New payment models bringing changes to medical practices

March 19, 2015

A study of 34 physician practices jointly sponsored by RAND Corporation and the American Medical Association found that alternative payment models are changing the way physicians and medical practices operate. However, changing the payment system doesn't always ensure patient care improves.

Alternative payment models are starting to change the ways physicians and medical practices operate-sometimes in surprising and unexpected ways.

A study of 34 physician practices sponsored jointly by RAND Corporation and the American Medical Association found that the growing use of alternatives to fee-for-service-including models such as episode-based and bundled payments, shared savings, pay-for-performance, accountable care organizations and medical homes-is causing practices to:

  • partner or merge with each other or with hospital systems so as to afford the investments necessary to succeed in using the new payment models, such as care managers and information technology,

  • develop team approaches to care management that include important roles for allied health professionals,

  • make greater investments in data management capabilities, such as buying or upgrading electronic health record (EHR) systems and devoting more resources to data collection and analysis, and

  • provide patients with more options for accessing care, especially after-hours or outside the office setting

Friedberg“We found that changing the payment system probably isn’t enough to ensure that patient care will improve,” Mark W. Friedberg, MD, MPP, a senior natural scientist at RAND and the study’s lead author said in a news release. “It’s the support that accompanies a new payment model, plus how well the model aligns with all of a practice’s other incentives, that could determine whether it succeeds.”

The movement away from fee-for-service reimbursements has been gaining momentum in recent years. Earlier this year, for example, the U.S. Department of Health and Human Services announced a goal of linking 30% of Medicare reimbursements to the “quality or value” of providers’ services by the end of 2016 and 50% by the end of 2018. In 2011, Medicare made virtually no payments through models other than traditional fee-for-service.

Related:Shifting reimbursement models: the risks and rewards for primary care

Similarly, by 2014 40% of al commercial in-network payments, and 24% of outpatient payments to primary care providers were either tied to performance or designed to cut waste, according to the nonprofit Catalyst for Payment Reform.

None of the practices participating in the RAND/AMA survey said they experienced financial hardship as a result of alternative payment models. At the same time, researchers found that practice-wide financial incentives for alternative payment models were not passed through to individual physicians. “In fact, the greatest marginal financial incentive facing nearly all physicians in the study...was to increase ‘productivity’ as measured by revenues or relative value units,” they write.

While an often-touted benefit of team-based care is that it would increase physician satisfaction by allowing doctors to practice at the “top of license,” the study found that the opposite may be occurring: delegating less-intense patient encounters to other providers “was described as a potential contributor to burnout because lower-intensity patients could be an important source of respite for busy physicians,” the authors write.

The study also recommends that payers explore ways to align and harmonize their alternative payment models, especially performance measures within the bounds of antitrust laws. Doing so “will free up the substantial physician practice resources currently spent on wrangling hundreds of performance measures and trying to create a coherent response to ’50 people shouting their priorities at you.’

“If this cacophony can be ameliorated…practice leaders can better devote their attention to the difficult work of making meaningful and beneficial changes to their processes for patient care,” they conclude.