Medicare at 50: Physicians brace for transition to value-based payment


As Medicare celebrates its 50th anniversary, federal officials are beginning one of the most significant shifts in the program’s history – paying physicians based on quality and efficiency rather than for the volume of services they provide. The shift to so-called value-based payment will be phased in, but it is coming soon.

Earlier this year, federal officials announced their goal to tie 85% of all Medicare fee-for-service payments to quality or value by 2016 and 90% by 2018, relying heavily on the use of alternative payment models such as Accountable Care Organizations (ACOs) and bundled payments. The shift also is being driven by the recent repeal of Medicare’s Sustainable Growth Rate formula. The law that removed the SGR from physicians’ lives also created alternative payment pathways that tie payments to performance on certain quality metrics or successful participation as part of an ACO.

How will these changes affect how physicians deliver care in the future? We invited physicians in various practice settings to offer their perspectives on how the new payment paradigm will drive practice changes.

‘Value’ payment system is arbitrary


While much has been written about the Centers for Medicare & Medicaid Services’ plan to shift its payment system away from fee-for-service and toward a “value-based” structure, most physicians in small and solo private settings have given little if any thought to its potential impact on their practices. That is about to change.

The principal vehicle for the CMS’s plan is something called the value-based payment modifier (VBPM), a component of the Affordable Care Act. The VBPM has not been on the radar of smaller private practices because up until now it has only applied to groups with more than 10 providers. Beginning this year, it applies to everyone. If you accept Medicare patients, regardless of the size of your practice, VBPM will become part of your life – because your 2017 Medicare payments will be adjusted based on your 2015 VBPM “score.”

Dr. Joseph S. Eastern

Dr. Joseph S. Eastern

It will adjust your reimbursements based on quality of care as defined by the CMS and cost, compared to other physicians. Your “score” will have a quality component and a cost component, and will be calculated based on measures reported through the Physician Quality Reporting System (PQRS). And the ACA requires that the program be budget neutral, which means that all rewards to physicians who pull the highest scores must be offset by penalties, or “negative adjustments,” to those who don’t score as well. In essence, the VBPM establishes arbitrary practice standards and spending ceilings; physicians who have the temerity to practice medicine as they see fit, or spend too much relative to their peers, will be punished.

Beyond the obvious and very real possibility of significant financial hardship, there are serious potential consequences inherent in this unprecedented new system. Health care is already among the most regulated industries in the country; the VBPM creates new incentives to practice “cookbook” medicine, and new disincentives to order tests, consults, or medications, even when doing so would clearly be in a patient’s best interest. The inevitable result will be compromised care and further limitation of patient access.

The VBPM’s potential effects on physician-patient relations and legal liability are additional serious concerns. Many patients will object to their physicians’ new reluctance to recommend appropriate interventions for fear of generating excessive costs; and should a less-than-thorough work-up lead to a missed diagnosis, the ACA offers no protection at all from any resulting malpractice litigation.

The already strained relationship between physicians and their hospitals will likely deteriorate as well. Hospital administrators will be scrutinizing each medical decision from admission to discharge, particularly in those institutions already in financial trouble, as is all too often the case. The constant necessity of justifying every significant order and consult will not be in anyone’s best interest, least of all that of patients.

For all the talk that the transition from fee-for-service to value-based reimbursement would result in better care at a lower cost, there is little evidence that care is improving, and even less that costs are decreasing. Conversely, there are plenty of warning signs that physicians in small private practices who can’t meet the new performance standards may face a significant financial burden because of the resulting penalties and lower reimbursements.

Dr. Eastern practices dermatology and dermatologic surgery in Belleville, N.J. He is the author of numerous articles and textbook chapters, and is a longtime monthly columnist for Dermatology News.

Staying independent may prove costly


The changes announced for Medicare and Medicaid, to be implemented over the next few years, are breathtaking in scope and ambition. A system based on payment for services is to become a system based on payment for individual health and population health outcomes. This will require enormous changes in the way health care is delivered, and this is an intended effect. Private payers will certainly desire the same results and savings.

I am a partner in a multiphysician, single-specialty private group practice. We have two hospital systems locally. Both of these are now health systems, in that they either employ or closely interact with many physicians.

Dr. Peter M. G. Deane

Dr. Peter M. G. Deane

Just a few years ago, our practice could comfortably make decisions about how we went about delivering care without much consideration of the plans of larger local institutions. Then came the rise of our local accountable care networks. These were created by the local health care systems to provide the overall organizational infrastructure to move from the current payment model to the coming one. We delayed for awhile but have now signed up with both. It can only be a matter of months before each of them pursues a meaningful degree of clinical integration. In other words, they will be analyzing data from our electronic medical record about our individual practice patterns and results, and giving us the results along with feedback on how to improve care.

For this to happen, our EMR system needs to be up to the task. We are unsure it will be. It has been difficult for some of us to adapt to electronic records systems. Now we need to see if our existing system can interoperate effectively. If not, we may be paying quite a bit for another one soon.

Our physicians are not accustomed to seeing report cards about their practice patterns. It will be a shock to see comparisons and rankings. But patients will be enrolled in and referred to us by the networks, and it will not be possible to ignore the reports we get.

Likely this radical change in the practice of medicine will drive some to retire, affecting the size of our group. We intend to remain in private practice, but independence may prove increasingly costly.

