Report: The National Commission on Physician Payment Reform

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March 5th, 2013
Categories: Healthcare Reform

physician payment reformThe National Commission on Physician Payment Reform issued a report on March 4th, 2013 listing a number of critical recommendations to control healthcare spending and improve quality by changing the way doctors are paid.  

At 18% of GDP, the United States spends more on healthcare than any other country. Although there are many factors that contribute to this enormous amount of spending, one in particular stands out; fee for service reimbursement. This report by the National Commission on Physician Payment Reform focuses on new ways to pay physicians with the aim of improving outcomes and reducing costs. They suggest the 12 recommendations below and provide a five-year plan for transitioning to a blended payment.

Commission Recommendations:

Transitioning from fee-for-service - The first three recommendations propose a rapid transition away from fee-for-service payment; yet recognize the need to fix current fee-for-service system inequities while the system is still in place.

  1. Over time, payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives.
  2. The transition to an approach based on quality and value should start with the testing of new models of care over a 5-year time period, incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade.
  3. Because fee-for-service will remain an important mode of payment into the future, even as the nation shifts toward fixed-payment models, it will be necessary to continue recalibrating fee-for-service payments to encourage behavior that improves quality and cost effectiveness and penalize behavior that misuses or overuses care.

Recalibrating fee-for-service and advancing fixed payment models - The next six recommendations provide a blueprint for transitioning to a value-based blended payment model over a five-year period, focusing on increasing reimbursement for evaluation and management services, reducing gaps in payment for the same physician services regardless of specialty or setting, and advancing bundled payment and capitation.

  1. For both Medicare and private insurers, annual updates should be increased for evaluation and management codes, which are currently undervalued. Updates for procedural diagnosis codes should be frozen for a period of three years, except for those that are demonstrated to be currently undervalued.
  2. Higher payment for facility-based services that can be performed in a lower-cost setting should be eliminated.
  3. Fee-for-service contracts should always incorporate quality metrics into the negotiated reimbursement rates.
  4. Fee-for-service reimbursement should encourage small practices (those having fewer than five  providers) to form virtual relationships and thereby share resources to achieve higher quality care.
  5. Fixed payments should initially focus on areas where significant potential exists for cost savings and higher quality, such as care for people with multiple chronic conditions, and in-hospital procedures and their follow-up.
  6. Measures to safeguard access to high quality care, assess the adequacy of risk-adjustment indicators, and promote strong physician commitment to patients should be put into place for fixed payment models.

Medicare Payment - The final three recommendations focus on ways to improve physician payment within the Medicare program.

  1. The Sustainable Growth Rate (SGR) should be eliminated.
  2. Repeal of the SGR should be paid for with cost-savings from the Medicare program as a whole, including both cuts to physician payments and reductions in inappropriate utilization of Medicare services.
  3. The Relative Value Scale Update Committee (RUC) should make decision-making more transparent and diversify its membership so that it is more representative of the medical profession as a whole. At the same time, CMS should develop alternative open, evidence-based, and expert processes to validate the data and methods it uses to establish and update relative values.

Click Here to download and read the report from The National Commission on Physician Payment Reform.