Bob Doherty

Senior Vice President, Governmental Affairs and Public Policy

American College of Physicians

March 3, 2009

Designing new payment models for Medical Care: Version 2009 (PCMH)

Presentation toThe Medical Home Summit

Traditional FFS Medical Care: Version 1965

Based on the way that care was provided 40 years ago—not way it delivered today• patients treated only when sick (acute

condition)

• little or no emphasis on prevention and coordination

• care based on doctor’s best judgment as informed by CME and journals but not on evidence-based guidelines

• specific visit or procedure code

• individuals not teams

• “usual, customary, reasonable” (UCR)

RBRVS-FFSMedical care: Version 1989

•Same as 1965 version but

•Instead of UCR, based on RBRVS

•Relative values based on time, mental and physical effort, and iatrogenic risk

•Initial pay shift to primary care, eroded over time

Traditional capitation:Medical Care: Version 1995

Per patient per month

Not risk-adjusted

Transfer of insurance risk to physicians

Incentive: do as little as possible, for as few as possible; keep people out of the office; don’t take on higher risk/higher use patients

Wanted! New pay models forMedical Care: Version 2009

Medical care today:

•prevention/management of illness rather than just treating disease

• care rendered by coordinated teams of health professionals

• clinical judgment informed by evidence-based clinical decision support

• results matter (not just service rendered)

• systems and processes of care to support better outcomes

Getting from here to there

“Here” is a payment system that discourages innovation, care coordination, teams, systems and better outcomes

“There” is a payment system that rewards practice innovation, care coordination, teams, systems and better outcomes

How do we get from here to there?

“There” . . .

The Patient-Centered Medical Home

• Care coordinated by personal physician

• Responsible for “whole” person

• Prevention and coordination

• Systems

• Patient-Centeredness

But a PCMH won’t work without a payment model designed for Medical Care: Version 2009

Payments to a PCMH must:

Be sufficient to recognize the costs, work and time for a practice to be qualified as a PCMH and sustain it over time

Recognize the value of physician time and work that falls outside of a face-to-face visit

Help offset the costs of acquiring HIT and other systems

Payments to a PCMH must:

Recognize the increased expense and work associated with caring for more complex patients

Provide positive incentives for practices take the first step up the QI ladder . . . with additional incentives to climb higher

Payments to a PCMH should not be based solely on:

doing as much as possible for as many as possible (FFS)

or doing as little as possible for as few as possible (capitation)

or how well a practice scores on quality measures (P4P) that may ignore elements of care that are not being measured

A better idea: combine FFS, monthly care coordination fees, and performance The PCMH payment equation:

$ Monthly care coordination prospective payments (tiered: levels 1, 2, 3)

x risk adjuster

$ Risk-adjusted care coordination fee

+ $ FFS payment for visits

$ Total payment w/o performance

+ $ Performance based payments*

= $ Total payment to the PCMH

*could be combined with shared savings model

*Incorporates work outside of visit and costs of HIT; amount could vary depending on practice capabilities per NCQA scoring

Patient-Centered Primary Care: The Denmark Example ______

Blended primary care payment system•Fee-for-service•Medical home payment

Organized off-hours service Health information technology

•Reimbursement for email•Health information exchange;

common portal

“Denmark leads the way”

98% of primary care MDs have totally electronic records and e-RX

Highest public satisfaction with health system among European countries

Source: Commonwealth Fund, 2006

Why is this a better way to pay? Reduces incentives for excess volume

Creates incentives for physicians to spend time coordinating care outside a visit

Accelerates adoption of HIT and other best practices

Assures that physicians will see the most complex patients

Rewards measurable improvements (quality, efficiency, satisfaction) and patient-centered care

Supports value of primary care

Payment Model for Non-PCMH

•Prospective Payment:-Structure-Care coordination &-Non face-to-face care-Adjusted for complexity ofpopulation & services•Enhanced RBRVS•Fee for Service•Performance

•Fee For Service•Enhanced RBRVS•Performance

•A la carte codes for:-Care Coordination-Non face-to-face care

Payment Models for the PCMH

•Fee For Service•Enhanced RBRVS

•Add-on codes•Performance

•Prospective Payment:-Structure

-Care coordination &-Non face-to-face care

-Adjusted for complexity ofpopulation & services•Enhanced RBRVS

•Fee for Service•Performance

•Global Payment•Procedures

•Performance

MEDICARE MEDICAL HOME DEMONSTRATION

PER PATIENT PER MONTH PAYMENT RATES, OVERALL AND BY PATIENT HCC SCORE

PPPM HCC Score <1.6

≥1.6

Tier 1 $40.40 $27.12 $80.25

Tier 2 $51.70 $35.48 $100.35

Practice Implications

Need to understand challenges of transformation

Initial capital and restructuring costs

Ongoing support & maintenance

Reporting on quality, cost and satisfaction

Implementation of HIT coincident with PCMH

What needs to be done to get “there”? More study needed on costs to practices to

become PCMHs

More work on risk-adjusters and tiers for the PPPM care coordination fees

Work with payers to overcome technical and administrative challenges

More work on building in performance-based compensation and shared savings

Pilot-testing

Benchmarks for evaluations

Does it provide sufficient support for practice transformation?

Does it make primary care more competitive and viable?

Is it administratively feasible for physicians and payers?

Does it work in smaller practices?

Does it create incentives for patient-centered care?

Does it accelerate adoption of the PCMH model?

Can it be scaled up to a national scale?

Does it lead to better patient care?

Benchmarks

Summary

Current pay models do not support the way care is delivered in 2009 (or the way it should be)

New models are needed to support prevention, systems, and care coordination in PCMH

Hybrid model (Denmark) holds particular promise

Model must be viable for practices (including smaller ones), payers

Summary

More work needs to be done on development, implementation and evaluation

But the promise of the PCMH will not be realized without a new payment system that works for patients, physicians and payers

COMING SOON!

Physician Payment: Version 2009!