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BLOG: Fee-for-Service Reimbursement - The End is Near?

From international law firm Arnold & Porter LLP comes timely views on current regulatory and legislative topics that weigh on the minds of today’s physicians and health care executives.

On March 4, the National Commission on Physician Payment Reform (NCPPR) released its final recommendations for reining in healthcare spending. Sponsored by the Society of General Internal Medicine (SGIM) and the Robert Wood Johnson Foundation (RWJF), the NCPPR is an independent commission created “to assess how physicians are paid, and how pay incentives are linked to patient care.”

 

After a year of study and deliberation, the NCPPR identified twelve recommendations to address systemic and Medicare-specific issues in today’s prevailing physician reimbursement models. The NCPPR’s recommendations, which are intended to provide a five-year blueprint for transitioning away from a fee-for-service reimbursement system, tackle several of the most hotly debated government reimbursement issues, such as:

• Payers should largely eliminate stand-alone fee-for-service payment to medical practices because of its inherent inefficiencies and problematic financial incentives.
• At the federal level, the Sustainable Growth Rate (SGR) should be eliminated. The SGR’s repeal 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.

Other recommendations include:

• The transition to an approach based on quality and value should start with the testing of new models of care over a five-year time period, incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade.
• 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.
• 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.
• Higher payment for facility-based services that can be performed in a lower-cost setting should be eliminated.
• Fee-for-service contracts should always incorporate quality metrics into the negotiated reimbursement rates.
• 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.
• 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.
• 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.
• The Relative Value Scale Update Committee 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.

The NCPPR is chaired by Dr. Steven Schroeder, a professor of health and healthcare at the University of California, San Francisco. Former Senate Majority Leader Bill Frist (R-Tenn.) is the group’s honorary chairman.

Ted Lotchin, JD, MPH, can be reached at Arnold & Porter LLP, 555 12th St. NW, Washington, DC 20004-1206; 202-942-5250; email: Ted.Lotchin@aporter.com