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Physican payment options power point 07-18-16
1. PHYSICIAN PAYMENT OPTIONS FOR
EFFECTIVE REFORM – LESSONS FROM
THE HAWAII EXPERIENCE
Stephen B. Kemble, MD
Past President, Hawaii Medical Association
Assistant Clinical Professor of Medicine, JABSOM
Assistant Clinical Professor of Psychiatry, JABSOM
July, 2016
2. Disclosure
• No financial conflicts of interest to disclose.
• I receive no money whatsoever for any of my
involvement in health care reform and health
policy activities.
4. Cost Control Strategies
• U.S. –
• Attempt to control cost by controlling
utilization
• Rely on market forces for pricing
• Other Countries and Hawaii under
Prepaid Healthcare Act –
• Maximize coverage
• Minimal restrictions on utilization
• Keep administrative costs low
• Price controls by government (or HMSA)
5. U.S. Cost/Utilization Control Strategies
•1980’s-1990’s: Managed Care
•Capitation
•Utilization Management
•2010: Affordable Care Act - “Value-
Based” Payment
•Bundled payments
•Shared Savings
•Capitation
6. U.S. Cost/Utilization Control Strategies
• Utilization management
• Administrative control of utilization by health plan or
government
• Capitation and “value-based” payment - shift
insurance risk onto providers of care.
• Assumes large amount of unnecessary care driven by
supposed incentive under FFS to maximize volume of care
• Insurance risk = incentive for providers to deliver less care
• Perverse incentives –
• Skimp on necessary as well as unnecessary care
• “Cherry pick” and avoid sicker, more complex, and socially
disadvantaged patients
• Counter-incentives – pay-for-outcomes and risk adjustment
7. U.S. Cost/Utilization Control Strategies
Shifting insurance risk onto patients
• High deductibles
• High co-pays
• Restrictions on benefits
• Banned by ACA - Pre-existing condition
exclusions
• Allowed by ACA – Restricted formularies,
narrow provider networks, exorbitant pricing
for drugs and medical equipment
8. US Health Care –
Is Excessive Utilization Due
to FFS Really the Problem?
9. US Public Spending per Capita for Health
Exceeds Total Spending in Other Nations
Public includes benefit costs for govt. employees & tax subsidies for private insurance
Data are for 2014 or most recent year
Sources: OECD 2015; NCHS; Health Affairs 2002 21(4)88
$3,240
$3,710
$4,120
$4,430
$4,720
$5,000 $5,220
$6,470
$6,292
$3,398
$-
$2,000
$4,000
$6,000
$8,000
$10,000
UK JAP FRA CAN GER SWE HOL SWI USA
Total US Public US Private
2013healthcarespendingpercapita
$9,160
10. Note: Data are for 2013 or most recent year available
Source: OECD, 2015
Physician Visits per Capita
4.0
4.5
5.0
6.4
7.3 7.7
12.9
0
2
4
6
8
10
12
14
USA DEN UK FRA AUSTRL CAN JAP
11. Note: Data are for 2012 or most recent year available
Source: OECD, 2015
Hospital Inpatient Days per Capita
0.6 0.6
0.7
0.8
0.9 0.9
0.0
0.2
0.4
0.6
0.8
1.0
12. Hawaii Under Prepaid Healthcare Act
Prepaid Health Care Act (1974)
• Employer Mandate (broad coverage of population)
• Mandated comprehensive benefits
• No pre-existing condition exclusions
• 10-20% co-pays (gold and platinum levels under ACA)
• Mostly small independent practices paid with FFS
Outcome as of 2008 (prior to ACA, P4P)
• Low administrative costs
• Minimal controls on utilization
• Better access and lower cost than the rest of U.S.
Per-capita Medicare Costs were also lowest in U.S.
14. Health Plan Competition Does Not
Reduce Cost
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
0% 20% 40% 60% 80% 100%
AvgFamilyPremiumbyState
% Market Share of Top 2 Plans (→less competition)
Market Saturation vs. Premium Cost
HI
1. C. Schoen, J. L. Nicholson, and S. D. Rustgi, Paying the Price: How Health Insurance Premiums Are Eating Up Middle-Class
Incomes—State Health Insurance Premium Trends and the Potential of National Reform, The Commonwealth Fund, August 2009.
2. American Medical Association, “2008 Update: Competition in Health Insurance, A Comprehensive Study of US Markets: 2008 Update.
