Our Prescription for Healthy Practices: Blended Payment

If you prescribed a medication for a patient and their condition didn't improve within an expected timeframe, would you advise them to keep taking the medication, despite their unfavorable outcome?

At some point, we have to acknowledge that it's not working. That might mean using the same drug in combination with another therapy, or it could mean starting something new entirely.

The same reality applies to our nation's system of physician payment and health care delivery. It's not working, and it's time to try something else.

Historically, family physicians -- like our subspecialty colleagues -- have been paid on a fee-for-service basis. And historically, we have been paid less.

Data from the Medical Group Management Association (MGMA) tells us that as primary care physicians, most of us should have seen our incomes increase in recent years. From 2008 to 2011, the average income for primary care physicians increased 14.4 percent to more than $212,000, says the MGMA. Although that increase is welcome news, the average income for subspecialists increased 13.1 percent during the same time, leaving an ongoing gap of more than $170,000 between subspecialists and primary care.

According to a recent physician compensation report from Medscape, the average radiologist makes almost as much as two family physicians.

Why? Because the fee-for-service system drives volume without regard to quality or necessity. The more tests and procedures subspecialists perform, the more they get paid. According to the Congressional Budget Office, nearly one-third of health care costs in the United States stem from unnecessary tests, procedures, medical appointments, hospital stays and other services that may not improve outcomes.

Meanwhile, we, as primary care physicians, don't get paid for many of the important services we perform related to coordinating and managing care. That brings us back to the aforementioned payment gap, which steers many medical students -- with their six-figure education debts -- to choose careers in higher paying subspecialties, leaving the nation with a shortage of primary care physicians.

So if a fee-for-service-based system results in too much care without regard for quality, what's the answer? A capitated system can lead to inadequate care, and a pay-for-performance environment can lead physicians to focus on certain aspects of care that payers are measuring at the expense of other necessary care.

Clearly, none of these methods yield an ideal solution when used as a sole incentive. That's why the Academy is advocating for combining incentives in a blended payment model that would provide better support for primary care and foster a more efficient health care system. Specifically, the AAFP supports a system that would include fee-for-service payments, quality incentives and care management fees for practices functioning as patient-centered medical homes.

The Academy isn't alone. CMS realizes that the way it has been paying for health care is unsustainable. The agency, which spent more than $985 billion last year on Medicare and Medicaid, is piloting the Comprehensive Primary Care (CPC) initiative in seven regions of the country. The project, which includes public and private payers, is a four-year initiative designed to test a model of care and a concurrent payment model that includes traditional fee-for-service payments, care management fees and the potential for shared savings.

If the CPC initiative is shown to improve quality and lower health care costs, CMS has the authority to expand the initiative nationwide.

More than two dozen private payers are participating in the CPC initiative. Health plans have been paying for volume, but what they want -- what their clients demand -- is value. Employers are weary of paying for health insurance that doesn't generate better results for employees.

National expenditures on health care reached $2.7 trillion (23-page PDF; About PDFs) last year. That number is expected to reach $4.7 trillion by 2021. Primary care has the potential to improve outcomes and care and lower costs in the health care system (8-page PDF; About PDFs).

Fee-for-service alone clearly has failed us and our patients. It's time to try something else.