Enhancing Primary Care Payments Without Adding Financial Risk.

The delivery of primary healthcare in the USA is threatened on multiple fronts. To preserve and strengthen this critical part of the healthcare delivery system, a rapid and broadly accepted change in the basic payment strategy is needed. This paper describes the changes in the delivery of primary health services that demand additional population-based funding and the need to provide sufficient funding to sustain direct provider-patient interaction. We additionally describe the merits of a hybrid payment model that continues to include some level of fee-for-service payment and point to the pitfalls of imposing substantial financial risk on primary care practices, particularly small- and medium-sized primary care practices lacking the financial reserves to sustain monetary losses.

Medicare's Stewardship Role to Improve Care Delivery: Opportunities for the Biden Administration.

Medicare initiatives have been instrumental in improving care delivery and payment as exemplified by its role in broadly expanding the use of telehealth during the COVID-19 pandemic. Medicare innovations have been adopted or adapted in Medicaid and by private payers, while Medicare Advantage plans successfully compete with traditional Medicare only because their payment rates are tied by regulation to those in the traditional Medicare program. However, Medicare has not succeeded in implementing new, value-based payment approaches that also would serve as models for other payers, nor has Medicare succeeded in improving quality by relying on public reporting of measured performance. It is increasingly clear that burdensome attention to measurement and reporting distracts from what could be successful efforts to actually improve care through quality improvement programs, with Medicare leading in partnership with providers, other payers, and patients. Although Congress is unlikely to adopt President Biden's proposals to decrease the eligibility age for Medicare or to adopt a public option based on Medicare prices and payment methods in the marketplaces, the Biden administration has an opportunity to provide overdue, strategic direction to the pursuit of value-based payments and to replace failed pay-for-performance with provider-managed projects to improve quality and reduce health disparities.

The Medicare Physician Fee Schedule and Unethical Behavior.

This Viewpoint discusses the Medicare Physician Fee Schedule and its flaws, including how they might be remedied by severing CMS dependence on Relative Value Update Committee estimates of time and intensity.

Statewide Payment and Delivery Reform: Do States Have What It Takes?

States' role in payment as well as coverage will be subject to debate as the administration and the Congress decide how to address the Affordable Care Act (ACA) and otherwise reshape the nation's health policies. Acting as stewards of health care for the entire state population and stimulated by concern about rising costs and federal support under the ACA, the elected and administrative leaders of some states have been using their political influence and authority to improve their state's overall systems of care regardless of who pays the bill. In early 2015 we conducted on-site interviews with key stakeholders in five states to explore their strategies for payment and delivery reform. We found that despite these states' similar goals, differences in their statutory authority and purchasing power, along with their leaders' willingness to use them, significantly influence a state's ability to achieve reform objectives. We caution federal and state policy makers to recognize the reality that state leaders' political desire to exercise stewardship may not be enough to achieve it.

Addressing Pricing Power in Integrated Delivery: The Limits of Antitrust.

Prices are the major driver of why the United States spends so much more on health care than other countries do. The pricing power that hospitals have garnered recently has resulted from consolidated delivery systems and concentrated markets, leading to enhanced negotiating leverage. But consolidation may be the wrong frame for viewing the problem of high and highly variable prices; many "must-have" hospitals achieve their pricing power from sources other than consolidation, for example, reputation. Further, the frame of consolidation leads to unrealistic expectations for what antitrust's role in addressing pricing power should be, especially because in the wake of two periods of merger "manias" and "frenzies" many markets already lack effective competition. It is particularly challenging for antitrust to address extant monopolies lawfully attained. New payment and delivery models being pioneered in Medicare, especially those built around accountable care organizations (ACOs), offer an opportunity to reduce pricing power, but only if they are implemented with a clear eye on the impact on prices in commercial insurance markets. This article proposes approaches that public and private payers should consider to complement the role of antitrust to assure that ACOs will actually help control costs in commercial markets as well as in Medicare and Medicaid.

Structuring payment to medical homes after the affordable care act.