17. Note: Data are for 2015 or most recent available
Figures adjusted for Purchasing Power Parity
Source: OECD, 2015; NCHS; CIHI
Insurance Overhead
$829
$160
$208
$245 $253 $268
$0
$200
$400
$600
$800
$1,000
USA CAN HOL GER FRA SWI
Dollars
per
Capita
21. Growth of Physicians and Administrators in U.S.
Bureau of Labor Statistics; NCHS; Himmelstein/Woolhandler analysis of CPS
Managers shown as moving average of current year and two previous years
0%
500%
1000%
1500%
2000%
2500%
3000%
3500%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Managers Physicians
Growth
since
1970
22. Health Costs as Percent of GDP
Statistics Canada, Canadian Inst. for Health
Inf., and NCHS/Commerce Dept.
5%
7%
9%
11%
13%
15%
17%
19%
1960 1970 1980 1990 2000 2010 2015
USA
Canada
NHP Fully Implemented
Canada’s NHP Enacted
24. Out-of-Pocket Payments
Note: Data are for 2013 or most recent year available
Source: OECD, 2015
$/Capita
Adjusted for
Purchasing
Power Parity
$1,074
$771
$674
$629
$277 $271
$0
$200
$400
$600
$800
$1,000
$1,200
USA AUSTRL GER CAN FRA HOL
25. High Deductibles Cut All Kinds of Care
150,000 Employees Lost “Cadillac” Coverage
No Evidence that Patients Shifted to “Higher Value” Care
-11.5%
-19.0%
-8.0%
-27.0%
-15.0%
-20.5%
-22.0%
Preventive
Brot-Goldberg et al, 6/2015
http://eml.berkeley.edu/~bhandel/wp/BCHK.pdf
Findings closely resemble those of Rand Health Insurance Experiment
Study found no evidence that patients shopped for lower prices
Percent
utilization
reduction
26. Medicare HMO Copayments
Cut Office Visits, Increase Hospitalizations
Source: NEJM 2010;362:320
All figures are per 100 enrollees
-19.8
2.2
13.4
-25
-20
-15
-10
-5
0
5
10
15
Difference
between plans
that did and
didn’t raise
copays
Outpatient
Visits
Hospital
Admissions
Hospital
Days
27. Medication Copays Increased Post-MI
Vascular Events in Minorities (An RCT)
Source: Choudhry N. Health Aff 2014:33:863
Cumulative
Incidence
Months
60%
50%
40%
30%
20%
10%
0
0 6 12 18 24 30 36
Usual coverage
Full coverage
28. Higher Medication Co-Pays =
Worse PediatricAsthma Outcomes
Children age 5-18
Source: JAMA 2012;307:1284
41.7
17
40.3
24
0
10
20
30
40
50
% of Days Used Meds Asthma Admits/1000
Low Copay
High Copay
29. Source: Rand Experiment. Pediatrics 1985;75:942
Higher Copayments = Kids Without Care
Percentage
with no
physician
visits in
year
5%
10%
18%
15%
21%
32%
0%
10%
20%
30%
40%
Free Care 25% Copay 95% Copay
(Like HSA)
Age 0-4 Age 5-13
30. Many Families Can’t Afford
Out-of-Pocket Costs
Kaiser Foundation, Consumer Assets and Cost Sharing, Based on Fed Survey, Feb 2015
31% of non-poor say they could not borrow $3,000 from relatives or friends in an
emergency
Percent of
non-poor
families with
liquid assets
less than
category
49%
63%
81%
89%
0%
20%
40%
60%
80%
100%
Deductible $2500/5000 OOP Limit $6000/12000
All Families Uninsured Families
32. Physician Payment & Motivation
• Behavioral Economics:
• intrinsic (do right for pt) vs. extrinsic ($) motivation
• Consequences of pay-for-performance (P4P):
• Measures for “performance” grossly inadequate
• Promotes physician greed (“extrinsic” motivation)
• Gaming documentation for payment
• Corruption of health care data
• Fraud and abuse
33. Can We Measure Quality in Health Care?
• Estimated 25% of patients in a typical
primary care practice are “complex”
• Quality in health care is very difficult to
measure due to its complexity.
• Available measures - either grossly invalid
or narrowly focused on what is easy to
measure (“streetlight effect”)
Grant, RW, Ashburner, JM, Hong, CC, Chang Y, Barry MJ, Atlas, SJ. Defining Patient Complexity From
the Primary Care Physician’s Perspective. Ann Int Med 155, No 12 (2011): 797-804
34. Quality Scores Tell More About Patients
than Physicians
Harvard physicians with poorer/minority patients score low
Source: Hong C et al. JAMA 9/8/2010. 304:10;1107.
