CMS Offers Flat-Fee Payment Model for Medicare Providers

Published June 27, 2019

Seema Verma, administrator of the Centers for Medicare and Medicaid Services (CMS), has publicly stated the fee-for-service model creates “perverse incentives” for doctors to perform unnecessary tests and other services.

CMS is offering several new payment models. One is a flat-fee program, called Primary Care First (PCF). It is voluntary five-year program, and doctors will receive rewards if their patients stay healthy. Another payment model reaches out to more advanced primary care practices to coordinate care for higher need patients who may not have a primary care provider, similar to Accountable Care Organizations (ACOs)

“As we seek to unleash innovation in our health care system, we recognize that the road to value must have as many lanes as possible,” said Verma. “Our Primary Cares Initiative is designed to give clinicians different options that advance our goal to deliver better care at a lower cost while allowing clinicians to focus on what they do best: treating patients.”

Adam Boehler, Medicare deputy administrator for innovation and quality, told the Wall Street Journalthe new flat-fee payment model offers doctors a 10 percent downside risk but a chance to earn 50 percent more money than fee-for-service if they meet the criteria for patient health.

Skeptical Providers 

Adam Habig, the cofounder and president of Freedom Healthworks, says he does not think primary care doctors will be quick to sign up for the Primary Care First program. His organization advises doctors on setting up direct primary care (DPC) practices, which similarly offer flat-fee primary care but without involving third-party payers like Medicare.

“Since the announcement, we’ve not seen any upsurge in interest among DPC practices for this program,” Habig said. “Doctors are skeptical of these programs in general, especially since the financial promise of ACOs for physicians was largely discredited.”

The fundamental problem is that a doctor’s influence on patients’ health extends only so far, says Habig.

“If the patient chooses to smoke, eat a poor diet, or not take medication, that decision-making cannot be controlled by the doctor,” Habig said. “It’s like punishing a parole officer if the parolee relapses into crime.”

Benefits for Big Operators

Smaller health care practices are less able to absorb the risk of individual patient’s behavior, says Habig.

“Large health systems can better hedge and disperse downside risk, but with only 500 to 600 patients, even a few disaster patients could be ruinous to a DPC practice,” Habig said. “So while some DPCs may sign on to a shared savings model, there likely won’t be much appetite among the DPC community for downside risk-sharing.”

Since the trust fund for Medicare is functionally insolvent, it’s understandable that the agency wants to offload risk wherever it can, but DPC would be a poor candidate for the program as currently proposed, says Habig.

“It’s a shame, because DPC is the cohort of practices that could benefit CMS patients the most with intense attention and care,” Habig said.

Suggests Pilot Voucher Program

Habig says there is a better way to bring down costs.

“What CMS needs to do is provide beneficiaries with vouchers or debit cards with a fixed amount—say, $125 per month—to ‘spend’ at the primary care practice of their choice. Then CMS can measure the results in terms of reduced downstream care costs and greater patient satisfaction compared to a control group.”

This would create the competition among primary care physicians to attract and retain Medicare and Medicaid customers that CMS hopes to foster, while removing barriers to access, Habig says.

“The key is that the CMS patient cannot impose any additional burden on the practice compared to a privately paying patient,” Habig said. “No additional reporting, administration work, forms, etc., or there will be no buy-in from doctors. Why CMS refuses to test pilot programs on this basis is mystifying.”

Ashley Herzog([email protected])writes from Avon Lake, Ohio.

Internet Info:

Primary Care First: Foster Independence, Reward Outcomes, April 22, 2019