The Patient-Centered Medical Home (PCMH) is a leading model of primary care reform, a critical element of which is payment reform for primary care services. With the passage of the Affordable Care Act, the Accountable Care Organization (ACO) has emerged as a model of delivery system reform, and while there is theoretical alignment between the PCMH and ACOs, the discussion of physician payment within each model has remained distinct. Here we compare payment for medical homes with that for accountable care organizations, consider opportunities for integration, and discuss implications for policy makers and payers considering ACO models. The PCMH and ACO are complementary approaches to reformed care delivery: the PCMH ultimately requires strong integration with specialists and hospitals as seen under ACOs, and ACOs likely will require a high functioning primary care system as embodied by the PCMH. Aligning payment incentives within the ACO will be critical to achieving this integration and enhancing the care coordination role of primary care in these settings.

The Road To Value Can't Be Paved With A Broken Medicare Physician Fee Schedule.

Value-based payment has been promoted for increasing quality, controlling spending, and improving patient and practitioner experience. Meanwhile, needed reforms to fee-for-service payment (the Medicare Physician Fee Schedule) have been ignored as policy makers seek to move payment toward alternatives, even though the fee schedule is an intrinsic part of Alternative Payment Models. In this article, we show how value-based payment and the fee schedule should be viewed as complementary, rather than as separate silos. We trace the origins of embedded flaws in the fee schedule that must be fixed if value-based payment is to succeed. These include payment distortions that directly compromise value by overpaying for certain procedures and imaging services while underpaying for services that add value for beneficiaries. We also show how the fee schedule can accommodate bundled payments and population-based payments that are central to Alternative Payment Models. We draw two conclusions. First, the Centers for Medicare and Medicaid Services should correct misvalued services and establish a hybrid payment for primary care that blends fee-for-service and population-based payment. Second, Congress should alter the thirty-five-year-old statutory basis for setting Medicare fees to allow CMS to explicitly consider policy priorities such as workforce shortages in refining fee levels.

Variation in processes of care for total hip arthroplasty across high-income countries.

Total hip arthroplasty (THA) is among the most commonly performed elective surgeries in high-income countries, and wait times for THA have frequently been cited by US commentators as evidence that countries with universal insurance programs or national health systems "ration" care. This novel qualitative study explores processes of care for hip replacement in the United States and 6 high-income countries with a focus on eligibility, wait times, decision-making, postoperative care, and payment policies. We found no evidence of rationing or government interference in decision-making across high-income countries. Compared with the 6 other high-income countries in our study, the United States has developed efficient care processes that often allow for a same-day discharge. In contrast, THA patients in Germany stay in the hospital 7-9 days and receive 2-3 weeks of inpatient rehabilitation. However, the payment per THA in the United States remains far above other countries, despite far fewer inpatient days.

Clarifying sources of geographic differences in Medicare spending.

BACKGROUND: Although geographic differences in Medicare spending are widely considered to be evidence of program inefficiency, policymakers need to understand how differences in beneficiaries' health and personal characteristics and specific geographic factors affect the amount of Medicare spending per beneficiary before formulating policies to reduce geographic differences in spending. METHODS: We used Medicare Current Beneficiary Surveys from 2000 through 2002 to examine differences across geographic areas (grouped into quintiles on the basis of Medicare spending per beneficiary over the same period). We estimated multivariate-regression models of individual spending that included demographic and baseline health characteristics, changes in health status, other individual determinants of demand, and area-level measures of the supply of health care resources. Each group of variables was entered into the model sequentially to assess the effect on geographic differences in spending. RESULTS: Unadjusted Medicare spending per beneficiary was 52% higher in geographic regions in the highest spending quintile than in regions in the lowest quintile. After adjustment for demographic and baseline health characteristics and changes in health status, the difference in spending between the highest and lowest quintiles was reduced to 33%. Health status accounted for 29% of the unadjusted geographic difference in per-beneficiary spending; additional adjustment for area-level differences in the supply of medical resources did not further reduce the observed differences between the top and bottom quintiles. CONCLUSIONS: Policymakers attempting to control Medicare costs by reducing differences in Medicare spending across geographic areas need better information about the specific source of the differences, as well as better methods for adjusting spending levels to account for underlying differences in beneficiaries' health measures.

