Five Variations in Payment Reform Can Impact Physicians

Janice Simmons, June 11, 2010

As physicians evaluate new payment options under healthcare reform, they should look at the new building blocks holding up the future economic structures. This can help in working with new healthcare delivery "pathways" such as accountable care organizations (ACOs), payment bundling, patient medical homes, and gainsharing, according to a new American Medical Association white paper released Thursday. 

Since many pilot projects are already underway in the private sector, "it’s critical that physicians in all practice sizes have the tools to succeed in these new programs." said Cecil Wilson, MD, AMA's president-elect in a statement.

In new paper, called "Pathways For Physician Success Under Health Care Payment And Delivery Reforms," author Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform, said the new payment reform proposals vary from the current payment system in at least one of five ways:

Paying more for some services. New payment systems may pay for certain services—or ways of delivering services—that are not currently paid for today. Or, they may pay more for services than are paid for today.

Basing payment on quality. New payment systems may make the payment amount for a service dependent on the quality of the service delivered. Examples will include pay for performance; nonpayment for services required to treat complications, limited warranties, non payment for services failing to meet minimum quality standards, and quality based tiering.

Bundling separate services into one payment. New payment systems may make a single combined payment for two or more services for which a physician is currently paid separately—or for services not currently paid for.

Making payments dependent on the amount and costs of services delivered by other physicians. New payment systems may make a physician’s payment dependent on the number of services or the cost of services delivered by other providers. This will include areas such as shared savings/gain sharing, bundling multiple providers into a single episode payment, and virtual bundling.

Paying to support specific provider structures, systems, and locations. The new payment systems may pay more for certain kinds of infrastructure or practice structures—or for physician practices located in particular geographic areas or serving specific kinds of patients.

In addition, each of these categories will be accompanied by changes in payment methods, including: condition/severity adjustment; outlier adjustments, quality and resource use measures and performance targets; patient attribution rules; and insurance benefit designs (including value based benefits and wellness incentives).

"This new member benefit maps out pathways to success, including compensation and legal issues and real life examples from physician practices," said Wilson. Other topics discussed in the white paper include the opportunities and challenges for physicians in small independent practices, and the key skills and resources needed to overcome barriers.

However, "physicians do not need to be employed by hospitals or join large group practices" in order to successfully "achieve the goals of managing costs and quality that payment reforms are designed to support," said Wilson.

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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