Introduction
The American Academy of Family Physicians (AAFP) believes value-based payment (VBP) should support collaborative partnerships between patients and physicians, improve the quality and patient outcomes of care and reduce unnecessary health care spending. To achieve these aims, VBP for primary care must support the four key functions of primary care (i.e., first-contact access, comprehensiveness, coordination and continuity), which are essential to meeting the goals of improved quality and reduced spending.1 The success of VBP is highly dependent on alignment across payers and unlikely to work if only a small subset of a practice's patient population is included. Increased investment in primary care across public and private payers using VBP models designed for primary care will contribute significantly to improving health, reducing inequities, reducing the per capita cost of care over time and improving the well-being of the care team.
To help facilitate the transition away from exclusive fee-for-service (FFS) payment and toward VBP arrangements that sustainably support the kind of robust primary care that is essential to a high-performing health care system, the AAFP has established a set of guiding principles to describe the ideal design for key components of VBP models for primary care.1
This paper and others in the series aim to translate the guiding principles into actionable steps that key stakeholders can use to implement VBP models that sustainably support primary care. The AAFP will provide background information, industry context and stakeholder recommendations, along with our expertise, to provide a broad understanding of the issues unique to primary care in VBP implementation.
This call-to-action brief focuses on the following principles1:
Value-based payment (VBP) models should be aligned across payers and provide predictable, prospective revenue streams as a foundation to sufficiently support comprehensive, longitudinal, patient-centered, high-value care, in addition to performance incentives that reward improvement, as well as sustained performance against financial and quality benchmarks. Within practices and other health care organizations, individual physicians should share in the financial rewards that accrue from their performance.
The sections below address reasons family physicians should become familiar with VBP models in primary care, the current state of such models, areas of success, areas that need improvement and recommendations for stakeholders to drive greater implementation of these guiding principles.
Rationale for Action
The current state of primary care in the United States is precarious. Research in the United States and other countries suggests that increased reliance on primary care is associated with longer life, better health and more equitable care.2,3,4 Despite the overwhelming evidence of primary care’s many benefits, the U.S. health care system has failed to financially prioritize primary care in its FFS payment system. The supply of qualified primary care physicians is insufficient and dwindling,5 as the number of new primary care physicians is not enough to replace the loss of practicing physicians to early retirement or other non-practicing career options that offer comparable or higher pay and less stress. This inadequate supply of primary care physicians contributes to the nation’s worsening health outcomes and life expectancies, and it places undue pressure on the broader health care system to care for an increasingly sick and aging population.6,7
A contributing factor to the inadequate supply of primary care physicians is the disproportionately low level of financial support for primary care. The United States spends more on health care delivery than any other developed nation,8 yet systematically underinvests in primary care.9 While measuring primary care investment is challenging given the many and varied definitions of primary care spending, researchers estimate that the United States invests only 5-7% of total health care spending on primary care, while other industrialized nations, on average, invest 14%.9 Perhaps most telling is that nations with greater investment in primary care consistently demonstrate health outcomes far superior to what is experienced in the United States.6 The underinvestment in primary care in the United States hinders primary care practices from investing in the people, technology, and processes necessary to improve outcomes for patients.
Like most physician services in the United States, primary care services are paid predominantly on an FFS basis that incentivizes utilization irrespective of quality.10 The comparatively low level of U.S. investment in primary care is largely driven by the current FFS valuation methodology that significantly undervalues primary care services and office visits relative to other specialty services.11 Undervaluing primary care is further reflected in physician compensation, as family medicine and other primary care physicians are paid substantially less than other specialist physicians, whether they are employed or in independent (physician-owned) practices.4,11 The undervaluing of primary care relative to other specialties contributes to the worsening workforce crisis in primary . Narrowing the financial gap between primary care and subspecialty physicians could help reduce the incentive for medical students to choose specialties other than primary care.
