Medicare Payment: Value Is as Important as Volume

In its continuing quest for a resolution to the Medicare payment problem, the AAFP once again has weighed in on the issue by calling on Congress to repeal the sustainable growth rate, or SGR, formula and enact permanent payment reform that includes a positive payment differential of at least 3 percent for primary care physicians.

"Family medicine supports a clearly defined path to permanent payment reform," said AAFP President Glen Stream, M.D., M.B.I., of Spokane, Wash., in a written statement (8-page PDF; About PDFs) to the Senate Health, Education, Labor and Pensions, or HELP, Committee.

"Whether this includes a multiyear extension of the current payment formula with a higher conversion factor for primary care, or a permanent fix to the fee-for-service system that includes (a) higher payment rate for primary care services, our recommendation is that the current flawed approach does not serve Medicare patients well and must be changed to reflect the value of primary care and family physicians," said Stream in a written statement for a HELP Committee hearing on the role of health care delivery system reform in lowering costs and improving quality.

Stream described the current health care system as "fragmented, uncoordinated, wasteful and expensive."

"Every day, family physicians and other primary care doctors see the results of our poorly functioning system of care. Duplicative and unnecessary tests are ordered. Diseases remain undiagnosed and untreated until they result in acute conditions. Patients with multiple chronic illnesses are shunted from one (sub)specialist to another -- each one of whom treats only one of the diseases.

"Increasing the role of primary care physicians in delivering health care would result in "high-quality, coordinated, cost-effective care to patients," said Stream.

The current payment system for Medicare hinders primary care physicians because it tries to control "the volume of health services at the individual physician level by imposing payment penalties globally across all physician payments," said Stream.

Typically, a payment model such as the SGR model, which calls for lower payment rates when the volume of services exceeds established targets, would result in physicians reducing the number of services they provide. Instead, the SGR has created an incentive for procedure-based physicians to boost the number of services provided to ensure stable or increased payments.

This practice, however, is unavailable to family physicians and other nonprocedure-based physicians, said Stream. For primary care physicians, the alternative is to stop providing services because the Medicare payment rates for their services don't cover their fixed costs.

Basing the payment system on the number of services provided rather than the value of services provided doesn't work, said Stream. The system doesn't value the comprehensive care provided by family physicians and other primary care physicians, including individual and population care management, behavioral health, behavior change coaching, facilitating social services, and making appropriate referrals.

"The unintended consequences of the (SGR) payment formula are why the AAFP and all major physician organizations long have recommended that Congress repeal the SGR," said Stream.

In his statement, Stream advocated the patient-centered medical home, or PCMH, model as an effective alternative to the current Medicare payment system. The PCMH is "a health delivery model based on blended payments to a primary care team, led by a physician, that includes fee-for-service and a monthly per-patient fee to cover the coordination of health care that focuses on preventing illness and managing chronic diseases like diabetes or asthma," said Stream. The model also recognizes quality improvement.

"The evidence for the value of primary care in restraining health care costs and improving quality is very clear when that care is delivered in a team-based, patient-centered medical home," said Stream.

Regardless of what kind of alternative Medicare payment system is put into place, Stream noted, "the AAFP believes that it will succeed only if it is built on providing health care that is patient-centered and incorporates an advanced primary care practice that is team-based and technologically capable."