Payment Reform Overview

For the past three years, the Wisconsin Academy of Family Physicians (WAFP) has focused its public policy efforts and its practice support efforts on helping practices earn recognition as Patient-Centered Medical Homes (PCMH). In 2009, a PCMH pilot was included in the Wisconsin State Budget for the Medicaid Program, and to date over 830 physicians in Wisconsin are now recognized as a PCMH by the National Committee for Quality Assurance (NCQA). In addition, the WAFP helped convene a multi-stakeholder PCMH demonstration project work group in addition to its participation in the Partnership for Healthcare Payment Reform .

The WAFP held the belief that the data and research unquestionably shows that the PCMH not only improves patient outcomes, reduces healthcare cost and improves patient and physician satisfaction, it also advocates for additional payment for primary care physicians as the central component of coordinated care. That emphasis on the value of primary care is behind most, if not all of WAFP's demonstration projects to date.

With so many Wisconsin physicians successful in gaining NCQA recognition, the WAFP refocused its efforts for 2011 to Payment Reform. The rationale for this subtle but significant shift is that PCMH mandates practice transformation. Care management, Care Coordination, outcomes measurements, Electronic Health Records, patient registries, and office redesign —all of which require a substantial financial investment from practices. In the end, this contribution yields significant savings for the entire healthcare system, savings that need to be shared with the primary care physicians investing in their patients and communities.

The current payment systems are inadequate to sustain the cost of becoming and continuing as a PCMH.

Reality Check #1: How physicians are paid matters

Basic Payment Methods	Potential Pitfalls
Salary	Productivity
Fee for Service	Overuse
Capitation	Underuse
Pay for Performance	Decreased effort on measurement of care

Reality Check #2: Changes to the E&M codes through the RBRVS system or the conversion factors do NOT constitute Payment Reform

Reality Check #3: Shared savings models have issues

Inefficiency is currently rewarded with the most financial benefit, i.e., ordering multiple tests and procedures rather than a focus on preventive care
Financial incentives are for short-term treatment, rather than the long-term health of the patient
Some potential savings should be used to increase the base for primary care
Essentially, patient for patient does not constitute payment reform

Reality Check #4: A transition strategy is required

Deep-seated habits and beliefs will take time to adjust to a new payment model
There will be winners and losers, both will need time to adapt to changing incentives
Adaptation in necessary for the long-term sucess of a new payment model

Several models are being tested nationally. They include:

Blended payment
Risk-adjusted comprehensive primary care payment – Goroll Model
Evidence-informed case rate bundled payment – Prometheus

The WAFP believes that the blended payment model offers the best method of transition at this time. The blended payment model elements include:

Fee for service – based on RBRVS
Care management fee – a capitated fee (per member per month) to cover non-visit based care
Pay-for-performance – a bonus dependent on reporting or performance on quality measures

Advantages of the Blended Payment Model

Due to its evolutionary nature, a blended payment method is probaly the easiest payment reform to implement at this time, since it requires the least amount of change to the current payment systems. It modifies the fee-for-service model already in place by supplementing it with a care management fee (capitated) and a pay-for-performance bonus, with which payers and physicians have some fammiliarity. Payers have also shown a willingness to experiment with blended payments in PCMH pilots.

Disadvantages of the Blended Payment Model

The blended payment model continues to rely on the Resource Base Relative Value Scale (RBRVS) and fee-for-service as a major component of physician payment. Due to this continued reliance and because it does not directly affect other specialties' payments, the blended payment model's impact on the payment disparities among specialties is unclear. The addition of a care management fee and pay-for-performance bonus may help, depending on their proportional size. It also potentially increases administrative burdens associated with tracking care management fees and reporting performance measures, in addition to the administrative hassles currently associated with fee-for-service.

According to the Patient-Centered Primany Care Collaborative (PCPCC), the care management fee is intended to compensate physician work that falls outside of a face-to-face visit, such as maintaining the health information technologies needed to achieve better outcomes. However, what that outside work actually involves has not been well defined. The result is widely varying estimates randing from $2-$3 pmpm in some pilots (e.g., Vermont) to $100 pmpm for some patients in the ddesign of a Medicare medical home demo.

The blended payment model does not specify the source of the funds that will pay for the care manegement fees or pay-for-performance bounuses. One possibility is shared savings; however, this a a transitional strategy at bes, as the care management fee is typically pre-paid and shared savings would be determined post facto. "New money" is not a likely option, given the near-universal desire to "bend the cost curve."

Proportions Matter!

The impact of the blended payment model on practices and their support of the PCMH will depend, at least in part, on the relative proportion of the blend attributable to the three elements.

If a blended payment is still 90% fee-for-service, the impact and support for the PCMH is probably little different than payment under a pure fee-for-service model. However, if the care management fee and pay-for-performance bonus are significant portions of total income, then real change may occur since the effects of fee-for-service are more likely to be moderated. The elements of the PCMH that depend on care management fees and pay-for-performance (i.e., care management, coordination, practice innovation and transformation) will also be better supported.