Commission: Phase out fee-for-service payment by 2020

Stand-alone fee-for-service payment models should be phased out by the end of the decade in favor of a blended payment system that would improve quality of care while reining in costs, according to a report issued today by the National Commission on Physician Payment Reform.

Fee-for-service is a chief driver of annual healthcare costs of about $8,000 per person, the commission said in a summary of its findings, as well as a driver of what it called the uneven quality of healthcare. "Its skewed financial incentives promoted fragmented care and encourage doctors to provide more--and more costly care--regardless of its benefit to patients," noted the commission.

"We can't control runaway medical spending without changing how doctors get paid," Honorary Committee Chair and former Senate Majority Leader Bill Frist, M.D., said today in a statement. "This is a bipartisan issue. We all want to get the most from our healthcare dollars, and that requires rethinking the way we pay for health care."

The 14-member commission, chaired by former Robert Wood Johnson Foundation President Steven Schroeder, M.D., devised 12 recommendations for reforming physician payment models, which include:

  • The transition to an approach based on quality and value should start with the testing of new models of care over five years, incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade.

  • Because fee-for-service will remain an important mode of payment into the future, fee-for-service payments should be recalibrated to encourage behavior that improves quality and cost-effectiveness and penalize behavior that misuses or overuses care.

  • Eliminate higher payment for facility-based services that can be performed in a lower-cost setting.

  • Incorporate quality metrics into the negotiated reimbursement rates for fee-for-service contracts.

  • Eliminate the sustainable growth rate (SGR) formula.

"I've never seen payers--both private and public--so involved in realizing that we're not getting proper value from our healthcare dollar, and that we've got to do something about that," Schroeder, a professor of internal medicine at the University of California San Francisco, told MedPage Today.

He said evaluation and management (E&M) services are relatively under compensated, while technological services are relatively overcompensated, MedPage noted. That means income for specialties such as primary care has not kept up with medical inflation.

To learn more:
- download the report (.pdf)
- read the summary
- here's the MedPage Today article