What Has Value – Shifting Our Focus

The healthcare industry has been buzzing about payment reform and pay for performance for some time now, especially since the release of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the introduction of the Merit-Based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs). The recent release of the MACRA Proposed Rule has further fueled the discussion and has those of us living in the healthcare industry focusing our sights on the items CMS says have value (or impact reimbursement).

So, What is Valued?

According to MIPS (in which early estimates expect between 687,000 and 746,000 physicians to participate) value drivers are quality, resource use, clinical practice improvement activities, and meaningful use of electronic health records. Advanced APMs provide incentives to physicians to develop and participate in new models of healthcare delivery in which there is substantial financial risk. Therefore, value is recognized when the following occur:

How Does Value Impact Physician Compensation?

Value is achieved through payment for quality of care, rather than purely the number of services performed. It is important to note that thus far, the government’s models are essentially budget neutral, meaning payment for quality and other “value-added” items noted above are not just a pay increase for physicians. Therefore, when the hospital down the street adds 10 percent to their physician compensation pool to account for quality, think carefully before following suit. There has been very little “new money” entering into the market, and with the budget neutral focus coming from the government, commercial payers will most likely follow suit.   

Furthermore, no one has eliminated fee for service (FFS). FFS continues to be a component of MIPS and APMs and will continue to be a component in most physician compensation models. Therefore, reimbursement will be based on a mix of both quality and production.  With this mix, compensation available for physicians will not necessarily increase, but will rather remain flat with some winners and losers.

What Does This Mean for You?

Value the Right Things – consider the goals of your value based incentive plan. Make sure physician incentives are linked to the health systems’ incentives.

Quality Payments Are Not Just Another Pay Increase – the focus on quality is a budget neutral focus. Some of the most common physician compensation models today have 60 to 80 percent of compensation guaranteed, and the remaining percentage is tied to a work relative value or production incentive with little or no focus on quality. The key is to properly balance production and quality based measures ensuring the patient population needs are met at the highest possible quality of care.

One Size Won’t Fit All - This shift will surely create both winners and losers; therefore, transparency and participation of physician leaders (both primary care and specialists), health system executives, health system board members, legal counsel, and outside consultants should be engaged when implementing the new compensation plans. Involving all parties is the key to creating changes in behavior, supporting needed infrastructure, and safeguarding the viability of the health system.

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