Proposed Hybrid Blended Reimbursement Model

A NEW PHYSICIAN PAYMENT SYSTEM TO SUPPORT HIGHER QUALITY,
LOWER COST CARE THROUGH A PATIENT-CENTERED MEDICAL HOME

May 2007

• Our current U.S. healthcare system is characterized by unsustainable cost growth and the presence of significant quality gaps. Healthcare costs are growing faster than the economy and healthcare outcomes in the United States contrast poorly with those of other industrial countries, despite the highest level of spending.

• One of the major reasons why high health care expenditures are not achieving better value is that traditional Fee-for-Service payment rewards piecemeal work and “volume” of services rather than prevention of illness and coordination of care. The more procedures a physician performs, and the higher the value of the procedure, the more the physician is paid.

• A better payment system is needed that aligns incentives for care that is coordinated by a personal physician through a Patient-Centered Medical Home (PCMH), a type of care that research shows is of higher quality and lower cost.

• A PCMH is a physician practice that has gone through a voluntary qualification process to demonstrate that it has the following characteristics and capabilities needed to effectively partner with patients to provide patient-centered care:

• a personal physician who is accountable for taking care of all of a patient’s health care needs;

• collaboration with multi-disciplinary teams of physicians, nurses, caregivers, and other health professionals, both within a practice and through coordination of care with health professionals in the community, to assure that all of the patient’s needs are met;
  
  • health information technologies to facilitate access to services and coordination and sharing of information among health professionals, care givers and sites of service;
  • transparency and accountability for achieving better results through reporting on evidence-based measures of care.

• A better payment model designed to support care provided through a PCMH would:
  
  • Pay physicians for the time spent to coordinate care with family caregivers and other health professionals that is separate from--and in addition to--the work included in a face-to-face encounter..
  • Create financial incentives for physicians to acquire and use health information technologies—such as patient registry systems, secure email, evidence-based clinical decision support, and electronic health records--to achieve better outcomes.
  • Result in a higher payments to primary care physicians based on achieving better outcomes and reducing total health care spending through a PCMH. Such payments should: recognize the time and expenses incurred in delivering patient-centered care through a medical home, be sufficient to address long-standing payment inequities that undervalue primary care, recognize the potential savings (such as preventing avoidable hospital admissions/ emergency room visits of patients with chronic illnesses) that can be achieved through effective care coordination by physicians, and include rewards based on performance.
  • Provide accountability and transparency for achieving better results by linking a portion of payments to reporting on evidence-based measures of care.

• The most effective way to re-align payment incentives to support the PCMH would be to combine traditional fee-for-service for office visits with a three part model that includes:

• A monthly care coordination payment (“bundled care coordination fee”) for the physician work that falls outside of a face-to-face visit and for the heath information technologies needed to achieve better outcomes. Bundling of services into a monthly fee removes volume- based incentives and promotes efficiency. The prospective nature of the payment recognizes the up-front costs to maintain the required level of care. Care coordination payments should be risk-adjusted to ensure that there are no inherent incentives to avoid the treatment of the more complex, costly patients.
  
  • A visit-based fee-for-service component that recognizes visit-based services that are currently paid under the present fee-for-service payment system and maintains an incentive for the physician to see the patient in an office-visit when appropriate.
  • A performance-based component that recognizes achievement of quality and efficiency goals.

This new PCMH payment framework will result in better value—defined as better outcomes at less cost—for patients and consumers and for the employers and governments that purchase health care on their behalf. It will result in better value by recognizing the higher quality and cost-savings associated with having a primary care physician who is accountable for a patient’s whole health, by rewarding physicians for prevention and coordination rather than volume of services, by facilitating the use of health information technologies to achieve better outcomes, and by introducing transparency and accountability for the care provided.