Trendspotter: Reimbursement Changes Will Affect Docs Unequally

November 3, 2010
Ken Terry

Doctors will continue to duke it out over reimbursement while pushing for a larger pot that will fund quality incentives. The problem is, the money available to pay physicians isn’t going to keep growing because we can’t afford to keeping paying more for healthcare. So physicians must accept the hard reality that they have hit their limit and will likely see reimbursement shrink in coming years.

While the Affordable Care Act emphasizes insurance reform, another important part of the legislation concerns reform of the care delivery system, which is necessary to get costs under control. The two provisions that could have the most impact are those authorizing Medicare to test payment bundling and to launch a shared-savings program for accountable care organizations (ACOs) - groups of doctors and hospitals that take responsibility for the cost and quality of care.

Unfortunately, both of these approaches would reduce the income of some physicians - particularly surgeons and other procedural specialists - because they turn the current business model of healthcare on its head. Any real effort to save money for Medicare or to impose a budget on an episode of care will require a shift from the current emphasis on “sick care” to population health management, which aims to keep people stay well or prevent them from becoming sicker.

Primary-care physicians, the key players in this effort, will be expected to reduce complications that require specialty care, hospitalizations, expensive tests, and procedures. So the types of care that are most lucrative today will become much less financially rewarding if reimbursement moves in this direction. Conversely, evaluation and management and care coordination will be reimbursed better.

As we all know, primary-care doctors are in short supply, partly because they earn about half of what specialists do, on average. If payment bundling and/or ACOs become established, however, that will change, because the system will have to reward the primary-care doctors who will be steering the ship. Medicare reimbursement policies are already heading in this direction. Last year’s changes in the Medicare fee schedule, for instance, favored primary care at the expense of some specialists. In 2013 and 2014, under the reform law, primary-care doctors - but not specialists - will be paid at Medicare rates for treating Medicaid patients.

Naturally, specialists are unhappy about Medicare fee changes that penalize them. According to a recent study in the Archives of Internal Medicine, 80 percent of surveyed doctors believed that primary-care doctors should earn more, but just 42 percent thought that funds should be shifted from procedures to E&M services. Only 39 percent of the respondents endorsed the idea of increasing primary-care pay by cutting specialty reimbursement 3 percent.

As one might expect, primary-care doctors and specialists had different views on this subject. A minority of specialists favored shifting money from procedures to cognitive services, but two-thirds of primary-care physicians supported the idea.

Payment bundling, which limits the amount paid for an episode of care, such as hospitalization and post-acute care, won approval from only 17 percent of all respondents. "Physicians generally showed the least support for proposals that carried the risk of reduced reimbursement, such as payments for bundled care," the authors stated. Apparently, most primary care doctors don’t believe this approach would lead to higher reimbursement for them, perhaps because they suspect that hospitals and specialists would take the lion’s share of the payments.

On the other side of the coin, 49 percent of respondents supported the idea of incentive payments for delivering high-quality care, with penalties for suboptimal care. This is an approach with which many doctors are already familiar via pay for performance programs; also, it wouldn’t replace or diminish the fee-for-service payments that currently contribute most of their revenue.

But while physicians may agree on that, primary-care doctors and specialists are far apart when it comes to deciding how to split up the Medicare pie. A recent Wall Street Journal article depicts fierce battles between generalists and specialists on the AMA’s RUC committee, which advises CMS on how to apportion Medicare payments. The primary-care representatives note that they usually lose out to the panel’s specialists and that primary-care doctors tend to get reimbursed more poorly as a result.

So here’s where things stand: Doctors will continue to duke it out over reimbursement while pushing for a larger pot that will fund quality incentives. The problem is, the money available to pay physicians isn’t going to keep growing because we can’t afford to keeping paying more for healthcare. So physicians must accept the hard reality that they have hit their limit and will likely see reimbursement shrink in coming years.

The question is whether specialists and primary care doctors can come to an understanding that will allow both to earn incomes commensurate with their skills and their value to society.