Beyond the problem of inappropriately low payment rates, the transactional nature of FFS is fundamentally misaligned with the continuous patient relationships that drive the delivery of high-quality, comprehensive, coordinated and longitudinal primary care. AAFP policy on “Comprehensive Care, Definition of” describes the practice of continuing comprehensive care as “the concurrent prevention and management of multiple physical and emotional health problems of a patient over a period of time in relationship to family, life events and environment.” High-quality primary care includes many discrete services, each of which requires significant documentation by the physician and care team to receive payment under the complex coding requirements of FFS.
Approximately one-third of family physicians were estimated to work in independent practices prior to the COVID-19 pandemic,12 with the number working as employees in practices owned by hospitals or corporate entities increasing overall from 2019 to 2022.13 Family physicians newer to the workforce are also more likely to be employed than more established family physicians.
Physician compensation frequently includes a productivity component tied to relative value units (RVUs) produced under FFS payments.14 Therefore, whether employed or in independent practice, primary care physicians must concentrate on maximizing the volume of services, which leads to burnout and limits their ability to invest in other aspects of care despite the potential value to patient health.15
Moving away from exclusive reliance on FFS and increasing primary care investment through VBP and other alternative payment models that sustainably support the advanced functions of primary care with prospective population-based payments at the organizational and individual level in an aligned manner is vital to ensuring our nation has the primary care physician supply necessary for a healthy future.
Considering the potential to properly invest, support and sustain primary care practices in the movement toward VBP models, the AAFP recommends the following actions in Table 1 for various stakeholder entities.
While not all purchasers are able to undertake the actions noted above, they do have levers to help achieve such actions through other stakeholders. For instance, given the prevalence of self-funded employers and their ability to stipulate their preferences in a request for proposal (RFP) process, such purchasers can use the RFP process as a mechanism to stipulate a minimum percentage of overall spending on primary care, as well as a minimum percentage of non-FFS payments going to primary care. Likewise, to the extent a purchaser is self-insured, one can argue they are the payer, as well as the purchaser, and thus capable of the same actions ascribed to the payers above.
Current State
Recognizing the need for payment reforms to better align incentives across health care stakeholders and reward improved patient outcomes, public and private payers are increasingly adopting VBP arrangements (such as accountable care organizations [ACOs]), in which financial incentives are tied to improvements in patients’ quality, costs and experiences of care than the volume of services furnished.16
While this concept is not new, the Center for Medicare and Medicaid Innovation (CMMI), created by the Affordable Care Act (ACA) more than 10 years ago, continues to bring increased focus and commitment to testing new value-based initiatives—often referred to as alternative payment models (APMs). The Centers for Medicare and Medicaid Services’ (CMS) current strategies reflect a clear intent to apply the learnings from the CMMI demonstrations and move the broader market toward more advanced APMs or VBP models that can be widely scaled and adopted.17 In fact, CMS aims to move all Medicare beneficiaries and the majority of Medicaid enrollees into accountable care arrangements supported with VBP models by 2030.
Among the many potential benefits of VBP models for primary care is decreasing the reliance on undervalued and overly burdensome FFS payments and increasing investment with prospective, population-based payments. The chronic underfunding of primary care via a predominately volume-based payment system makes the transition to VBP models relevant and important to family physicians, whose FFS payments are undervalued despite their outsized role in population health.
Participating in APMs that offer predictable, prospective revenue streams using population-based payments enables practices to invest in the infrastructure and care teams needed to deliver the “four C’s” or “advanced functions” of primary care.18 Many of these important functions (first-contact access, comprehensiveness, coordination, and continuity along with care management, caregiver and patient engagement, and planned care and population health) are currently undervalued, require significant documentation or are not compensated under traditional FFS payments.19 Additionally, prospective, population-based payments, such as capitation, can be less burdensome than traditional FFS payments that rely on complex documentation and tracking set forth by the Current Procedural Terminology (CPT) coding requirements and payer policies.20 Given these and other benefits, there is mounting multi-stakeholder, cross-industry support for a primary care payment system that rewards value and holds promise for slowing the overall growth of health care costs.
