Value-Based Care Reimbursement Needs Greater Customization

March 15, 2016 - With rising healthcare spending found throughout the US, the federal government has put greater focus on value-based care reimbursement than ever before. Healthcare providers and payers are seeking ways to move beyond fee-for-service payment and adopt quality value-based care reimbursement instead of quantity-based fee-for-service. This includes the Medicare Physician Fee Schedule.

A report published in the New England Journal of Medicine explains that there are both benefits and disadvantages to the Medicare Physician Fee Schedule. For example, certain fee schedules offer many service codes and a mix of services that impact the value of medical care. One negative in the Medicare Physician Fee Schedule is that it keeps providers apart and does not incentivize care coordination and integration.

Additionally, fee schedules and the fee-for-service payment model reward the quantity of services regardless of necessity instead of the quality of patient care, the report states. When it comes to value-based care reimbursement, the Department of Health and Human Services (HHS) has established the Merit-Based Incentive Payment System and Alternative Payment Models.

However, both the Merit-Based Incentive Payment System and Alternative Payment Models are connected to the Medicare Physician Fee Schedule. The general base of the physician fee schedule will need to be stable in order to ensure that the value-based care reimbursement models remain strong.

The Medicare Physician Fee Schedule depends upon the resource-based relative value scale, which has two main issues, the report finds. This includes incorrectly evaluating physician work and the inability to measure “nonprocedural physician activities.”

“When physician compensation is calculated as if all payers used Medicare’s fee schedule, cardiologists and radiologists have incomes up to 2 to 2.5 times those of family physicians, general internists, pediatricians, and psychiatrists. And in fact, virtually all payers base their fee schedules on Medicare’s RBRVS [resource-based relative value scale],” the report stated.

“We believe that two key flaws in the RBRVS are its substantial misvaluations of physician work and the failure of current service codes to capture the range and intensity of nonprocedural physician activities, known as evaluation and management (E/M) services. Correcting these flaws could improve outcomes and support movement toward payment models that will better serve Medicare beneficiaries.”

In addition to these two major issues, the current service codes lack the ability to analyze and measure “cognitive work,” Which consists of management, decision-making, and data analysis.

Service codes under the Medicare Physician Fee Schedule will need to evolve and expand to incorporate the multitude of new medical services since people are living longer, more chronic conditions are affecting the population, and physician work has become more complex. There are various tasks that doctors complete which are not recognized it within the Medicare Physician Fee Schedule.

However, the Centers for Medicare & Medicaid Services (CMS) has added codes to reimburse doctors for tracking patient transition of care. In order to move away from payment related to the quantity of services and embrace value-based care reimbursement, healthcare payers will need to compensate providers for more complex services related to care coordination, population health management, and data analysis.

Along with the flaws seen in the Medicare Physician Fee Schedule, it seems that the design of Alternative Payment Models do not reform some of the problems seen with current provider reimbursement, according to one report from the Center for Healthcare Quality and Payment Reform (CHQPR).

Payment reform is not occurring at a preferred level, as many providers find the alternative models inconsistent with high-quality, low-cost medical care. It seems that “physician-focused” alternative payments are capable of boosting the quality of care while reducing wasteful healthcare spending.

Harold D. Miller, CHQPR’s President and CEO, mentioned that the new alternative payment models may not necessarily be better than the fee-for-service system, as these structures may actually make it more difficult for providers to decrease healthcare spending.

In order to truly achieve greater value and reduced costs, providers and payers will need to work together to design stronger and more coordinated alternative payment structures.  There are several popular options to choose from when working to create a quality-based, low-cost healthcare option.

Many providers and payers across the country are working together to form accountable care organizations and patient-centered medical homes as well as develop bundled payment model contracts. Colin Luke, Attorney and Partner at the Waller Lansden Dortch & Davis law firm, explained in an interview with HealthPayerIntelligence.com how bundled payment models will need to align payer and provider incentives in order to truly succeed.

“You’ve got to align the incentives and make sure that the multiple parties to the bundled payment arrangement have equal incentive to make the arrangement work at the end of the day, Luke clarified. “Without aligned incentives, you would get short-term success for one of the parties, but long-term it’s not going to work.”

“In order for it to be successful, I think you’ve got to have the ability to control the covered lives and to mandate or at least create incentives for using certain types of providers and for participation in the quality and health improvement initiatives,” he concluded.

When searching for methods to lower medical care spending and improve the quality of patient care, adopting value-based care reimbursement or alternative payments may not be enough. These programs should also be customized to fit the needs of all parties and encompass multiple physician service codes that expand beyond the Medicare Physician Fee Schedule.