Inside CMS's push to rebalance Medicare payments toward primary care

The country's underinvestment in primary care means missed opportunities to catch chronic disease early and help patients change unhealthy habits before those become costly, said the leader of Medicare's Innovation Center.

"We underinvest in primary care at the current prevailing payment rates," said Abe Sutton, director of the Center for Medicare and Medicaid Innovation (CMMI).

Sutton pointed to the health care system's reliance on a fee-for-service model tied to relative value units, or RVUs. The formula determines how much Medicare pays for a service based largely on the time, skill and resources it requires.

Meanwhile, the United States has a smaller supply of general practitioners than other countries in part because of how Medicare prices services, agreed Joe Albanese, director of policy for Medicare. The Centers for Medicare & Medicaid Services (CMS) calculates prices using cost data rather than the value a service delivers to patients, a practice that has "compounding impacts" on the primary care workforce over time, Albanese said.

Sutton and Albanese spoke during a conversation moderated by Shawn Martin, executive vice president and CEO of the American Academy of Family Physicians during the Primary Care for America event earlier this month. The Medicare leaders were tight-lipped about the draft 2027 Medicare Physician Fee Schedule that would be released later the same day. But they had plenty to say about Medicare and CMS’ role in the administration’s effort to Make America Healthy Again.

Fee schedule adjustments

CMS made three changes to the physician fee schedule over the past year to address what Albanese called big shortcomings.

First, the agency introduced an efficiency adjustment that acknowledges some complex surgical and specialty procedures become less time-consuming as technology and technique improve. Because the fee schedule operates under budget neutrality, payment increases in one area must be offset elsewhere. That change freed up funds that raised the overall conversion factor, the dollar figure used to calculate Medicare payments across the board, Albanese said.

Second, CMS revised how it calculates practice expenses to correct a system biased toward large hospital systems. The previous method had sometimes paid hospitals twice for indirect costs such as overhead and salaries, Albanese said, putting independent, non-hospital-based practices, including many primary care offices, at a disadvantage.

Third, the agency is moving away from outdated or limited survey data when setting prices for certain services, instead drawing on broader, more current sources. In some cases, it borrows figures from Medicare's outpatient hospital payment system, such as for radiation therapy, Albanese said.

A menu of care models

CMS offers a range of programs meant to give primary care practices options depending on how much financial risk they're willing to take on, said Sutton, whose office designs and tests voluntary payment and care models. Those include the AHEAD Model, short for Achieving Healthcare Efficiency through Accountable Design. It lets primary care practices in participating states receive a set per-patient payment, known as capitation, to invest in care upfront. Another is LEAD, the Long-term Enhanced ACO Design Model, the successor to CMS's ACO REACH model, which Sutton described as designed for organizations willing to take on the greatest share of financial risk in exchange for the greatest opportunity to invest in patient care.

Between those poles sit advanced primary care management codes, which let physicians bill for care coordination without taking on financial risk, and the Medicare Shared Savings Program, with tracks ranging from upside-only arrangements to a full-risk "enhanced" track. The menu is meant to fit practices where they are without becoming confusing, Sutton said.

He described speaking with a rural obstetrics and gynecology solo practice that closed because low reimbursement rates and a limited patient base made it economically unsustainable. That also illustrates a broader problem: As wages rise in other industries, health care employers must compete for nurses and other staff, but Medicare and commercial payment rates haven't kept pace. That mismatch is contributing to commercial insurance premiums rising about 7% a year, and as much as 9% in some parts of the country, along with rising costs in Medicare and Medicaid, Sutton said. In response, CMMI has launched four drug-payment models and several aimed at "upstream prevention," including one built around digital therapeutics. These are software-based tools meant to help patients stay healthy between office visits, so physicians can see more patients amid a physician shortage.

Cutting the paperwork

Quality measurement is a prime example of a well-intentioned tool that can create paperwork without clear benefit, Albanese said in response to a question from Martin about reducing physicians' administrative burden. Earlier this year, CMS finalized the removal of 11 quality measures from the Medicare Advantage program, the privately administered alternative to traditional Medicare. The agency found they offered little meaningful differentiation between health plans for patients using star ratings to choose coverage, Albanese said. At the same time, the agency added a new measure for behavioral health screenings. CMS is working to rebalance its broader measure sets toward clinical outcomes and expand the use of digital quality measurement, which should make reporting easier for clinicians while still supporting meaningful comparisons for patients, Albanese said.

Guardrails for AI

In the conversation, Martin quipped he got five questions into the conversation before mentioning artificial intelligence and its potential effects on health care. CMS's approach to artificial intelligence in primary care centers chiefly on affordability, Sutton said. He pointed to its potential to expand access to personalized health tools directed by a patient's own physician. But he cautioned against a scenario in which AI tools are added to the fee schedule and used simply to increase the volume of billable services, which he said is already contributing to rising insurance premiums through administrative, rather than clinical, uses of AI.

Sutton said CMS is more comfortable paying for AI tools under two circumstances:

• When a health system or practice that carries financial risk for its patients, such as one participating in LEAD, adopts a tool and monitors results
• When CMS itself sets clinical outcome targets tied to payment, such as improvements in hemoglobin A1C levels, a blood test that measures average blood sugar control.

The Food and Drug Administration also vets the safety of these tools for market access, and some states are beginning to weigh in on how they license technology used in clinical decision-making, Sutton added.

The fee schedule's rigid, service-by-service structure makes it harder to pay appropriately for AI than the more flexible models CMMI can test, Albanese said. CMS's goal is to ensure AI supports the relationship between doctors and patients rather than becoming a new avenue for billing for work that should already be part of routine care, particularly given ongoing concerns about fraud, waste and abuse in traditional Medicare, he said.

Looking ahead

Asked what they hope will change in the next five years, Albanese pointed to broader adoption of value-based, risk-based and accountable care models. He cited examples such as Medicare Advantage, the Medicare Shared Savings Program, LEAD and other CMMI programs that put primary care physicians at the center of coordinating patient care. He also cited proposed changes to equalize payment rates between hospital-based and non-hospital settings for outpatient drugs and routine imaging services, which he said would reduce incentives to deliver care in higher-cost settings.

Some entity should be clearly responsible for proactively engaging every patient, Sutton said, whether a primary care physician, a hospital or an insurance plan. That kind of accountability, he said, would prevent gaps in care that lead to higher costs later.

“I want the entire health care system to start to look like that, so that people who are not engaged in the health care system suddenly have people reaching out to them to try and engage them, whether it's the primary care physician who's in their community, or somebody else coming in from a plan perspective, who now sees it as their duty to do so,” Sutton said. “I think it's incumbent upon us to build the infrastructure to make that possible.”