'Kafkaesque' Value System Unfairly Penalizes Doctor Pay

Cheryl Clark, August 25, 2014

How much physicians get paid is increasingly determined by a formula that penalizes doctors whose patients are more expensive—even when those higher costs stem from services that other doctors perform, according to a new report.

How much physicians get paid is increasingly determined by a "Kafkaesque" payment formula, one that penalizes doctors whose patients are more expensive—even when those higher costs stem from services that other doctors perform.

That's the analysis from a healthcare payment reform consultant and author of a new report, "Fair and Effective Ways to Analyze the Drivers of Healthcare Costs and Transition to Value-Based Payment."

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A complex system of physician "accountability" for services is already in place with some Medicare demonstration projects, ACOs, and some commercial health plans, and is soon to be folded into the Medicare's physician fee schedule formula, says Harold D. Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, a research nonprofit he launched.

But, he explains, the system uses an unreasonable method to assign a patient's healthcare costs and quality to a particular doctor based on the plurality of visits to that doctor in a given year, not whether the doctor actually performed or referred the patient to the expensive services.

In what he calls an extremely bizarre example of the worst kind of unintended consequence, the formula could prompt doctors to "try to avoid seeing" patients with certain high-cost conditions, especially if the patients previously saw them or might switch to other doctors by year's end.

The penalty for low quality and/or high cost could affect 10.4% of providers in practices of 100 or more, cutting as much as 1% from their Medicare physician fee schedule payment, Miller says (based on estimates in a January 2014 report).

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