14%
3% 10%
29%
26%
10%
17%
38%
0%
10%
20%
30%
40%
Minority Non-English
Speakers
Uninsured /
Medicaid
Infrequent Visits
Top Scoring Physicians Bottom Scoring Physicians
Patient characteristics in panels of
high- and low-scoring physicians
35. Medicare’s Premier Demonstration:
A P4P Failure at 252 Hospitals
Note: P4P failed even among poor performers at baseline
Source: NEJM March 28, 2012
0.45%
-1.65%
-1.16%
0.21%
-0.51%
0.31%
-1.58%
-1.28%
-0.28%
-0.66%
-2%
-1%
0%
1%
CHF AMI Pneumonia CABG All
Conditions
P4P Hospitals Control Hospitals
Worse
Better
Change
from
baseline
in 30-
day
mortality
5-year outcomes show no effect on mortality
36. Flodgren et al. “An overview of reviews evaluating the
effectiveness of financial incentives in changing
healthcare professional behaviors and patient outcomes.”
Cochrane Review of
“Paying for Performance”
“We found no evidence
that financial incentives
can improve patient outcomes.”
July 6, 2011
37. Don Berwick –
The Toxicity of Pay-for-Performance
“Despite their superficial logic, systems of merit pay or pay
for performance have features that are toxic to systemic
improvement. Contingent rewards doled out by supervisors
cause decreased focus on customer needs, loss of
accurate information about defects and improvement
opportunities, avoidance of stretch goals, and decreased
innovation. They may also erode teamwork. Pay for
performance may mark a naive understanding of the
complexity of human motivation.”
• Berwick DM. The Toxicity of Pay-for-Performance. Quality Management in
Health Care, 1995, 4(1), 27-33.
38. ACOs and P4P
Implementation Without Evidence
• P4P is official Medicare policy, widely adopted by private payers
• No Randomized Control Trials showing improved outcomes.
• No improvement in largest demonstration project.
• Concern about negative side effects.
• ACOs are the newest health policy panacea
• No Randomized Control Trials
• No savings in largest demonstration project.
• Disturbing HMO experience.
Implementing everywhere interventions
– which have been proven nowhere –
risks failure on a colossal scale
41. Commonwealth Fund Survey of Primary Care Physicians. November
2012
Note: Rx indicates prescribed drug or treatment
US Doctors Face Biggest Rx Hassles
9% 10%
17%
21%
26%
37%
52%
0%
10%
20%
30%
40%
50%
60%
UK AUSL FRA CAN HOL GER USA
Percent of primary
care doctors
saying physician
or staff time
getting needed Rx
approvals is a
major problem
42. Commonwealth Fund Survey of Primary Care Physicians. November
2012
US Doctors’ Satisfaction Is Low
87% 84% 82% 80%
76%
62%
54%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NOR UK CAN AUSL FRA USA GER
Percent of primary
care doctors
saying they are
satisfied or very
satisfied
46. Medicare ACOs: No Savings
The 2014 ACO
Experiment
• 353 ACOs
• Medicare paid
$60 billion
• 6 million
patients
Overall
Results
• 196 ACOs cut
Medicare’s
costs
• 157 raised
costs
Economic
Impact
•Net loss of $3
million to the
Trust Fund
after paying
bonuses
Source: Kaiser Health News 9/14/15
Based on CMS 2014 ACO Performance data
47. Failure of ACO Demo Projects
CMS Report on Pilot ACOs so far –
Only 29 of 114 “shared savings” ACOs saved enough for shared savings
12 of 35 original “Pioneer” ACOs (more risk) dropped out
11 of 23 remaining “Pioneer” ACOs lowered Medicare spending, but
savings were offset by administrative costs
• Savings on Medicare spending- - 0.5%
• Increased administrative cost- + 1-2%
Net cost increase - + 0.5-1.5%
The Pioneer Accountable Care Organization Model. JAMA Sept 17, 2014
Medicare Payment Advisory Commission, Nov 2013
48. Source: Medscape July 9, 2012
More Doctors Are
Hospital Employees
Percent of
newly hired
physicians
employed by
hospitals
11%
50%
63%
75%
0%
20%
40%
60%
80%
2004 2011 2012 2014
(Projected)
49. Hospital-Physician Integration
Increases Costs by Raising Prices
JAMA IM 10/19/2015
Graph shows difference between MSAs at the 75th
(vs 50th) percentile in change in integration 2008-2012
Outpatient costs
associated with
greater
physician/hospital
integration
($s/capita)
$75
$14
$0
$20
$40
$60
$80
Total Due to utilization
50. Health Affairs 2014;33:1680-8. Based on analysis of Medicare data
Medical Home Score, P4P Incentives, and Risk Sharing showed no effect
Small, MD-Owned Practices,
FewerAvoidableAdmissions
Public reporting appears counterproductive
4.31
6.47
4.63
5.31
4.57
5.46
0
1
2
3
4
5
6
7
Small Large MD
Owned
Hosp.
