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.

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.

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.

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.

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.

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.

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.

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.

Home Health Use In Medicare Advantage Compared To Use In Traditional Medicare.

Medicare covers home health benefits for homebound beneficiaries who need intermittent skilled care. While home health care can help prevent costlier institutional care, some studies have suggested that traditional Medicare beneficiaries may overuse home health care. This study compared home health use in Medicare Advantage and traditional Medicare, as well as within Medicare Advantage by beneficiary cost sharing, prior authorization requirement, and plan type. In 2016 Medicare Advantage enrollees were less likely to use home health care than traditional Medicare enrollees were, had 7.1 fewer days per home health spell, and were less likely to be admitted to the hospital during their spell. Among Medicare Advantage plans, those that imposed beneficiary cost sharing or prior authorization requirements had lower rates of home health use. Qualitative interviews suggested that Medicare Advantage payment and contracting approaches influenced home health care use. Therefore, changes in traditional Medicare home health payment policies implemented in 2020 may reduce these disparities in home health use and spell length.

Can Insurance Market Competition Coexist With Provider Price Regulation? Evidence From Medicare Advantage.

Proposals to contain health care costs often draw from 1 of 2 primary policy approaches-price regulation or market competition. These approaches are often viewed as in conflict, even though some health economists have long argued that they may be compatible, and desirable, given the unique characteristics of health care markets. Medicare Advantage (MA) markets provide a real-world example supporting the view that provider price regulation and insurance market competition can be complementary.

Improving The Medicare Physician Fee Schedule: Make It Part Of Value-Based Payment.

Alternative Payment Models (APMs) can address the limitations inherent in fee-for-service payment to support new approaches to health care delivery that produce greater value. But the models being tested are directly layered on top of fee-for-service architecture, specifically the Medicare Physician Fee Schedule. Shoring up that architecture to produce greater value, in combination with APMs, should be considered an integral part of the movement to value-based payment. We propose ending the split within the Centers for Medicare and Medicaid Services between the people managing the Medicare Physician Fee Schedule and those creating and testing APMs, with both groups advised by a revamped Physician-Focused Payment Model Technical Advisory Committee that covers both dimensions of creating greater value.

Payment Innovations To Improve Diagnostic Accuracy And Reduce Diagnostic Error.

Diagnostic accuracy is essential for treatment decisions but is largely unaccounted for by payers, including in fee-for-service Medicare and proposed Alternative Payment Models (APMs). We discuss three payment-related approaches to reducing diagnostic error. First, coding changes in the Medicare Physician Fee Schedule could facilitate the more effective use of teamwork and information technology in the diagnostic process and better support the cognitive work and time commitment that physicians make in the quest for diagnostic accuracy, especially in difficult or uncertain cases. Second, new APMs could be developed to focus on improving diagnostic accuracy in challenging cases and make available support resources for diagnosis, including condition-specific centers of diagnostic expertise or general diagnostic centers of excellence that provide second (or even third) opinions. Performing quality improvement activities that promote safer diagnosis should be a part of the accountability of APM recipients. Third, the accuracy of diagnoses that trigger APM payments and establish payment amounts should be confirmed by APM recipients. Implementation of these multipronged approaches can make current payment models more accountable for addressing diagnostic error and position diagnostic performance as a critical component of quality-based payment.

Paying hospital specialists: Experiences and lessons from eight high-income countries.

Payment systems for specialists in hospitals can have far reaching consequences for the efficiency and quality of care. This article presents a comparative analysis of payment systems for specialists in hospitals of eight high-income countries (Canada, England, France, Germany, Sweden, Switzerland, the Netherlands, and the USA/Medicare system). A theoretical framework highlighting the incentives of different payment systems is used to identify potentially interesting reform approaches. In five countries,most specialists work as employees - but in Canada, the Netherlands and the USA, a majority of specialists are self-employed. The main findings of our review include: (1) many countries are increasingly shifting towards blended payment systems; (2) bundled payments introduced in the Netherlands and Switzerland as well as systematic bonus schemes for salaried employees (most countries) contribute to broadening the scope of payment; (3) payment adequacy is being improved through regular revisions of fee levels on the basis of more objective data sources (e.g. in the USA) and through individual payment negotiations (e.g. in Sweden and the USA); and (4) specialist payment has so far been adjusted for quality of care only in hospital specific bonus programs. Policy-makers across countries struggle with similar challenges, when aiming to reform payment systems for specialists in hospitals. Examples from our reviewed countries may provide lessons and inspiration for the improvement of payment systems internationally.

A Physician's Perspective On Vertical Integration.

Vertical integration has been a central feature of health care delivery system change for more than two decades. Recent studies have demonstrated that vertically integrated health care systems raise prices and costs without observable improvements in quality, despite many theoretical reasons why cost control and improved quality might occur. Less well studied is how physicians view their newfound partnerships with hospitals. In this article I review literature findings and other observations on five aspects of vertical integration that affect physicians in their professional and personal lives: patients' access to physicians, physician compensation, autonomy versus system support, medical professionalism and culture, and lifestyle. I conclude that the movement toward physicians' alignment with and employment in vertically integrated systems seems inexorable but that policy should not promote such integration either intentionally or inadvertently. Instead, policy should address the flaws in current payment approaches that reward high prices and excessive service use-outcomes that vertical integration currently produces.

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.