Developing a Viable Alternative to Medicare's Physician Payment Strategy

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The Issue

Medicare employs a two-part system for reimbursing physicians on a fee-for-service basis: the resource-based relative value scale, which estimates the effort and expenses required to treat patients, and the sustainable growth rate (SGR) formula, which attempts to tie the growth of physicians’ payments to growth in the economy. Neither appears to be working as intended. Congress is now considering legislation that would incentivize physicians to improve quality and lower costs.

Medicare employs a two-part system for reimbursing physicians on a fee-for-service basis: the resource-based relative value scale, which estimates the effort and expenses required to treat patients, and the sustainable growth rate (SGR) formula, which attempts to tie the growth of physicians’ payments to growth in the economy. Neither appears to be working as intended. Congress is now considering legislation that would incentivize physicians to improve quality and lower costs.

What the Study Found

In a Commonwealth Fund–supported Web First article in Health Affairs, author Gail Wilensky observes the growing bipartisan congressional agreement on some of the elements a physician payment reform strategy should include. Two current proposals call for a replacement of the SGR with value-oriented payment systems that tie payment to performance and for participation in alternative health care delivery systems.

In reviewing pilot programs that are already experimenting with new ways to organize or pay physicians—like patient-centered medical homes, accountable care organizations (ACOs), and bundled payment—Wilensky finds inconsistent results. Most medical home pilots have found modest savings at best, she notes, and the Pioneer ACO project, developed by the Centers for Medicare and Medicaid Services (CMS), has exhibited uneven performance. The bundling pilots under the CMS Innovation Center all use hospitals as the focal point, adding to a shift in power in favor of hospitals.


Conclusions

The CMS Innovation Center should test other payment strategies directed toward physicians that are outside the hospital bundled payment, Wilensky suggests. In addition, she finds the bipartisan, bicameral congressional proposal promising, saying it would “move Medicare’s reimbursement for physicians away from a system that primarily rewards physicians for volume instead of value—that is, lower costs and improved quality.

 

Publication Details

Publication Date: December 11, 2013
Authors: Gail R. Wilensky
Summary Writer: Deborah Lorber
Citation:
G. R. Wilensky, "Developing a Viable Alternative to Medicare's Physician Payment Strategy," Health Affairs Web First, published online Dec. 11, 2013.
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