Owned
No Yes
Ambulatory
Care
Sensitive
Admission
Rate per
100
Public Reporting
52. Physician Payment Options
• Fee-For-Service:
• Motivates doctors to work harder – good or bad depending
on need
• U.S. fees (RBRVS) favor procedures over cognitive services
• Can be incentive to provide unnecessary care
• Can be made much more incentive-neutral (i.e. fee-for-time)
• Salary
• Incentive-neutral
• Most appropriate for hospital-based MD’s doing shift work
• For MD’s who can control patient load, less incentive to work
hard without productivity incentives
53. Fee-For-Time Principles
• Incentive-Neutrality –
• Minimize perverse incentives and counter-
incentives
• Minimize administrative costs and burdens
• Promote and rely on intrinsic motivation of
physicians
• Quality improvement from front lines of
care, not central administration
• Intermountain model vs utilization management
54. Two MD Payment Options
1. Independent practice – Fee-for-Time
2. Employed physicians in hospitals, health
centers, large groups – Salary
• Straight salary for shift work specialties who
don’t control patient volume
• May use simple productivity incentives for
physicians who can control work volume
• Capitation for primary care –
• Would be okay if not complicated by need for P4Q
and risk adjustment (high administrative burdens)
55. Fee-For-Time Proposal
• Incentive-neutral fee-for-service
• Payment based on time scheduled, not “pay-for-
documentation”
• Each procedure, including cognitive services, associated with usual
time scheduled. This becomes basis for payment.
• Time includes documentation and care coordination
• Modifiers based on –
• Years of training required for specialty
• Overhead required for specialty
• Regional cost-of-living
• Physicians allowed to collectively negotiate fees and
modifiers
56. Fee-For Time Proposal
• Full complexity of ICD-10 not required
• Eliminates RBRVS and E/M coding
• Documentation focused on clinical priorities and
quality improvement, not “pay-for-documentation.”
• Documentation follows medical model, enforced with
periodic audits:
• Reason for visit
• Interval problem-focused history
• Exam, labs, imaging
• ICD-10 Diagnoses (4 digits)
• Assessment, reasoning, and plan
• Signature
57. Fee-For-Time Implications
• Billing vastly simplified
• No disincentive to treat complex or difficult patients
• Supports intrinsic motivation and professional ethics
• Minimizes incentives for unnecessary care
• Minimizes need for utilization management
• Minimizes opportunities for fraud and abuse
• Reduced office staffing and overhead (no need for billers,
coders, scribes)
• Encourages independent practice
• No barrier to providing care in rural and underserved
areas
• Computerization not absolutely required
58. All-Payer System
Unified delivery system
• All health plans required to:
• Use same network of MD’s and hospitals
• Cover same comprehensive benefits – all medically necessary care
• Pay physicians the same for all plans
• Hospitals - all plans pool resources and pay hospitals with
global budgeting
• Eliminates cost of hospital billing and collections (~10% of hospitals’
budget)
• Eliminates incentives to provide unnecessary care
• Eliminates incentives to push highly reimbursed services vs.
necessary but money-losing services (e.g. ER, psychiatry)
• Eliminates hospital P4P
• Equal access to care for all, including Medicare and Medicaid
59. Intermountain Quality Improvement
• QI projects targeting identified problems and
unreasonable variability in processes of care
• Data collected at local level based on QI project needs
• Protocols developed by providers of care and modifiable
by them
• Deviation from protocols for good clinical reasons is both
expected and encouraged
• No centralized P4P
• Most problems are system problems – no individual
blame or individual ratings
• Teamwork supported and encouraged
60. Cost Implications
• Administrative savings for health plans
• Vastly simplified FFS claims processing
• Eliminates need for most of “medical management” and
utilization management
• Significantly reduced opportunities for fraud and abuse
• Eliminates expenses of pay-for-quality, pay-for-
documentation, risk adjustment
• Administrative savings for doctors and hospitals
• Savings on billing and collections administration - about 10%
of collections (both doctors and hospitals)
• Much simpler coding and documentation
• Markedly reduced prior authorizations
• No P4P, risk adjustment
• Improved professional autonomy and morale
61. All-Payer plus Fee-For-Time
Frees Each to Do What They Do Best:
• Doctors to focus on patient care
• Hospitals to focus on meeting community
inpatient health care needs
• Health plans to focus on risk pooling, claims
processing, and administrative support for
doctors and hospitals,
• Not:
• Micromanaging doctors and hospitals
• Trying to avoid covering sick people