Already, patients see that their physicians make less eye contact with them and more time documenting care. This will likely get worse. We worry that if increased expenses cause staff cuts, the personal service we provide will suffer.

Redesigning medical practice will be a serious challenge for us. But our goal has always been to provide the best care, and in a value-based system, that should be what sustains us all.

Dr. Deane specializes in allergy, immunology, and rheumatology and is a partner in a private group practice with eight physicians and five offices in greater Rochester, N.Y. He is also the chief of allergy, immunology, and rheumatology at Unity Hospital in Rochester.

Value shift brings irreparable change to private practice


The simple truth is that we are in transition. The current health system, for the most part, rewards “making widgets” (volume). That is, being paid for units of work actually being done. The more patients you see, the more procedures you do, the more you are compensated. We are moving from “volume” to “value” as we try to move away from “widgets” to management of population health. How do we get there? What can we as physicians and providers do?

I am part of a 40-person, single-specialty private cardiology practice in the Washington, D.C., suburbs. In the coming years, the CMS will reward (the euphemism for payment) practices that meet their definitions for quality and penalize those that don’t meet those metrics.

Dr. Robert Shor

Dr. Robert Shor

We have participated in PQRS/PQRI, Meaningful Use (MU), and other Medicare programs for which we are compensated. But how do you truly determine what are quality metrics and what is truly meaningful use of health system resources? How do we impact health on an individual and population view?

For us to be compliant with the Medicare rules and get paid, we have had to heavily invest in not only EHRs (we were an early adopter around 2000), but personnel costs to make sure all of the paperwork is completed appropriately for submission and for the audit that precedes the CMS payment for MU.

So how do we proceed going forward? In my opinion, what is clear is that private practice has been irreparably changed. The notion of an individual physician or a small practice surviving without some arrangement with a health system, an ACO, or a Clinical Integrated Network (CIN) is rapidly dwindling.

I have seen a variety of actions taken as providers try to survive and jockey for position to their advantage and we have explored a wide range of options. For an ACO to succeed in the shared risk model, it usually is part of a larger health care system. Thus many practices – primary care and subspecialty – have integrated with these health systems. Indeed, about 70% of the cardiology community is now integrated. To manage costs, you need to know your costs and most of the cost remains in the hospital care.

What do you do if you want to stay independent or do not feel you have a reliable health system with which you can integrate? Many practices may merge in a formal or looser network of practices to create a CIN where EHR access to patient records within the network is streamlined and care can be more effectively given. This has benefits, but also limitations. I believe that any future in which cost is contained on a larger scale will require close collaboration with hospitals given the disproportionate cost incurred during hospital care. Some practices have decided to form Physician Service Agreements with hospital systems to help manage product lines within the health system and to establish more meaningful relationships in an effort to coordinate care more effectively. This provides an opportunity to impact inpatient care, to contribute to programs that reduce hospital readmissions, and to reach the holy grail of preventing disease by better outpatient care. This would truly help with population health care management.

Some of the challenges, at least in large metropolitan areas, are that practices may work at several hospitals with different health systems. They may want to continue providing care at all of the hospitals in their community, but may be forced to choose. This does not appear to me to be in the best interest of our patients, many of whom we have cared for many years. However, the choice may be forced upon them as the health systems force the issue and make the decision for us.

The future holds much uncertainty, but also opportunity. Will our practice survive in its current form in 5 years? For now we are trying to read the tea leaves, like so many others, to make the best decisions on behalf of our patients to allow us to be able to continue to provide care in our community.

We are still reading the tea leaves.

Dr. Shor is vice president of Virginia Heart, which has nine offices in the northern Virginia region. He is the chair of the board of governors of the American College of Cardiology.

Leaving behind fee-for-service battles


Many of us in health care received with a mix of excitement and fear the recent news from the CMS regarding the transition to 90% value-based payments by 2018. For me, an employed family medicine physician and medical director of a new ACO in western North Carolina, I applaud the ambitious goal and understand the sentiment behind it. But, I also worry about the ability of most providers to adapt to this change in such a short time span.

Dr. Robert Fields

Dr. Robert Fields

The rationale behind value-based payments couldn’t be clearer – we spend too much on health care. Way too much. So much, that if we continue on this track our country will break under the financial pressures of providing care in a fee-for-service system. In addition, U.S. medical outcomes lag behind most other industrialized nations, which leads to the conclusion that the system at large is not providing the value it should.

As I put on my rose-colored glasses, I hope this restructuring encourages the system at large to coordinate care better, to improve our information systems to share relevant clinical data, and to encourage quality improvement at the practice level so that we move toward improved outcomes for our patient populations.

When talking to providers about our ACO and adding value in health care, they think we are saying that THEY are not delivering high value care. I keep reiterating, and will continue to do so, that value-based payments are not a criticism of our individual abilities as physicians or a comment on our interactions with our patients, but acknowledgment that how we communicate with and manage our populations as a network of hospitals, providers, and agencies lacks the efficiencies and coordination of services that patients deserve.

Ultimately, we are moving toward a patient-centered health care system that requires a fundamental transformation in how we pay for and deliver care. Measurement and quality improvement, although new to health care, has existed in every other industry for years.

In the end, I hope patients feel they are getting more efficient, coordinated care and that providers can start to see improvements in outcomes without the daily battle of the fee-for-service world.

Dr. Fields is a family physician and the medical director of Mission Health Partners, a physician led ACO in Asheville, N.C.


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