Since 2015, the Healthcare Payment Learning and Action Network (HCP-LAN) has provided a forum for multi-stakeholder engagement with the explicit goal of increasing the adoption of APMs that shift health care dollars away from FFS and toward VBP arrangements. The HCP-LAN developed the APM Framework to provide a common vocabulary and structure for discussing and measuring industry adoption.
The APM Framework in Figure 1 outlines the following four categories of health care payment approaches21:
Used with permission from the Health Care Payment Learning & Action Network. Alternative Payment Models. The APM Framework. http://hcp-lan.org/workproducts/apm-framework-onepager.pdf
The population-based payments of Category 4 offer prospective, non-FFS revenue tied to broad accountability for patients’ care needs—ranging from the total cost of care to more targeted accountability for specific services or a range of services, including primary care capitation.
Unfortunately, progress toward Category 3 and 4 APMs (models generally referred to as more advanced forms of VBP) has been slow. According to the HCP-LAN’s latest data, assessing APM adoption across traditional Medicare, Medicare Advantage, Medicaid and commercial markets in 2021 showed that 40.5% of payments were still FFS with no link to quality (Category 1), while just 7.4% of payments were made via non-FFS population-based payments (Category 4).22 The share of primary care dollars that come through prospective payment mechanisms is relatively unknown, and the majority of VBP arrangements are still largely tethered to an FFS architecture.22,23
What Is Not Working
Many VBP models remain tethered to FFS payments, limiting practice transformation that can otherwise occur under a well-structured population-based, prospective payment model. While sufficiently high levels of capitation are necessary to truly transform practices, most VBP arrangements continue to rely primarily on FFS payments with bonus opportunities or penalties based on predetermined performance metrics.24
Practices are limited by a lack of viable APMs for primary care, with misaligned and inadequate incentives to transition to such models. Where models are available, they are often limited, with fewer options for certain practice types (e.g., small, independent and safety net practices, including practices serving a large proportion of patients with Medicaid) or geographies (e.g., rural, underserved urban). Additionally, many payers fail to offer viable approaches to accepting downside risk, often requiring primary care practices to accept such risk before they are prepared to do so, which serves as a deterrent to participation. Requirements to accept downside risk—and other costs associated with transitioning to VBP arrangements—may feel untenable to practices, especially if they mistrust performance measurement.
Practices are further limited by the lack of payer alignment, resulting in ongoing administrative burdens as they work to operate under several sets of rules and payment structures. Lack of alignment across multiple payers with whom primary care practices contract means fewer practices qualify to meet patient thresholds set by individual payers.
Given these limitations, the incentives to transition are often insufficient. For example, under Medicare’s Quality Payment Program (QPP), the bonus to those participating in Advanced APMs is just 5% through the 2024 payment year, declining to 3.5% in 2025, with subsequent years providing only a 0.5% differential in the Medicare fee schedule updates over non-Advanced APM participants.25,26
Organizational financial rewards earned through third-party payer contracts are poorly or unfairly distributed to the individuals and/or service lines associated with earning them. Physician compensation contracts for employed physicians are frequently tied to productivity incentives, which are most often measured in FFS relative value units (RVUs). This is true whether the organization is paid on an FFS or VBP basis. These individual incentives embedded in compensation agreements are frequently at cross-purposes with the goals of VBP, which rely on team-based, comprehensive and coordinated care to achieve the outcomes required for VBP success. This challenge is not limited to FFS versus VBP incentives for employed physicians.27 In some instances, improved evaluation and management (E/M) valuation reflected in organizational payments has not been immediately reflected in the compensation of individual physicians responsible for earning the enhanced revenue for their employer.
The evidence in support of VBP models for primary care has been hampered by model design, implementation and evaluation. Successes like the ACO Investment Model are not yet the norm. Statutory requirements and limitations associated with federal VBP models for primary care have impacted their ability to demonstrate “success” as defined in statute. Underwhelming performance results are partly due to the inherent challenges of national, payer-specific evaluations that fail to recognize regional successes, which are frequently fueled by participation from multiple payers, and of the extensive administrative complexity of the VBP landscape.28 Other, commercial payers who participate in multi-payer models or have their own models should evaluate such models, if they do not already, and share those evaluations.
