Payment Reform for Primary Care Within the Accountable Care Organization

Abstract

HEALTH CARE REFORM REQUIRES NEW DELIVERY SYStems and new modes of payment to support them. Transitioning from a fee-for-service payment system, with its emphasis on volume, to a more valuedriven payment model that encourages better health and better health care at lower cost will require realignment of financial incentives. The change will affect a diverse set of clinicians and health care organizations as they form integrated networks such as accountable care organizations (ACOs). Failure to reform payment could result in participants working in conflict with the goals of the ACO, thwarting the potential benefits of delivery reform. Primary care, the foundation of the ACO, requires payment reform to enable and make durable its transformation into a high-performance model such as the patient-centered medical home. Although increasing numbers of primary care physicians are employed and ostensibly salaried, their payment, whether on an employed or contractual basis, remains largely volumedriven, contingent on meeting productivity standards based on number of face-to-face visits, adjusted for complexity. Such volume-driven payment behaves and feels little different from traditional fee for service, except income is averaged over 12 months and periodically reconciled. Ironically, while expressing the desire to move forward with payment reform, many emerging ACOs and traditional integrated delivery systems (whether they employ or contract with independent group practices and physicians) retain volumebased fee for service as the predominant mode of payment, including that for primary care. Some emerging ACOs have begun to rethink this approach (F.J. Crosson, Council of Accountable Physician Practices, oral and written communication, May 7, 2012). Even Medicare retains fee-for-service payment rules for practitioners in many of its ACO piloting efforts. The concern is that continued reliance on fee-for-service payment for primary care as well as for specialists, with its emphasis on volume of services, threatens meaningful practice transformation and the very goals of delivery system reform. In primary care, such volume-based payment has fostered the harried “hamster-wheel” practice environment that so frustrates patients, demoralizes physicians, and deters medical students from entering the field. Despitewidespreadacknowledgmentof theneed for fundamental reformofpayment forprimarycare,whydoesvolumedriven fee for service remain the dominant mode of payment? What are the major barriers to primary care payment reform? First, there is the inertia that derives from payers and practitioners having spent billions on an elaborate fee-forservice administrative infrastructure, an enormous investment built into their business models and control systems; fundamental change is likely to be expensive and disruptive. Second, the net investment required for transformation of primary care practices into high-performance medical homes will necessitate reallocation of resources away from specialties and hospitals and toward primary care—a shift exacerbated by the expected more judicious use of specialized services by primary care medical homes. Not surprisingly, these changes are likely to be resisted by those, primarily specialists, who have prospered under fee for service and who remain powerful in local medical communities because of the enormous revenue they have generated. With reform of payment and delivery systems, those physicians and organizations who order tests and perform procedures unnecessarily or inefficiently will probably experience decreases in income, be they specialists or primary care physicians. Third, many health care executives (including some physician managers) believe that physicians work harder under fee for service and that productivity is at risk of faltering under payment systems that do not maintain a strong, volume-based incentive. In addition to these external factors, there are reservations within the primary care community. Some find it difficult, even objectionable, to desert fee for service, because, in their view, volume-based payments are an important incentive to seeing more patients, a just reward for working harder, and an essential means of maintaining and enhancing access to care. They also argue that fee-for-service payment establishes the value of the services delivered, providing a monetary basis for the social contract between physician and patient. Others, although displeased with the current mode of payment, express skepticism about payment reform because of unsatis-