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National commission calls for phasing out of fee-for-service pay within 5 years

Washington, DCThe National Commission on Physician Payment Reform issued a report today detailing a series of sweeping recommendations aimed at reining in health spending and improving quality of care by fundamentally changing the way doctors are paid. The Commission, chaired by former Robert Wood Johnson Foundation president Steven A. Schroeder, M.D., with former Senator Majority leader Bill Frist, M.D., as Honorary Chair, calls for eliminating stand-alone fee-for-service payment by the end of the decade. The group urges a transition over five years to a blended payment system that will yield better results for both public and private payers, as well as patients. (See list of Commissioners here.)

"We can't control runaway medical spending without changing how doctors get paid," said Dr. Frist. "This is a bipartisan issue. We all want to get the most from our health care dollars, and that requires re-thinking the way we pay for health care."

The United States spends an unprecedented $8,000 per person on health care each year. Yet, despite this enormous investment, Americans' health pales in comparison to that of other nations. Fee-for-service, where doctors are paid for each service they provide, is the dominant method of compensating physicians, and a chief driver of the high cost and uneven quality of health care in the United States. Its skewed financial incentives promote fragmented care and encourage doctors to provide moreand more costly careregardless of its benefit to patients, according to the Commission.

"The way we pay doctors is profoundly flawed," said Dr. Schroeder, distinguished professor of health and health care at the University of California, San Francisco. "We need to move rapidly away from fee-for-service and embrace new ways of paying doctors that encourage cost-effective, high quality care. The Commission's recommendations put us on that path."

After a year of deliberation, the high profile commission adopted 12 recommendations for reforming physician payment. The 14-member commission comprised physicians from a variety of specialties, public and private sector leaders, consumer advocates, and respected health policy experts, including Kavita Patel of the Brookings Institution and a former member of the Obama administration, and Troyen Brennan, executive vice president and chief medical officer of CVS Caremark.

Phasing Out Fee-For-Service
The Commission's recommendations provide a blueprint for phasing out fee-for-service and transitioning to a more value-based, mixed payment model over a five-year period. Initial steps include fast-tracking new models of care, such as accountable care organizations and patient-centered medical homes that reimburse doctors through fixed payments and shared savings, and adopting bundled payments for patients with multiple chronic conditions and in-hospital procedures and their follow-up.

The Commission pointedly noted that fee-for-service will remain an important mode of payment into the future, and that bundled payments and other fixed payment models are not a panacea; many of these models still pay individual physicians on a fee-for-service basis. As such, the Commission put forth several recommendations for recalibrating fee-for-service payment to fix payment inequities and reward care that improves patients' health.

Among the recommendations:

  • Increase reimbursement for evaluation and management (E&M) services. Technical services provided by surgeons, radiologists and other procedural specialists are reimbursed at a much higher rate than E&M services, such as preventive health care or an office visit to discuss diabetes management. This approach discourages doctors from spending time with patients, particularly those with complex chronic illness, and has fueled the widening pay gap between specialties that has contributed to the nation's primary care shortage. For example, in 2011, a radiologist, on average, earned $315,000 a year, while a family doctor on average earned $158,000. Cardiologists, endocrinologists, hematologists, infectious disease specialists, neurologists, psychiatrists, and rheumatologists, as well as primary care doctors, provide a high mixture of E&M services, as compared with technical services.
  • Pay equal rates for the same physician services regardless of specialty or setting. Over the past years, there has been a trend to reimburse medical services performed in outpatient facilities at a lower rate than those same services when provided in hospitals. For example, Medicare pays $450 for an echocardiogram done in a hospital and only $180 for the same procedure in a physician's office.
  • Abolish Medicare's Sustainable Growth Rate (SGR). The Commission believes that the $138 billion that the Congressional Budget Office estimates it will cost to repeal the SGR can be found entirely by reducing overutilization of medical services within Medicare.
  • Improve the Relative Value Scale Update Committee (RUC). Decision-making needs to be more transparent, and membership must be more representative of the medical profession as a whole, according to the Commission. In addition, CMS should avail itself of alternate sources of advice about pricing physician services.

As the population ages and baby boomers enroll in Medicare, health spending is going to continue to rise unless we act now to reform physician payment, says the Commission. The Commission has set forth an aggressive timeframe for reform, and expects to see significant change in the way doctors are paid over the next couple of years.

Controlling Health Care Spending
At nearly three trillion dollars a year18 percent of GDPspending on health care in the US has reached an unsustainable level. Recognizing that the way physicians are paid drives this high level of spending, the Society of General Internal Medicine convened the National Commission on Physician Payment Reform in March 2012. The independent Commission is funded in part by the Robert Wood Johnson Foundation and the California Healthcare Foundation.

"Health care providers should be paid for the quality of the care they deliver, not just the quantity. The work of this commission helps move us toward that goal," said Risa Lavizzo-Mourey, MD, president and CEO of the Robert Wood Johnson Foundation. "These recommendations come directly from physicians and others who are showing leadership in addressing the rising costs of health care."


Contact: Jemma Weymouth
Burness Communications

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