Category Archives: Payment Models

Capitation? What Capitation?

Policy makers who are responsible for shaping how the federal government (the country’s biggest payer of health care services) pays physicians are pushing CMS on a rapid path away from traditional fee-for-service (FFS). As I discussed last year, CMS intends to have 50% of its payments flow through “alternative payment models” such as ACO’s and bundled payments by 2018, with nearly all of the rest of the FFS payments linked to quality measures.

While I believe this is generally a good thing, I pointed out recently that changing how the dollars flow is not the same as changing how the care gets delivered. Changing payment models facilitates redesigning care, but it doesn’t automatically create new care models. That only happens when physicians, liberated from the constraints of FFS, lead the way to do the right things for patient.

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Incentives and Capabilities

The idea that we have to “change incentives” for physicians is all the rage. Oceans of ink are being spilled over the transition away from the traditional fee for service payment model to a menagerie of value-based ones. At the core of much of the discussion about how to make the transition is figuring out how risk-bearing organizations like large physician groups, health systems, ACOs and the like are going to provide appropriate incentives to the individual, front-line physicians who are providing the clinical care. It is not a trivial problem to solve.

The usual explanation of the challenge goes something like this: In the old days, when organizational success was defined by the number of “heads in beds” in hospitals or patient encounters in the clinic, it was pretty straightforward to “share” that success with physicians. The more patients they saw (or procedures they did) the better it was for everyone, and rewarding “productivity” floated everybody’s boats. Under alternative payment models, the measures of success of the organization are different and more complex – generally combinations of quality measures, patient satisfaction, efficiency, etc. – and translating that into new physician payment models is not so easy. If you continue to reward productivity, then it may defeat organization efforts at efficiency; make the payment model too complex by including many different performance metrics, and physicians don’t get invested in any of them; make the model too simple, and physicians will be insulated from the organizational goals.

Lost in all of the details of how to create the illusory “perfect” physician incentive program is the fact that incentives are only a part of picture. Combinations of carrots and sticks only work where the capability to respond exists. It is not helpful – to patients, doctors, or anybody else – to implement incentive programs that reward or punish physicians when the systems of care in which they work have not been redesigned to achieve the new goals. For example, tying a physician’s compensation to cancer screening rates in a primary care setting without designing a system to identify appropriate candidates for screening and facilitating the testing is just a demoralizing punishment for the physician.

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Who’s in Charge Here?

I spent a couple of hours today discussing a topic that has become increasingly important in the world in which we live, and which would have completely mystified an earlier generation of physicians. The subject was “attribution.” Simply put, how should one decide which patients “belong” to which doctors? On a more technical level, what algorithms should be employed to connect patients, or episodes of care for those patients, or specific quality measures pertaining to those patients, to particular physicians?

Here’s why this is a hot topic. CMS is moving rapidly to alternative payment models. Medicaid is transitioning to a capitated system. Commercial payers are entering into “risk” arrangements with providers. All around us, fee for service is losing sway and is being replaced by a spectrum of new ways to pay for care. In the “old world” of fee for service, whoever provided the service got the fee. There was no mystery about how the dollars should flow. In the “new world” all that changes. In many instances, payments are linked to quality measures. So, for example, physician groups or integrated health systems may be subject to penalties or earn bonuses depending on how “their” patients do. Too many readmissions? Penalty. Excellent blood pressure control? Bonus. Simple enough in theory but complicated in practice.
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Guide for the Perplexed

It is clear that the way that health care gets paid for in the United States is undergoing rapid change. What is not at all clear, at least not to me, is exactly what the payment model will look like in the future, or how far off that future is. Although everybody agrees with Yogi’s assessment that “it’s tough to make predictions, especially about the future,” this exercise seems particularly challenging because of the wide variety of “alternative payment models,” likelihood that they will co-exist, and the prevalence of regional differences.

It is because of this complexity that I found a recent paper in the Annals of Internal Medicine to be helpful. It is a simple “field guide” to different payment models that starts with distinguishing the “unit of payment” (e.g., per unit of time, per episode of care, per beneficiary, etc.) and then uses these to review efforts at payment reform over time.

I found this helpful in keeping all of these things straight in my head, and I liked the way it started from “first principles.” I think it is worth the read.

What do you think?