Beyond demonstrations: implementing a primary care hybrid payment model in Medicare.

The National Academies of Sciences, Engineering, and Medicine's (NASEM's) 2021 report on primary care called for a hybrid payment approach-a mix of fee-for-service and population-based payment-with performance accountability to strike the proper balance for desired practice transformation and to support primary care's important and expanding role. The NASEM report also proposed substantial increases to primary care payment and reforms to the Medicare Physician Fee Schedule. This paper addresses pragmatic ways to implement these recommendations, describing and proposing solutions to the main implementation challenges. The urgent need for primary care payment reform calls for adopting a hybrid model within the Medicare fee schedule rather than engaging in another round of demonstrations, despite legal and practical obstacles to adoption. The paper explores reasons for adopting a roughly 50:50 blend of fee-for-service and population-based payment and addresses other design features, presenting reasons why spending accountability should rely on utilization measures under primary care control rather than performance on total cost of care, and proposes a fresh approach to quality, emphasizing that quality measures should be parsimonious, focused on important outcomes with demonstrated quality improvement.

Association of Commercial-to-Medicare Relative Prices With Health System Financial Performance.

Importance: Various studies have documented the rise in commercial insurance prices during the past 2 decades; however, estimates on the association of rising costs with health systems' financial health are lacking. This study calculated 2 measures from standardized Audited Financial Statements (AFSs)-operating margins and days of unrestricted cash on hand-to explore the associations. Objective: To estimate the association between health systems' financial condition and the ratio of commercial to Medicare relative prices. Design, Setting, and Participants: This cross-sectional analysis combined standardized 2018 AFSs from a large sample of US health systems with publicly available relative price data to assess the association between their financial outcomes and commercial-to-Medicare relative inpatient prices. The 2018 AFSs were collected and standardized from a convenience sample of multihospital health systems and single hospitals that were included in round 4 of the RAND Hospital Price Transparency Study. Cross-sectional, multivariate regression models were estimated, controlling for payer mix and other system characteristics, and models were weighted by health systems' 2018 adjusted admissions. The analyses were conducted July 2021 through November 2022. Exposures: The commercial-to-Medicare relative price for inpatient services (2018-2020 pooled average), which represents the average amount paid by commercial plans as a percentage of what Medicare would have paid to the same health system for the same services. Main Outcomes and Measures: Operating margins and days cash on hand, which capture complementary aspects of financial performance (profitability and liquidity). Results: The study sample included 156 health systems in the US, representing diverse geography, size, and ownership type. Mean (SD) days cash on hand were 180.1 (113.3) and operating margins were 3.3% (3.6%) in 2018. Overall, a 1-unit increase in the commercial-to-Medicare relative price ratio was associated with a 21.3% (95% CI, 21.3% to 21.4%; P < .001) increase in days cash on hand and a 2.7 (95% CI, 2.7 to 2.7; P < .001) percentage point increase in average operating margins. Higher Medicaid payer mix share was associated with fewer days cash on hand (-3.3%; 95% CI, -3.3% to -3.3%; P < .001) and lower operating margins (-0.081; 95% CI, -0.082 to -0.081; P < .001). Conclusions and Relevance: This cross-sectional study of health system financial data found that higher commercial-to-Medicare relative prices and a lower Medicaid payer share were associated with higher profits and more days cash on hand. These findings provide evidence against the claim that relatively higher commercial prices are primarily used to offset losses from public payers rather than to increase profits and liquidity.

How Price Regulation Is Needed To Advance Market Competition.

