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Improving Payment for Primary Care: The Foundation of a High-Quality, Affordable Health Care System

Our three takeaways from recent Congressional Hearing on Primary Care Payment Reform.

Side image of the U.S. Capitol Building
(Anna Moneymaker/ Getty Images)

Primary care plays a vital role in efficient, high-quality care. But fee-for-service (FFS) payment – the predominant way we pay for health care in the United States – fails to give primary care physicians flexibility to deliver comprehensive, patient-centered care. In addition, the Medicare physician fee schedule, which determines how clinicians are paid for services provided to Medicare patients, has led to chronic underinvestment in primary care. 

At a recent U.S. Senate Budget committee hearing, expert witnesses recommended reforms that would reimburse primary care physicians more accurately and appropriately for better patient health. Arnold Ventures supports a shift to value-based payments to rebalance payments between primary and specialty care. We submitted a statement for the record highlighting support for the committee’s work and the discussion draft Chairman Whitehouse introduced. 

Here are three key takeaways from the hearing: 

Cost-efficient health care requires robust primary care. 

Amol Navathe, MD, PhD, internal medicine physician and health economist at the University of Pennsylvania, emphasized how a robust, well-resourced primary care system can better manage population health and overall health care costs. Studies find that better continuity in primary care is associated with reduced mortality, health care expenditures, and hospitalizations.

Dr. Navathe shared his experience developing a population-based, primary care payment model with Blue Cross Blue Shield of Hawaii, which has demonstrated the feasibility of a widespread shift away from FFS as the model operates across commercial, Medicare Advantage, and Medicaid managed care plans. Population-based payment models reimburse providers for delivering a set of services to a defined population. 

Witnesses and members of the committee also addressed the promise of accountable care organizations (ACOs) to provide higher-quality, more person-centered care, including by improving primary care. ACOs are groups of providers who come together to deliver coordinated care and agree to be held accountable for the quality and cost. Evidence suggests that ACOs have generated net savings and have enabled providers to maintain or improve quality. At the hearing, Bob Rauner, MD, who has led ACOs in Nebraska, noted evidence showing that ACOs led by physicians are more  successful in generating savings compared to those led by hospitals. 

The current Medicare fee schedule leads to underinvestment in primary care. 

Fee-for-service payment for primary care does not always reflect the true time and resources needed to care for patients. Over time, a specialty bias” has developed in the fee schedule – specialty care and procedures are overvalued and therefore overpaid, while primary care services are undervalued and underinvested in. This imbalance can drive unnecessary, costly care and is evident in the compensation differences between primary care and many specialties. For example, in 2021, the median compensation for radiology ($482,000) was 83 percent higher than that for primary care ($264,000).

Chris Koller, president of the Milbank Memorial Fund and a leader in primary care policy, said, Medicare is not getting a good return for its spending. It is spending more on specialty services than it needs to because it encourages them, as well as the production of clinicians who perform them.” 

CMS and Congress can act to improve the way we pay for primary care. 

In a landmark 2021 report, the National Academy for Science Engineering and Medicine recommended that hybrid capitated payment, rather than FFS, become the default payment model for primary care. A hybrid capitated payment model would provide monthly, per-enrollee payments to providers for a core set of services and care management. This alternative payment structure can result in more patient-centered care, greater use of technology like telehealth, and stronger team-based staffing. 

Even within ACOs, primary care clinicians typically receive FFS payments, which incentivize them to focus on reimbursable services and visit volume. Hybrid capitated payments within ACOs would give primary care clinicians more flexibility to deliver care that improves health outcomes. 

The Centers for Medicare and Medicaid Services (CMS) already has the authority to implement hybrid payment within the ACO program, which would be an important first step. Congress must act to shift primary care reimbursement for the broader Medicare program. Chairman Whitehouse’s discussion draft would give CMS the authority to offer hybrid payments to all primary care providers across the fee schedule. Widespread change across Medicare is necessary to ensure providers have uniform access to flexible payments and aligned incentives to drive efficiency, 

In addition to supporting movement to capitated payments, CMS and Congress can also act to address the misvalution of codes in the Medicare fee schedule which leads to underinvestment in primary care. Experts have recommended a variety of reforms. For example, the valuation process should be more transparent, independent from conflicts of interest, and reliant on empirical data rather than survey data from medical societies dominated by specialists. In his discussion draft, chairman Whitehouse proposes establishing a new technical advisory committee to make recommendations to CMS on ways to address the misvaluation of services. This committee would be a step in the right direction. 

Read Arnold Ventures’ Statement for the Record here.