Letter to the editor: Replace SGR with hybrid payment model

May 23, 2014

A reader writes that the proposed replacement for the Sustainable Growth Rate formula will not control healthcare spending or improve the quality of care.

While the Medicare Sustainable Growth Rate (SGR) cap is poised to be repealed, the proposed replacement does not solve the problem. The SGR was designed to cap Medicare spending, but has failed, while the cost of fixing Medicare has risen every year since the late 1990’s. But what is to replace SGR and keep Medicare solvent and the healthcare industry from exploding under the weight of its costs?

The practical solution is a hybrid payment system that incentivizes doctors to be good stewards of the healthcare dollar as well as rendering accessible, quality care. It allows the doctor to concentrate on the patients rather than trying to document to get paid more.

Americans want and deserve to trust that when their doctor does not order a test or procedure, it is because it is not needed and not just to cut costs or that when their doctor orders a test or procedure, it is because it is needed and not to generate income.

Most healthcare providers are honest, but living in a capitalistic society. The current fee-for-service system is too much of a business. The more you sell, the more money you make. On the other hand, the capitation model encourages keeping the money and minimizing medical services. The hybrid physician payment system keeps the balance.

The hybrid payment model combines  fee-for-service and pay-for-performance elements. Under such a plan, on an assumed $100 fee, a doctor gets $60 reimbursement in seven days without claim denials. In addition to helping the doctor receive the 60% of this fee faster, it cuts down unnecessary operational and administrative costs on the payer’s side and on the doctors’ side.

The balance of the $100 fee would be escrowed and paid out quarterly depending on several factors, such as patient satisfaction, outcome, complications and if he or she prescribed only what is necessary, “being an effective steward of the healthcare dollar.”

Every quarter, a small and statistically valid sample of the physician’s services would be analyzed and the remaining $40, plus a 3 percent bonus, would be paid out as a reward for hitting benchmarks. On the other hand, if the performance is poor, the physician would receive less than the $40.

Ideally, the model gives physicians reasons to monitor costs and avoid prescribing unnecessary services but also incentivize to achieve good outcome for the patients and render superb “customer service.” At the same time the $60 paid fee-for service-without hassle would encourage doctors to be accessible.

The hybrid model incentivizes doctors to provide the best and most efficient, yet effective, treatment process. Elements of the treatment process are follow-up visits, tests, procedures and surgery. Doctors are the ones who advise patients and hence control what healthcare services are consumed. Healthcare spending starts with the doctor.

Changes to the healthcare reimbursement system should lessen financial interests from affecting patient care. Stakeholders on all sides would be well served by reminding themselves that at some point, we are all patients.

The hybrid payment system is not a panacea. It is the right step to start. Solving the healthcare delivery system and its finances and the human factor is a gargantuan task.

It behooves all sectors to pull together to solve the crisis and not strategize to set a better mousetrap to make more money under any reform.

K. J. Lee, MD

New Haven, Connecticut