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Physicians will be paid differently
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Health care spending in the United States is approaching $3 trillion annually. There is a high probability there will be additional increases in the total spending related to the number of patients covered, consequences of an aging population living longer and the additional coverage mandates under the Affordable Care Act.
Politicians and policymakers have been resistant to any significant reductions in existing health care entitlements to deal with the escalating costs. To date, there has been limited debate that has involved the stakeholders in any meaningful way.
National Commission
The current proposed thinking and direction for the implementation of the Affordable Care Act involves instituting a change in physician incentives as the major effort and basis to reduce future costs of health care. These proposed changes in physician pay incentives will fall heavily on physician health care providers and occur in conjunction with continued price controls, decreasing reimbursements and subtle rationing.
The National Commission on Payment Reform, led by honorary chairman, former Senate Majority Leader Bill Frist, MD, (R-Tenn.), was comprised of select physicians — not representative of the large number of practicing physicians — health care policy, delivery and payment experts. The commission was charged to create new physician payment systems in which “the incentives would yield better results for both payers and patients.” The bottom line from the 14-member commission was the recommendation to transition away from the current fee-for-service model during the next 5 years to 7 years.
Douglas W. Jackson
The commission postulated that health care costs could not be controlled unless physician payment incentives were changed. According to the report, “While physician fees and salaries and related expenses account for 20% of health care spending, the decisions they make influence an additional 60% of spending.” The report then continues that “the ways in which physicians are compensated focuses on the incentives of fee-for-service payment results in more expensive care.” In the end, the commission recommended that a fixed payment mechanism, such as capitation and bundling of fees, has potential to promote more prudent, high-value health care.
Basic recommendations
While the commission recognized that the fee-for-service model will remain relevant for some time, they strongly proposed that other payment models should evolve in this decade. Other recommendations pursued fixed payment models for evaluation and management services. In addition, during the proposed transition, efforts to reduce the differences in the payment of specialists in relation to primary care physicians were recommended.
Additional recommendations proposed altering payments within the Medicare program. The commission proposed changing physician payments and the current relationship to the use of Medicare services. They supported the effort for more “evidence-based and utilization of expert processes to validate services.” They proposed a physician payment system that drives higher quality and more cost-effective care and helps improve not only individual health, but also that of the United States. Exactly how this may work nationally based on existing data and models were not included in the report. Regardless of whether an orthopedic surgeon is currently salaried or in a fee-for-service model, it is worth the time to read the report.
Accountable era of medicine
Fee-for-service medicine was being challenged before the commission released their report in March. Progressive declines in reimbursements and increased overhead costs have made running private practices more difficult. The increasing hassle factors such as compliance issues, present more frequent audits and challenges to private practices. Yet, all of the commission’s suggestions to control costs do not take into account the increasing costs and benefits paid to hospitals, insurance companies and their administrators and executives.
Policymakers and politicians seem to overlook the fact that a major driver of health care cost is illness from behavioral choices. Currently, the patient is the one person who is shielded from controlling health care costs. Patients need to have incentives to be accountable for their unhealthy lifestyles and equally participate in good outcomes and cost-saving decisions. It is more difficult when physicians are the only ones held accountable. The health care system will have great difficulty in reaching its goals when patients are not allowed to reap the financial benefits or pay the financial costs of their choices.
One difference of the 1990s-style HMOs that focused on reducing costs and the new accountable care organization (ACO) payment model of today is that participating physicians are not eligible to keep the savings from lowered costs. There are some yet-to-be defined methodologies in which there can be some sharing of savings if the physicians achieve measurable quality improvements and outcomes. In the 1990s, quality and outcome measures were not available, but I remain skeptical if they can be used in their current status to incentivize and reward physicians.
Limited data and longer-term results of the pilot studies for both private and public ACOs have had mixed results on sustained savings. The few studies that have shown savings in health care costs over a 5-year period have had critics state that their limited success may not be adaptable to a national level. Building on the few ACO successes that have rewarded low-cost innovation has placed us on course for an expanded large national experiment.
One can talk of quality care, improved outcomes and better results, but unless rationing and decreased reimbursements are part of the mix, I doubt there will be any reversal of escalating health care costs. My concern remains that physicians will find that the new incentives based heavily on measurable outcomes may challenge the sacred physician-patient relationship. This relationship involves human interactions and may not fit well into a standardized system.
When I entered private practice 40 years ago, some policymakers and physicians told me there was less than 20 years left for fee-for-service medicine in the United States. I was not deterred and have had a satisfying career caring for patients. There have been changes occurring over the years. After 1992 and 20 years of practice, my take-home income for the same workload saw a steady decline. It decreased by 50% for patient care during the following 20 years. Even with governmental mandates, regulations and oversight, I remain of the opinion that it will take much longer than is being proposed to eliminate every role for the fee-for-service model as a mode of payment in the United States.
Eliminating fee-for-service medicine
During the next 5 years to 7 years, we will see shifts towards fixed payment and possibly even further movement toward a single payer model (see my Commentary “Health care is moving toward a single-payer system, April 2013). Physicians are anticipating these changes and will make it happen faster by electing to move quickly to salaried positions. We have seen this transition play out in other countries, primarily in Europe and Canada. Physicians there have evolved to basically salaried models and have seen decreased income.
However, whenever there is a large government takeover action that changes incentives and the economy, impacted individuals develop opposite and different reactions and variations by bringing forward alternative solutions to varying degrees. The proposed new system to get away from the current fee-for-service model does not include patient incentives and an uncoupling from the third party. The actual costs are sheltered from the patient who should see benefits or incentives to use fewer resources as part of a solution. There are strong proposals for controlling and incentivizing physician behavior and much less attention has been paid to the insurance companies, hospitals and other special interests impacting policy and increasing the costs of health care.