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12 Ways to Reform Physician Payment


A 14-member commission adopted 12 recommendations to reform the physician payment system in the U.S. so it drives higher quality and more cost-effective health care.

Despite the fact that health care spending per person is incredibly high in the U.S., the country is lagging behind other comparable nations in health care causing many in the industry to reform payment and increase quality of care. A recent commission of physicians from various specialties has adopted 12 recommendations to reform physician payment.

“We can’t control runaway medical spending without changing how doctors get paid,” former Sen. Majority leader Bill Frist, MD, said in a statement. “This is a bipartisan issue. We all want to get the most from our health care dollars, and that requires re-thinking the way we pay for health care.”

The commission focused so closely on physician payment because how health care providers are paid drives health care expenditures. In May 2012, the Kaiser Family Foundation reported that physician salary and related expenses accounted for 20% of health care spending in the U.S., but the decisions physicians make influences an additional 60% of spending.

“There is no question that we need to reform our physician payment system,” the commission wrote in its report. “Both private and public payers must take steps now to move the U.S. toward a physician payment system that drives higher quality and more cost-effective care, and helps improve not only individual health but that of the nation.

The 12 recommendations adopted by the 14-member commission fall under three categories.

Transition from fee-for-service

1. Eliminate stand-alone fee-for-service payments over time.

2. Transition to quality- and value-based approach with broad adoption at the end of 10 years.

3. While shifting to fixed-payment models, recalibrate fee-for-service payments to encourage behavior that improves quality and cost effectiveness.

Recalibration and advancement

4. Increase updates for evaluation and management codes while freezing updates for procedural diagnosis codes for three years.

5. Eliminate higher payments for facility-based services that can be performed in lower-cost settings.

6. Incorporate quality metrics in fee-for-service contracts.

7. Fee-for-service reimbursement should encourage practices will fewer than five physicians to form virtual relationships.

8. Focus fixed payments on areas with the potential for cost savings and higher quality.

9. Safeguard access to high quality care, assess adequacy of risk-adjustment indicators and promote commitment to patients.


10. Eliminate Sustainable Growth Rate (SGR)

11. Pay for SGR repeal with cost savings from Medicare program such as physician payment cuts and reductions in inappropriate utilization of Medicare services.

12. More transparent decision making and membership diversification from the Relative Value Scale Update Committee, as well as evidence-based processes to validate data and methods the Centers for Medicare and Medicaid uses to establish and update relative values.

For more information on each recommendation and to read the full report, click here.

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