In US health policy, conventional wisdom holds that market competition and price regulation are mutually exclusive strategies to stem high and rising provider prices. This incorrect assumption centers on the belief that robust competition in US commercial health insurance markets must include provider price competition. Other developed countries, however, commonly implement price regulation to support competition over important care delivery components other than prices, including quality of care and patient choice, and to provide stronger incentives for providers to improve operating efficiency. Conventional US policy wisdom also holds that price regulation inevitably will fail because of excessive complexity or succumb to the interests of regulated entities. This analysis challenges conventional wisdom by urging policy makers to consider regulations that limit out-of-network provider prices and establish flexible hospital budgets. Each of these proposals would require less administrative complexity and burden than other proposed approaches. We conclude that it is time to move discussions from whether to regulate hospital prices to determining how best to do so.

How Denmark, England, Estonia, France, Germany, and the USA Pay for Variable, Specialized and Low Volume Care: A Cross-country Comparison of In-patient Payment Systems.

BACKGROUND: Diagnosis-related group (DRG)-based hospital payment can potentially be inadequately low (or high) for highly variable, highly specialized, and/or low volume care. DRG-based payment can be combined with other payment mechanisms to avoid unintended consequences of inadequate payment. The aim of this study was to analyze these other payment mechanisms for acute inpatient care across six countries (Germany, Denmark, England, Estonia, France, the United States [Medicare]). METHODS: Information was collected about elements excluded from DRG-based payment, the rationale for exclusions, and payment mechanisms complementing DRG-based payment. A conceptual framework was developed to systematically describe, visualise and compare payment mechanisms across countries. RESULTS: Results show that the complexity of exclusion mechanisms and associated additional payment components differ across countries. England and Germany use many different additional mechanisms, while there are only few exceptions from DRG-based payment in the Medicare program in the United States. Certain areas of care are almost always excluded (eg, certain areas of cancer care or specialized pediatrics). Denmark and England use exclusion mechanisms to steer service provision for highly complex patients to specialized providers. CONCLUSION: Implications for researchers and policy-makers include: (1) certain areas of care might be better excluded from DRG-based payment; (2) exclusions may be used to incentivize the concentration of highly specialized care at specialized institutions (as in Denmark or England); (3) researchers may apply our analytical framework to better understand the specific design features of DRG-based payment systems.

Use of physicians' services under Medicare's resource-based payments.

BACKGROUND: In 1992, Medicare implemented the resource-based relative-value scale, which established payments for physicians' services based on relative costs. We conducted a study to determine how the use of physicians' services changed during the first decade after the implementation of this scale. METHODS: With the resource-based relative-value scale, Medicare payments are based on the number of relative-value units (RVUs) assigned to physicians' services. The total number of RVUs reflects the volume of physicians' work (the time, skill, and training required for a physician to provide the service), practice expenses, and professional-liability insurance. Using national data from Medicare on physicians' services and American Medical Association files on RVUs, we analyzed the growth in RVUs per Medicare beneficiary from 1992 to 2002 according to the type of service and specialty. We also examined this growth with respect to the quantity and mix of services, revisions in the valuation of RVUs, and new service codes. RESULTS: Between 1992 and 2002, the volume of physicians' work per Medicare beneficiary grew by 50%, and the total RVUs per Medicare beneficiary grew by 45%. The quantity and mix of services were the largest sources of growth, increasing by 19% for RVUs for physicians' work and by 22% for total RVUs. Our findings varied among services and specialties. Revised valuation of RVUs was a key source of the growth in RVUs for physicians' work and total RVUs for evaluation and management and for tests. New service codes were the largest drivers of growth for major procedures (accounting for 36% of the growth in RVUs for physicians' work and 35% of the growth in total RVUs), and the quantity and mix of existing services were the largest drivers of growth for imaging. The growth in RVUs for physicians' work was greatest in cardiology (114%) and gastroenterology (72%). The total growth in RVUs was greatest in cardiology (99%) and dermatology (105%). CONCLUSIONS: In the first 10 years after the implementation of the resource-based relative-value scale, RVUs per Medicare beneficiary grew substantially. The leading sources of growth varied among service types and specialties. An understanding of these sources of growth can inform policies to control Medicare spending.