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CMS Reforms Help Bring PCPs on Board with Reduced Costs, Readmissions

Analysis  |  By Gregory A. Freeman  
   January 08, 2018

Primary care physicians get the carrot when CMS incentivizes reduced readmissions and population health, while hospitals get the stick for the same goals. Nevertheless, hospitals and health systems should benefit from physicians joining the effort.

Hospitals and health systems should benefit financially from efforts by the Centers for Medicare & Medicaid Services to address wide variations in incomes for primary care and specialty practitioners, says the author of a recent analysis.

Researchers at the Urban Institute, with funding from the Robert Wood Johnson Foundation, explored two reform methods CMS is using to address underpayment for primary care in Medicare. The first involves new billing codes that incentivize specific activities that CMS wants clinicians to engage in and, second, is a demonstrations test of whether CMS can achieve favorable outcomes by paying for promising new care delivery approaches.

The analysis indicates that CMS is willing to pay increasingly large amounts for managing the care of patients with chronic conditions—a high-need, high-cost group. Improving the health of these patients could, in turn, save Medicare a lot of money, so CMS has an ongoing interest in figuring out how much it should reimburse for their care, says Rachel A. Burton, a senior research associate in the Health Policy Center at the Urban Institute.

"We first saw them paying physicians $10 per beneficiary per month through one demonstration, and another doubled it to about $20 per beneficiary per month, and that still didn't seem to be enough, so subsequent billing codes have increased it now to about $90," Burton says. "CMS clearly is trying to figure out how to cover physicians' costs and make it worth their time to manage these patients who use a disproportionate amount of resources."

CMS also is showing more willingness to pay physicians for non-face-to-face visits with patients through new billing codes for telemedicine, telephone calls, emails, and brief conversations among staff, Burton notes. CMS will now pay physicians for that care even in a month in which they did not have in-person contact with the patients, she says.

Fair pay

"That definitely suggests they're modernizing how we provide primary care, without having to drag the patient in every month in order to justify payment," she says. "They're also moving toward more of a blended payment approach, still using fee-for-service billing codes to pay for discrete, particular services that they want providers to do, but also using monthly fees meant to cover a laundry list of small things that would be hard to pay for individually. The idea is to pay them fairly for everything they have to do to provide good care to these patients, without breaking every single thing down to a separate charge, because that's not practical."

These efforts should benefit hospitals and health systems by making this group of patients healthier overall, which reduces the likelihood of costly inpatient care and readmissions, Burton says. That is especially important now that the Hospital Readmissions Reduction Program (HRRP) financially penalizes hospitals with high readmission rates, she says.

"There should be more primary care practices that are more actively trying to prevent readmissions now because of their own incentives [and] the new billing codes that are available to primary care practices," Burton says. "It's not all on hospitals now to prevent readmissions. They have partners out there in the community who have the same financial incentives to keep people healthy and out of the hospital."

Medicare is using different financial incentives to get their attention, Burton says. "More of a carrot with the primary care practices and a stick with the hospitals—but with the same ultimate goal," she says.

Any hospitals that were inclined to acquire primary care practices to get them on board with best practices to reduce readmissions—and also direct referrals of a healthier cohort of patients—might back off on those plans now that CMS is incentivizing the practices directly, Burton notes.

The motivation for most primary care acquisitions is obtaining the referrals, of course, but she notes some hospitals may have been drawn additionally to the idea of guiding the physicians to reduce readmissions for the hospital's benefit. That is less necessary now that the physicians have their own incentives.

"This is all a positive move for hospitals and health systems from a financial standpoint," Burton says. "Rather than a big announcement that CMS is changing something in a dramatic way, this has been more of an ongoing, incremental effort but the different approaches are coming together, and I think both primary care providers and hospitals are starting to see the benefits."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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