to completion of treatment of that condition. This is similar to the DRG

prospective payment system used for hospitals by Medicare and other payers. Inaddition, surgeons are typically paid a single amount for all services associatedwith a particular episode of care.4. Multi-Provider Bundled Episode of Care Payment. Two or more providers arejointly paid a fee for their combined services rendered during a single episode ofcare.5. Condition-Specific Capitation. A fee is paid to cover all services rendered byall providers to deal with a particular condition, either on a one-time basis (forshort-term conditions) or on a regular, periodic basis (for longer-term conditions,such as chronic diseases).6. Capitation. A regular, periodic fee is paid to cover some or all services renderedby all providers for all conditions affecting a particular patient.

(This structure is adapted from various authors, particularly "Theory and Practice in theDesign of Physician Incentives," by James C. Robinson, Milbank Quarterly, 79:2, June2001.)

Reimbursement Scenarios

Documents

Transcript of Reimbursement Scenarios