What Is Working
Improvements to E/M payment levels facilitate investment. Because many APMs continue to rely on an FFS architecture (32.6% in 2021),22 improved payment for office/outpatient E/M services helps transition to value-based primary care models by increasing overall primary care payment. Improved payment for office/outpatient E/M services has come through increased relative value units assigned to those services. It has also come through payment for code G2211 (Visit complexity inherent to evaluation and management associated with medical care services that serve as the continuing focal point for all needed health care services and/or with medical care services that are part of ongoing care related to a patient’s single, serious condition or a complex condition), an add-on code primary care physicians and others may list separately in addition to office/outpatient E/M services. Likewise, the addition of new FFS billing opportunities that recognize the delivery of high-value primary care as beyond the scope of a single service (e.g., chronic care management, transitional care management) has aided in this transition. These codes allow primary care practices that rely on FFS as their primary revenue source to pay for important infrastructure, including staff and technology, that is essential to their success under VBP models. While that revenue may be helpful, it will likely be insufficient to fund all necessary infrastructure changes, so the practice remains dependent on stable FFS payment.
Promising early results continue to drive participation and model improvements. APMs with proven results have encouraged more practices to transition to value-based primary care models, an encouraging sign since physician-led ACOs have had more success than their hospital-led counterparts.29 The ACO Investment Model (AIM), a former primary care and population management model administered by CMMI, offered advance payments to ACOs to fund practice transformation. The model demonstrated savings and reduced inpatient admissions, readmissions, post-acute care utilization and emergency department visits while maintaining quality.30 The success of AIM led to permanent changes to the Medicare Shared Savings Program (MSSP), incorporating advanced payments to support physician participation in new ACOs.31 Results in certain regions of the country participating in CMMI’s Comprehensive Primary Care Plus, or CPC+, have also shown promising results.32,33 The details on CMMI’s latest primary care model, Making Care Primary, are unfolding as this paper is being finalized for publication. However, CMMI has included several model improvements, such as including federally qualified health centers as eligible participants and optional upfront investments for smaller organizations with fewer resources and new to VBP.
State efforts aid progress by targeting primary care-focused investment goals or aligned model adoption. Several states are targeting efforts to boost investment in primary care. For example, Oregon, Connecticut and Pennsylvania have created investment targets to increase the share of primary care spending in their states.34 Other states, like Colorado,35 Washington36 and California37 are working to develop multi-payer primary care APMs.
Growth is occurring among advanced primary care organizations. The rapidly growing market for advanced primary care organizations, as evidenced by the influx of private equity and venture capital, is demonstrating the value and potential of transformed primary care delivery. Organizations that are built for success using VBP revenue models rather than incrementally transitioning away from FFS demonstrate that VBP works. Experts predict these newer organizations could comprise nearly one-third of the primary care market by 2030.38 Other segments of primary care innovation experiencing growth include sophisticated value-based enablement partners to support the successful participation of independent primary care practices.39
Call to Action
The AAFP calls on stakeholders to measure, track and increase investment in primary care to facilitate the transition to VBP by primary care physicians. As part of this effort, the AAFP calls on purchasers, payers and policymakers to provide greater incentives and support to primary care physicians to transition to VBP, including advance payment opportunities and “upside-only” options for first-time VBP participants.
The AAFP calls on purchasers, payers and policymakers to provide a variety of VBP models for primary care that are aligned across payers. The AAFP calls on stakeholders to ensure these aligned VBP models provide predictable, prospective revenue streams, including incentives that reward improvement and sustained performance. Further, the AAFP calls on all stakeholders to subject implementation of VBP models to rapid and frequent reassessment across these guiding principles.
Lastly, the AAFP calls on primary care physicians and those who employ them to ensure that individual physicians share in the financial rewards that accrue to their organization from their performance.
References
(April 2024 BOD)