Skip to main content

SGIM Calls for End to Fee-For-Service

 |  By John Commins  
   March 04, 2013

Fee-for-service medicine is a financially unsustainable payment model that should be phased out by the end of the decade, a study commissioned by the Society for General Internal Medicine recommends.

The study released Monday by SGIM's National Commission of Physician Payment Reform calls for an aggressive five-year transition into blended payment models such as patient-centered medical homes or accountable care organizations that reward outcomes quality and value. During the transition, the commission said fee-for-service would be "recalibrated" to correct payment inequalities for services such as evaluation and management.

Commission Chairman, Steven A. Schroeder, MD, professor of health and healthcare at the University of California, San Francisco, says he went into the year-long project last March thinking that fix fee-for-service could be fixed, but concluded after months of study that an aggressive phase-out makes more sense.

"It's so complicated to fix it and we've been trying for 30 years," Schroeder tells HealthLeaders Media.

"It promotes higher volume, and because the valuations tend to be huge, to create more high-tech things. It changes the mix of services that a physician provides because there is such a gray area in healthcare. At the margins it creates incentives to do more costly things."

Schroeder acknowledges that a transition away from fee-for-service will be complicated. "Phasing out implies that it will take some time," he says. "There may be pockets due to size or geographic isolation or difficulty in getting other forms of payment. You will still have some stand alone fee-for-service, but the commission's sense was we should try to make these more oddities than common practice."

Richard "Buz" Cooper, MD, a healthcare economist at the University of Pennsylvania's Wharton School, told HealthLeaders Media in an email exchange that eliminating fee-for-service has been a popular idea in the healthcare reform movement but that "it's hard to find evidence that FFS makes a difference."

"My impression from the various studies is that the added productivity of physicians under FFS counterbalances their poorer productivity under other systems of compensation, and the net result is that there is little difference," Cooper says.

The commission's 12 recommendations include increasing reimbursement for evaluation and management services for all physicians, while holding flat reimbursements for technical services provided by surgeons, radiologists and other specialists. Schroeder says fee-for-service does not reward physicians for preventive healthcare consultations and discourages them from spending time with chronic care patients to create a care regimen.

 



The skewed incentives of fee-for-service have created a widening pay gap between specialists and primary care physicians and have contributed to the nation's shortage of primary care physicians. The study notes that radiologists earned $315,000 on average in 2011 while primary care physicians earned $158,000.

Schroeder says that while holding flat reimbursements for specialty care would likely be resisted by specialists, they also would be compensated for evaluation and management services.

"What is different is we are not saying this is not just a primary care issue," he says. "It's an E&M issue which pertains to most specialists, to gastroenterologist and cardiologist and neurologist who have a mixture of E&M and technical procedures. All boats will rise on that. We are not just saying let's just do a special subsidy for primary care doctors."

American Medical Association President Jeremy Lazarus, MD, reviewed the report and said in an emailed statement to HealthLeaders Media that "many of the ideas discussed in the physician payment report, such as the need to eliminate the Medicare physician payment formula, are consistent with AMA policy, which is developed by our House of Delegates with members from all state and national medical specialty societies."

"However," Lazarus added, "much of this report reflects the view of only one specialty and does not reflect the broad, diverse field of medicine."

The commission report also calls for equal pay for physician services regardless of the setting. The study noted that Medicare pays $450 for an echocardiogram in a hospital and $180 for the same procedure in a physician's office.

"Right now you have terrific incentives for hospitals and physicians doing the procedures to let the hospital buy them up," Schroeder says. "They can have a major increase in their billing for the same product and the public is stuck with increased fees. This is an example where you are getting no extra value. You are just paying more."

The commission also calls for the elimination of the widely reviled Sustainable Growth Rate cap, with the $138 billion cost of removing the reimbursement cap paid for by identifying and reducing overuse of Medicare medical services.

Anders M. Gilberg, senior vice president, government affairs with the Medical Group Management Association, says many of the recommendations brought out in the report are "generally in line" with previous reports from other groups, commissions and think tanks.

"There is a recognition in this paper that you wouldn't simply be able to save money in Medicare just looking at the physicians' services piece of the pie alone. Physicians' services are only about 12% of the Medicare payment," Gilberg says. "It seems like what they are thinking here and what others are thinking is what can physicians do to prevent hospitalizations and in less-costly settings. My gut reaction is that it does have that bigger-picture focus that looks across multiple aspects of Medicare for savings, which is what you'd have to do to really save the system money."

Schroeder says many of the recommendations in the report will face significant opposition from vested interests in the healthcare sector. Still, he hopes the report will "advance the dialog" about how transitioning compensation models.

The difference now, he says, is the widespread understanding that the growth in healthcare expenditures—now averaging about $8,000 annually per person in the United States—is unsustainable. 

"I have been following this stuff since the 1970s. I have never seen it this intense and I have never seen the non-healthcare sector so vested in solving this issue," he says.

"The status quo is always comfortable. It's always hard to get people to accept change if they think they are giving something up. On the other hand there is this huge realization that compared to the last 30 years the cost question is here to stay. It's not a question of 'if' but 'how.'"

"There is going to be a lot of back-and-forthing. When you take money out of something the people who are affected are going to push back. There is $3 trillion in the healthcare system now. We are at 18% of GDP. Many prestigious bodies have said there is a tremendous amount of wasteful care, so I can't believe we can't find ways to work things through."

"I would urge the players to try to carve the best kind of solution they can to maximize value to patients, make doctors and hospitals feel like they are providing good value, and bend the cost curve. Will it do so? I certainly hope so."

Pages

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

Tagged Under:


Get the latest on healthcare leadership in your inbox.