Federal Efforts to Overhaul the Way We Pay for Primary Care, Explained

Federal Efforts to Overhaul the Way We Pay for Primary Care, Explained

Jun 19, 2019

Earlier this year, the Centers for Medicare & Medicaid Services (CMS) announced that it would invite medical practices to voluntarily participate in new payment models for primary care in the Medicare program. The initiative is called Primary Cares, and its goals are to reduce Medicare spending and improve both the quality of and access to primary care for Medicare beneficiaries—especially for those with complex, chronic conditions and serious illness. CMS officials believe that the new payment models could affect as many as 11 million Medicare fee-for-service beneficiaries and an estimated one in four primary care practitioners.

In light of that announcement, I invited three primary care experts from Mathematica to explain the latest push by CMS to change primary care through new payment models. My guests are Jeffrey Ballou, Eugene Rich, and Julie Schilz, who have the combined experience and expertise of a health economist, a general internist, a medical practice leader, a registered nurse, and a former senior executive at a national health insurance company.

Click here to listen to the full interview. You can also read edited excerpts of the interview in the following transcript.

Define primary care.

Schilz: Historically, we thought of primary care as embodying four attributes: first contact, continuous, comprehensive, and coordinated. Recently, we’ve started to add another element: person and family-centered care.

Rich: The disciplines that are most commonly referred to as primary care clinicians are general internists, family physicians, geriatricians, and pediatricians. Many nurse practitioners and physician’s assistants also provide primary care.

Why does primary care matter, both in terms of keeping people healthy and reducing medical costs?

Schilz: Currently, the U.S. pays more and gets less. Per capita, we pay more in health care delivery costs [than other industrialized countries], and our quality is [worse]. We have an opportunity with primary care [because] better use of primary care is associated with lower costs. High-performing primary care leads to fewer hospitalizations, fewer emergency room visits, and lower mortality. If this weren’t enough, when patients and families use primary care, their satisfaction is so much higher than when they use other services.

How does the Medicare program currently pay for primary care, and why is CMS interested in a change?

Rich: The Medicare program has not traditionally paid explicitly for primary care services. It pays any qualified provider through the Medicare Physician Fee Schedule, typically on a per-service or per-encounter basis. It pays the same for that service whether it’s delivered by a primary care clinician or a specialist. In fact, patients have no incentive to seek care from a primary care clinician. And when patients do see a primary care clinician, there is no incentive for the clinician to provide comprehensive, coordinated, person-centered care.

Several recent federal initiatives encourage a shift from fee-for-service to value-based care. What is value-based care, and how is “value” being defined in value-based care?

Ballou: Value means getting more quality for the same price or a lower price, or at least getting the same quality for less money. That’s the mission of the Center for Medicare & Medicaid Innovation: to develop and test models of health care delivery that we think could lead to higher-value care.

As we talk about value-based payment and value-based purchasing, once it comes down to trying to operationalize this notion of value, we get into trouble in a hurry because quality is such an important part of the value equation, and it turns out quality is really difficult to measure. But we have some fuzzy notion of what should go into quality. We know, for example, that when we go to the physician’s office, we want to have a good experience there. We know that we want our physicians to be available to us when we need them, we want to stay out of the hospital, and we want to have confidence that our physicians are treating us according to approved guidelines. Those are all pieces of quality that we can measure, if imperfectly.

Why is value such a hot topic in healthcare right now?

Ballou: With a fee-for-service [approach], you’re paying an amount of money and you’re getting back a product or a service in return. For so much of our everyday life, that’s uncontroversial. We buy T-shirts and piano lessons and refrigerators, and that’s all fee for service, and we don’t think twice about that. But one of the important ways that [health care] differs economically is that when we go to the doctor, we often don’t know what we want or what we need, and we rely on our doctors to tell us what we need. That is, they need to diagnose us, and then, to put this in crude economic terms, to sell us the things that they just told us we need. That sets up an incentive in the health care system for that system to sometimes provide more care than patients need.

In the 1990s, health maintenance organizations thought they had solved this [incentive] problem with capitation; basically, they said, we’re going to give physicians this fixed pot of money, and we’re going to tell the physician, “Treat your patients with that fixed pot of money, and if you can do it for less, then you can keep the savings. But if it costs you more, that needs to come out of your pocket.”

[Capitation] actually turned out to be a reasonably effective way of containing health cost growth, but no one liked it. Patients didn’t like not being able to choose their doctors, which is often the way [capitation] worked out. Physicians resented all of the bureaucratic oversight and other restraints on their ability to exercise their professional judgement. Since then, we’ve been feeling our way around in the middle between capitation and fee for service, and the space in the middle we’ve called value-based payment. We’ve called it that because we’ve decided not only is cost reduction important, but quality is also important. So we’ve talked about, “Well, why don't we pay for value?” [In other words,] pay for trying to keep quality high and costs low.

