Payment Reform

The Joint Principles of the Patient Centered Medical Home list several recommendations for payment reform that are elaborated by Ginsburg.  These components have been incorporated into various payment models and are being tested in pilot sites across the country.

Increase Fee-for-Service Rates

Many providers report they lose money on every Medicaid and Medicare visit because reimbursement rates are set so low they do not reflect the costs of providing various services.

  • Increasing private and public insurance reimbursement rates for E&M codes is needed to revive primary care and is relatively easy to implement now.
  • In the long run however, moving away from fee-for-service payments toward capitated payments for all primary care services and bundled payments for all specialist and hospital services for acute episodes of care and post-acute care seems likely to decrease fragmentation, be more cost-effective and if tied to outcomes, drive value.

Add Supplemental Payments

Many providers report they lose money on every Medicaid and Medicare visit because reimbursement rates are set too low and do not reflect the costs of providing various services. Increasing private and public insurance reimbursement rates for E&M codes is needed to revive primary care and is relatively easy to implement now. In the long run, however, moving away from fee-for-service payments toward capitated payments for all primary care services and bundled payments for all specialist and hospital services for acute episodes of care and post-acute care seems likely to decrease fragmentation, be more cost-effective and if tied to outcomes, drive value.

The PCPCC hybrid blended reimbursement model includes a monthly risk adjusted care coordination fee that covers all of these services.  An alternative is for payers to reimburse some of these services through new care coordination/self-management support, E&M codes and temporary procedure codes (the latter are used by BCBSM to support office-based care coordination and self-management support). Some plans include additional monthly fees for nurse care managers who provide services to patients with complex illnesses. In pilot projects, monthly supplemental fees range from $3 for basic services, to the projected $50 for tier 2 patients in the upcoming CMS pilot.

Share Cost Savings

Physicians caring for patients in a PCMH could receive a share in the savings from reduced hospitalizations and emergency department visits associated with physician-guided care management in the office setting. The upcoming CMS pilot will estimate a single savings figure for the demonstration. Eighty percent of the savings that exceed two percent of the comparison group costs will be shared with participating providers in the intervention group. 31 The Agency for Healthcare Research and Quality estimates ten percent of hospitalizations in 2004 could have been avoided through good primary care.

Reward Quality

Pay-for-performance programs provide bonuses for meeting targets on clinical process and outcome measures (e.g., HEDIS), satisfaction surveys (e.g., ACAHPS) and/or efficiency indicators. One way to drive improved care is to increase the portion of physician salary tied to outcomes. If this strategy is employed, it should be carefully designed in order to incentivize important outcomes..

Build Infrastructure

The amount of up-front money needed to create a PCMH is a significant barrier for practices. Although PCMH practices may reap some financial benefits from improved office efficiency and through adoption of IT, it is ultimately the consumers and purchasers of health care, not the primary care practice, who will benefit from better health and lower cost outcomes. Some pilot projects and the BCBSM PGIP provide up-front dollars to pay for some or all of the initial infrastructure costs enabling more practices to engage in transformation. The federal stimulus funds designated for building IT infrastructure in 2011 are intended to assist practices in investing in the electronic technology needed to implement the PCMH.

Payment Reform is Needed Now

Some payers are reluctant to move toward payment reform without results in hand from the PCMH pilots in this country. However, in recognition of the immediacy of the primary care crisis, payers interested in supporting PCMH development are urged to not delay payment reform until further pilot data are reported. Rather, Blair and others encourage payers to move ahead with some level of increased payment and to adjust rates over time as data on costs are collected and analyzed.

Source: Part 2: Transform Primary Care Practice and Payment. Pages 6 & 7. MPCC FourPart White Paper Series Primary Care is in Crisis. 2009.