Rachael Brashears, DO, MBA
PGY2, University of Missouri School of Medicine
As residents we spend much of our time working, studying, mastering our physical exam, building patient relationships, and learning the field of PM&R. There are many looming questions that hang over our heads as we near the end of our residency: Where will I work? Do I want a job in academics or private practice? Would I rather be employed or a business entrepreneur? At this point in our careers, we seldom think about the various payment models of reimbursement for physicians and health care systems. Furthermore, throughout our medical training there is very little emphasis on education for the business of medicine or the economic infrastructure of this complicated system. The purpose of this article is to educate residents on various payment models and how they may impact future physiatric practice.
There are many existing and emerging health care payment models. Although each model is different, they do share one unifying factor: quality. Quality outcome metrics are key in the final reimbursement rates of the payment models. The 8 basic types of health care payment models we will discuss include: Fee-for-Service, Pay-for-Coordination, Pay-for-Performance, Bundled Payment, Upside Shared Savings Programs, Downside Shared Savings Programs, Partial or Full Capitation, and finally Global Budget1. This may seem overwhelming at this point; however, through the next 2 the PM&R Resident newsletters, we will break down each of the payment models. This article will cover the following 4 health care payment models: Fee-for-Service, Pay-for-Coordination, Pay-for-Performance, and Bundled Payments.
This is the most traditional of all of the health care payment models, and likely the most familiar. With this model, payers or patients pay health care providers for each particular service performed1. This emphasizes more of a focus on volume-based care over value-based care, since reimbursement increases as the number of services increases. There is a continuing debate over whether this model incentivizes providers to prescribe more and more services1. With FFS, a sick patient is worth more money to a provider than a healthy patient. This model of payment has been implicated as having directly contributed to the rising medical costs in our country2. In our current health care era, where there is a focus on health care costs, this model is quickly being phased out. Incentives are lacking with this model to implement preventative care strategies, prevent hospitalizations or take any other cost-saving measures2. The providers are not at any risk of losing any money; instead, they can only increase their income by providing and billing for a greater number of services.
The most common Pay-for-Coordination model is the “Patient-Centered Medical Home.” This model focuses on coordinating the care between a patient’s primary care physician and specialists. It is a team-based approach consisting of physicians, nurses, medical assistants, pharmacists, nutritionists, social workers, and care coordinators, and it also integrates mental health and specialty services for holistic patient care3. One of the focuses of this model that is overlooked by the traditional FFS model is the substantial amount of nonclinical work that goes into coordinating patient care, including patient education, communications with various health care providers, phone calls, emails, scheduling appointments, and interactions with patients outside the clinical setting. This model relies heavily on health information technology and electronic medical records to help coordinate care and facilitate communication amongst the various providers3. Improving communication can reduce the redundancy of expensive tests and procedures between the primary care provider and the various specialists. It also helps drive down the overall costs of health care with a focus on preventative care in an attempt to reduce expensive emergency room visits and hospital admissions. The transformation of primary care practices into patient-centered medical homes is supported by several Centers for Medicare & Medicaid Services (CMS) Innovation Center programs, including the Multi-Payer Advanced Primary Care Practice (MAPCP) Demonstration and the Comprehensive Primary Care (CPC) Initiative3.
This model is also commonly called “Value-Based Reimbursement.” With this model, financial rewards are offered to providers who achieve, improve or exceed their expected performance on specified quality and cost measures, which essentially incentivizes providers to improve the quality and efficiency of health care. A certain set of quality measures are defined and clinicians can then earn a bonus or increase their future earnings based on their performance within the quality measures. Such quality measures include patient access to care, use of electronic medical record systems, and the patient’s experience or satisfaction with their care2. This model also penalizes health care providers by reducing reimbursement rates in the event of poor outcomes, hospital readmissions, medical errors, and for increased costs of medical care4. It is meant to improve the quality of care and is quickly gaining market share. In fact, more than half of commercial health maintenance organizations are using this model, and recent legislation has required CMS to adopt this model for Medicare4. This model encompasses many different types of measures, such as process, outcomes, patient experience, and structure. For instance, measuring blood pressure at every office visit, lowering a patient’s blood pressure over time or counseling patients to stop smoking are all measures that are recorded and can affect reimbursement over time.
Bundled Payment Model
This model is also known as “Episode-of-Care Payment.” With this model, the health care system is provided with a set sum of money to cover the entire episode of care. Commonly-bundled episodes of care examples include an inpatient hospital stay for a heart attack or an inpatient rehabilitation stay for a stroke. It covers all care related to an entire “episode” of illness. Medicare’s Diagnosis Related Group (DRG) payments to hospitals are essentially a form of Bundled Payment5, where a hospital is reimbursed a set sum of money based on the diagnosis being treated during that stay. This model is considered to be the middle ground between FFS and Global Payment models. It typically requires providers and facilities to take on a financial risk for certain designated care, while leaving the FFS payment system intact for all other services5. For example, a defined episode of care for the bundle could include a time frame of 3 days prior to a knee replacement surgery and include all care extending to 30 days past a patient’s discharge from the hospital for the procedure. Services delivered by multiple providers are “bundled” into a single payment and then the payment is divided amongst the providers (orthopedic surgeon, anesthesiologist, physiatrist) and facilities (acute hospital or surgical center, rehabilitation hospital, nursing and therapy staff) taking care of the patient during that time period5. This promotes a team-based approach to health care. This model is similar to the FFS model, in that it compensates providers for treating sick patients, but without specific incentives to provide preventative care6. This reimbursement method is commonly used in the rehab setting with bundled payments for total hip and knee replacements under Medicare's Comprehensive Care for Joint Replacement model. Furthermore, rehabilitation centers will start to see more bundled payments as they are on the horizon for hip and femur fractures and cardiac rehab.
Stay tuned for the next the PM&R Resident newsletter in June, where we will break down the remaining 4 health care payment models: Upside Shared Savings Programs, Downside Shared Savings Programs, Full or Partial Capitation, and Global Budget.
- “Healthcare Payment Models: Types of Payment Models.” McKesson, 2017, http://www.mckesson.com/population-health-management/resources/what-payment-models-exist/. Accessed 1 Jan. 2017.
- Harold D. Miller (September–October 2009). "From Volume to Value: Better ways to pay for health care". Health Affairs (Project Hope). 28 (5): 1418–1428. doi:10.1377/hlthaff.28.5.1418. PMID 19738259.
- Breakaway Policy Strategies for FasterCures. “A Closer Look At Alternative Payment Models.” Fastercures, 2017, http://www.fastercures.org/assets/Uploads/PDF/VC-Brief-AlternativePaymentModels.pdf. Accessed 8 Jan. 2017.
- Hughes, Justin. “Difference Between Pay-for-Performance and Fee-for-Service Payment Models.” CureMD, 5 Nov. 2013, https://blog.curemd.com/difference-between-pay-for-performance-and-fee-for-service-payment-models/. Accessed 8 Jan. 2017.
- Burton, Rachel. “Payment Reform: Bundled Episodes vs. Global Payments: A debate between Francois de Brantes and Robert Berenson.” Timely Analysis of Immediate Health Policy Issues, Sep. 2012, http://www.urban.org/sites/default/files/publication/25816/412655-Payment-Reform-Bundled-Episodes-vs-Global-Payments.PDF. Accessed 1 Jan. 2017.
- "Bundle Medicare’s Payments to Health Care Providers." OPTIONS FOR REDUCING THE DEFICIT: 2014 TO 2023. Congressional Budget