Under the new payment models being launched through the Primary Cares Initiative, what might be different for practices that volunteer to participate, and how might that change affect patients, hospitals, and clinicians?

Rich: Primary Care First is a new model that is intended to reduce the administrative burden for practices that participate. It relies on a core monthly primary care payment that is adjusted according to the complexity of the beneficiaries the practice is responsible for. For the practices to care for more complex patients, the payment is increased over the estimated historical spending on primary care services for that population. The enhanced monthly payment for primary care is intended to give primary care practices the resources to provide a different suite of services to their patients.

There is still a simplified per-patient-visit payment, a fixed amount with much less in the way of documentation requirements. To make sure there’s no incentive to avoid visits with patients—which was the concern when you have a payment that is only capitation or only a monthly per-patient payment—the Primary Care First model continues to have a modest incentive to see patients face-to-face when the patients want. There’s also an incentive to not shift services elsewhere, but instead to provide more of the visits in your office. So it’s trying to encourage the practices to deliver comprehensive, accessible, continuing care for their Medicare beneficiaries. There is a focus on performance, but it’s actually on an aspect of performance that other research has shown is susceptible to high quality primary care.

Taking stock of what we've learned so far about primary care and the different ways of paying for it, what questions do you still have about payment models and how they affect the cost and quality of care?

Ballou: I’m interested in knowing how many folks are actually going to participate [in the Primary Cares payment models]. Practices or other providers are not going to get involved in voluntary models unless they think they can do well [financially] or at least do better than the status quo option, which is largely fee for service at this point. If you’ve got a huge amount of participation relative to expectation, that’s a suggestion that most people think they’re going to do very well in this model and—assuming they understand the rules—perhaps the incentives weren’t tough enough. By contrast, if no one’s participating, there’s a possibility that the risk bar was set a little too high.

Schilz: I would say what I’m interested in as we continue further with the models is the multipayer aspect. Any primary care practice, small or large, could have upward of 45 different payer mechanisms. If all of these payer mechanisms have just a slightly different way of identifying their value-based payment model, this leads to administrative burden for the practices and takes away from the practices’ ability to . . . deliver care. In lessons learned [from Primary Cares], there has to be consistency in the payment model, consistency in the measures that are being expected, and [consistency] in the program elements of value-based payment models.

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Show Notes

Koller, C. “Putting Primary Care First?” Milbank Memorial Fund, Blog: The View from Here. Available at https://www.milbank.org/2019/05/putting-primary-care-first/#.XQEI19heFkk.email. Accessed May 31, 2019.

McConnell, K. “Investing in Primary Care and Dismantling Fee-For-Service.” The Milbank Quarterly, vol. 97, May 2019. doi:10.1111/1468-0009.12399.

Reid, R., C. Damberg, and M. Friedberg. “Primary Care Spending in the Fee-for-Service Medicare Population.” JAMA Internal Medicine, April 2019. doi:10.1001/jamainternmed.2018.8747.

O'Malley, A., E. Rich, L. Shang, T. Rose, A. Ghosh, D. Poznyak, and D. Peikes. “New Approaches to Measuring the Comprehensiveness of Primary Care Physicians.” Health Services Research, vol. 54, no. 2, April 2019, pp.356–366.

Goroll, A. “Does Primary Care Add Sufficient Value to Deserve Better Funding?” JAMA Internal Medicine, vol. 179, no. 3, March 2019, pp. 285–460.

Epperly, T., C. Bechtel, R. Sweeney, A. Greiner, K. Grumbach, J. Schilz, G. Stream, and M. O’Connor. “The Shared Principles of Primary Care: A Multistakeholder Initiative to Find a Common Voice.” Family Medicine, vol. 51, no. 2, February 2019, pp. 179–184.

Tikkanen, Roosa. “Multinational Comparisons of Health Systems Data, 2018.” New York: The Commonwealth Fund, 2018. Available at https://www.commonwealthfund.org/publications/other-publication/2018/dec/multinational-comparisons-health-systems-data-2018. Accessed May 31, 2019.

O'Malley, A. S., E. Rich, A. Maccarone, C. DesRoches, and R. Reid. “Disentangling the Linkage of Primary Care Features to Patient Outcomes: A Review of Current Literature, Data Sources, and Measurement Needs.” Journal of General Internal Medicine, vol. 30, supplement 3, August 2015, pp. 576–85.

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J.B. Wogan

J.B. Wogan

Senior Strategic Communications Specialist
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