Pay-For-Performance: A Changing Payment Paradigm

Deciding how to attribute payment could be a reimbursement challenge.
Deciding how to attribute payment could be a reimbursement challenge.

Understanding how healthcare will function in the next five to 10 years is much like trying to work a puzzle. But the puzzle is missing some integral pieces – one of which is how you are going to get paid.

The only problem is, absent the use of a crystal ball, no one can really predict the answer to that question. Physicians can be reimbursed or compensated in numerous ways, including salary, fee-for-service, bundled payments, and capitation. A couple of these will likely float to the top, however.

“There is institutionalized resistance to changing what we are comfortable with even though we know it doesn't work and the system is broken,” said Jeffrey Kaufman, MD, Chair, Health Policy, Western Section, American Urological Association, and Chair of Urology at Western Medical Center in Santa Ana, Calif. “I think there is going to be some sort of gradual transition under the ACA [Accountable Care Act] to … a smorgasbord of practice and payment styles and I don't think any single one is the answer.”

Here are some of the ins and outs of reimbursement and how to make it work for you.

Likely models

There seems to be a consensus that fee-for-service will be a mainstay and the building block upon which other payment methods will revolve. Michael Brown, president of Health Care Economics, a consulting firm in Fishers, Indiana, said the insurers he talks with plan to use fee-for-service and move toward pay-for-performance.

Moving from volume-based to performance-based pay has not been an easy shift, though.

Pay-for-performance, which essentially reimburses physicians based on patient outcomes, presents some challenges. The first is determining what to measure.

“You have to define performance and when you start getting into an outcome discussion, you have all kinds of measurement problems,” Brown said.

Various types of measurements include quality, utilization, and safety, but they will vary depending upon the practice. For example, primary care doctors might try to lower blood glucose levels for diabetic patients, while urologists, might reduce the number of complications after prostate surgery.

A second challenge is how to attribute payments. Dr. Kaufman provides the example of a patient with prostate cancer. He may see a patient initially and then send him to one hospital for surgery and another for chemotherapy. Who would receive payments for the procedure?

“Attribution is tricky and there are several proposals out there,” he said. “Right now, PCPs are going in one direction, and others are not sure where to go.”

Amy Lischko, a healthcare policy specialist and associate professor at Tufts University School of Medicine in Boston, said specialists might also be moving toward bundled payments.

Lischko said some specialties – like obstetrics – have been using this method for a long time. She thinks it will be a more gradual transition for others.

“Providers will need to look at data and figure out what is reasonable reimbursement for episodic and chronic diseases,” she said.

For instance, a urinary tract infection may take one visit, a test, and a course of antibiotics. Chronic conditions like kidney disease, she said, may have more variability. These would be more difficult to pinpoint cost.

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