12 Recommendations for Payment Reform in Healthcare

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The National Commission on Physician Payment Reform has issued 12 recommendations for models to pay healthcare providers that maximize positive clinical outcomes, enhance patient satisfaction and physician autonomy and incentivize cost-effective care.

In an article published by The New England Journal of Medicine, two commissioners from the NCPPR call these recommendations "aggressive approaches" that provide a blueprint for healthcare payment reform. The article was penned by NCPPR Honorary Chair William Bill Frist, MD, and Chair Steven Schroeder, MD.

Here are the NCPPR's 12 recommendations that support a blueprint to reform healthcare payments.

1. Over time, payors should largely eliminate standalone fee-for-service payments to medical practices due to their inherent inefficiencies and problematic financial incentives. The model incentivizes increased volume and cost of services, encourages duplication, discourages care coordination and promotes inefficiency in care delivery.

2. The transition to value-based payments should begin by testing new models of care over a five-year period and incorporating them into more medical practices.
The goal here is broad adoption of these models by the end of the decade.

3. Fee-for-service payments should continue to be recalibrated. Even as the industry shifts to fixed payments, the fee-for-service model will remain important into the future and should be regularly assessed.

4. Fees for certain codes should be either increased or frozen. For Medicare and private insurers, fees should be increased for evaluation-and-management codes, which are currently undervalued. Fees for procedural diagnosis codes, which are generally overvalued and thus create incentives for overuse, should be frozen for three years.

5. Increased payments for facility-based services that can be provided in lower-cost settings should be eliminated.
There has been a trend in which payors reimburseme for medical services performed in facilities owned by hospitals at a higher rate than that for the same services provided in office settings. The authors cited the example of Medicare paying $450 for an echocardiogram performed in a hospital and only $180 for the same procedure performed in a physician's office.

6. Fee-for-service contracts should always include a component of quality or outcome-based performance reimbursement that is significant enough to motivate substantial change in behavior. The incentive inherent in fee-for-service payment arrangements to increase volume can be mitigated by incorporating quality metrics into the negotiated reimbursement rates.

7. Changes in fee-for-service reimbursement should encourage practices with fewer than five providers to form virtual relationships and share resources to increase quality of care. Fee-for-service payment should reimburse small practices for care that is not delivered in person (e.g., by telephone or email) and for coordination among providers, as well as allow for sharing of ancillary providers.

8. As the industry moves toward fixed payments, initial payment reforms should focus on areas that hold substantial potential for cost savings and better quality of care. A logical place to start is by changing how physicians are paid to deliver care to patients with multiple chronic conditions, including behavioral health disorders. These patients make up 5 percent of all patients but consume half the country's healthcare resources.

9. Measures should be put in place to safeguard access to high-quality care, assess the adequacy of risk-adjustment indicators and promote a strong physician-patient commitment.

10. Medicare's sustainable growth rate adjustment should be eliminated, as it "shows no prospect of ever working." The authors said "the practice of setting expenditure targets for one year and ignoring the consequences of exceeding them the next year makes no sense."

11.  Cost-saving measures to offset the elimination of the SGR should come not only from reduced physician payments but also from the Medicare program. CMS and the Medicare program should look for savings by reducing inappropriate utilization of Medicare services.

12. The Relative Value Scale Update Committee should continue making changes to become more representative of the medical profession and to make its decision-making more transparent. Also, CMS should develop additional open, evidence-based and expert processes beyond the recommendations of the Relative Value Scale Update Committee when establishing and updating RVUs. Critics contend that since nearly 90 percent of the RVU Update Committee's recommendations have historically been adopted by the CMS, it should be considered as a federal advisory committee and be subject to the sunshine requirements and oversight mandated by the Federal Advisory Committee Act. The committee is now managed by the American Medical Association.

More Articles on Payment Reform:

Study: Only 11% of Hospital, Physician Pay Tied to Performance
Value Over Volume — Healthcare's New Mindset
Report: 29 States Earn "F" in Healthcare Price Transparency



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