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6 Ways Current Healthcare Spending Measurements Unfairly Penalize Physicians


Healthcare spending measures are increasingly being used to reward or penalize physicians, hospitals, and other providers, but there are 6 fundamental problems with the current system.

Healthcare spending measures are increasingly being used to reward or penalize physicians, hospitals, and other providers, but there are 6 fundamental problems with the current system, according to a new report.

The Center for Healthcare Quality & Payment Reform’s Measuring and Assigning Accountability for Healthcare Spending report explains how problems with these spending measures could harm both patients and healthcare providers.

to author Harold D. Miller, the Center’s president and chief executive officer

The methodologies for attribution and risk adjustment are unfair for evaluating providers, according . In addition, they could potentially cause problems for efforts to improve patient care quality.

Not only are providers being held accountable for aspects of spending they have no control over, but they are being unfairly penalized for patient care.

“Providers can be inappropriately penalized for caring for sicker patients and for providing the services needed to achieve better health outcomes for their patients,” Miller wrote.

The 6 fundamental problems he identified are:

1. Many patients and the spending on their care are not assigned to any provider

This can cause distortions in comparisons of spending between providers and creates perverse incentives as providers could be penalized for keeping patients healthy and the patients most in need of care coordination will be excluded.

2. Providers cannot control all of the services and spending assigned to them

Most spending attributed to physicians results from services delivered by other physicians, according to Miller. Since physicians can be assigned accountability for services a patient received before the physician became involved in care, there is incentive not to become involved with costly patients.

3. Providers are not attributed the spending for many services they provide

The physician who treats a preventable condition, such as a hospital-acquired infection, may be assigned the spending for the care instead of the provider who caused the condition. Miller also pointed out that since total spending frequently excludes prescription medications, patients who use more drugs, but fewer services will appear artificially lower.

4. Spending measures do not distinguish appropriateness of services

A provider who delivers recommended services could have higher spending than one who delivers less expensive, but inappropriate services, or one who fails to deliver the recommended services.

5. Risk adjustment systems do not adequately adjust for patient needs

Systems that predict spending on care without adjusting for differences in patient needs cause physicians to focus spending reduction efforts on the wrong patients. In addition, patients who need different kinds of services from physicians in different specialties are assigned the same risk score. As a result, spending comparisons are distorted.

6. Inadequate adjustments are made for structural differences in costs

Most systems make few, if any, adjustments for the fact that providers in rural areas and poor communities incur higher costs to deliver the same services, which penalizes them for factors outside of their control.

As an example, Miller considered a hypothetical patient who, over the course of a year, sees 2 primary care physicians, a cardiologist, a neurosurgeon, a gastroenterologist, goes to a skilled nursing facility, and is admitted to the hospital. The individual components of spending should be assigned to each physician who controls each service.

However, under the current system, the second primary care physician could have all services, unfairly, attributed to him or her.

“Pay for performance and shared savings programs based on spending measures not only fail to resolve the barriers to change created by fee-for-service payment, they can further discourage action by penalizing providers based on flawed systems of assigning accountability,” Miller concluded.

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