End of fee-for-service need be nigh

The National Commission on Physician Payment Reform co-chaired by former Senate majority leader Bill Frist, MD, a Republican and heart surgeon from Tennessee, is calling for the federal government to phase out the fee-for-service payment model within the next decade.

The commission, which includes representatives from WellPoint, Tufts Medical Center and the American College of Physicians, argues in a report released Monday that “our nation cannot control runaway medical spending without fundamentally changing how physicians are paid, including the inherent incentives built into the current fee-for-service pay system.”

Created by the Society for General Internal Medicine, the 14-member commission proposes eliminating fee-for-service in the next decade by transitioning, over five years, to a blended payment system geared towards aligning incentives, then following the evidence from models emerging today.

The commission “is fully aware that ACOs and bundled payments are not a panacea,” Frist and co-chair Steven Schroeder, MD, a professor at the University of California, San Francisco, wrote in Health Affairs. Many of the new payment models, they said, “still pay individual physicians on a fee-for-service basis. What we don’t want is old wine in new bottles — we need to ensure that the current skewed fee-for-service incentives aren’t incorporated into these new models.”

The commission is recommending, among other measures, increasing reimbursement for evaluation and management services to curb the fee-for-service model’s gravitation towards use of technical services provided by surgeons, radiologists and other specialists; paying equal rates for the same physician services regardless of specialty or setting; and abolishing Medicare’s sustainable growth rate formula, which the commission thinks can be offset by reducing overutilization within Medicare.

 “Although the effectiveness of mechanisms such as bundled payments, financial risk sharing, pay for performance, and other experiments in reducing costs and improving quality are not yet proven, the Commission believes that the nation must move swiftly to adopt these promising models,” Frist and Schroeder wrote in Health Affairs.

Among other recommendations, the commission is calling for an emphasis on transparency in determining how physicians are paid and services are reimbursed. Higher payment for facility-based services that can be performed in lower-cost settings should be eliminated, the commission suggests. And for both Medicare and private insurers, “annual updates should be increased for evaluation and management codes, which are currently undervalued,” while most updates for procedural diagnosis codes should be frozen for three years, the commission suggests.