The United States’ health care system is inefficient and often fails to deliver high-quality, patient-centered care. A key driver of this problem is the predominant way we pay providers. The fee-for-service (FFS) payment system reimburses health care providers based on the volume and type of services they perform, rather than on whether they improve care for patients. Alternatives to FFS — so-called “alternative payment models” (APMs) — can help solve this problem by giving providers stronger incentives and greater flexibility to efficiently deliver patient-centered care that improves population health. These models include accountable care organizations (ACOs), which hold providers accountable for the total cost and quality of care.
The Center for Medicare & Medicaid Innovation (CMMI) recently underscored a renewed commitment to advancing the adoption of ACOs and similar models in its Strategy Refresh, reinvigorating interest in payment reform among the health policy community. With aspirations to have all Medicare FFS beneficiaries in ACOs or similar accountable care models by the end of this decade, CMMI can play an important role leading the transformation of our health care system and patient care, but there is still a lot of work to be done to realize the promise of payment reform.
To reflect on the current state of payment reform and explore where we are headed, Arnold Ventures sat down with leading health care expert Dr. Amol Navathe, assistant professor of health policy at the University of Pennsylvania Perelman School of Medicine and current commissioner of the Medicare Payment Advisory Commission (MedPAC), a non-partisan agency that advises Congress on Medicare policy. Dr. Navathe’s work is rooted in his experience as a practicing physician where he navigates the challenges of our FFS system and sees the promise of APMs.
This interview has been edited for length and clarity.
You are engaged in payment reform from many different angles. Can you share your perspective on where things stand with payment reform and what big issues or ideas are on the horizon?
Dr. Amol Navathe
Payment reform is moving from its early childhood years into adolescence. We have some early evidence on what does and does not work, but we do not yet have systematic, national participation in APMs across clinical settings, physician types, organizations, or payers.
Looking forward, I think there are more questions than answers at present (certainly for me)! There are many areas we need to work on: How do we best garner broad participation while using incentives that have some “oomph” to them? What are the best ways to engage specialist physicians in payment reform? How do we protect equity in models where incomplete risk-adjustments put our most disadvantaged patients in the crosshairs?
Medicare is continuing to chart the path, which will be necessary since market power dynamics oftentimes slow growth of payment reform. However, we also need leadership from the private sector. That is where approaches targeting improving the value of care directly, which can cut across payment contract types, may be very valuable.
APMs have been identified as a promising way to provide more patient-centered care. Thinking about your own experiences as a physician who treats patients, how do you think patients benefit from receiving care under APMs compared to FFS?
Dr. Amol Navathe
As a clinician, I would say it’s important to highlight that APMs are not the destination themselves. The financial incentives are really at the broad organizational level, which as a clinician I rarely “feel” in my clinical practice. But the capabilities and infrastructure prompted by APMs are huge – this is where patients really benefit. We have more longitudinal care programs and other types of clinicians who can help to care for patients beyond the visits or hospitalizations in which I see them. This added flexibility and enhanced support surely feels like the “right” way to care for patients!
If we empower primary care to be as comprehensive, patient-centered, and proactive as possible, it will allow our other resources and infrastructure to be more cost-efficient as well.Dr. Amol Navathe assistant professor of health policy at the University of Pennsylvania Perelman School of Medicine and current commissioner of the Medicare Payment Advisory Commission
What role do you think primary care can and should play in creating a more efficient health care system?
Dr. Amol Navathe
Primary care is most certainly the foundation of our health system. If we empower primary care to be as comprehensive, patient-centered, and proactive as possible, it will allow our other resources and infrastructure to be more cost-efficient as well. While we have not solved this challenge of empowering primary care (e.g., CMMI demonstrations have offered hints of success but no home runs), there is consensus that this is still the direction for our system. My research group, in collaboration with BCBS of Hawaii, designed and deployed a completely new primary care payment system that tried to reduce the churn of unnecessary visits and improve the physician experience while also enabling a more holistic, proactive model of care for patients. When COVID hit, these practices were far better positioned to shift to telehealth, be funded sustainably, and succeed despite the challenges. It was rewarding to see the feedback that the new primary care payment model was deemed to be such a success factor in navigating COVID. More broadly, the model is still a work in progress as there are areas like referrals to specialists that probably could be more efficient, but it offers hints that we are on the right track.
There’s a lot of discussion about APMs at the moment. In your opinion, what are some of the major issues with the existing fee schedule? Why is thinking about improvements to FFS payments still important?
Dr. Amol Navathe
An Achilles’ heel of current APM approaches is that they still rely on FFS as the payment backbone. This creates friction in two places. First, the fee schedules are based on historic assessments of effort and resources of services (that have been updated over time), not the health value of the services. So doing a procedure that is ‘hard and intensive’ gets rewarded financially even if the health it produces is small. These incentives are pervasive in existing fee schedules.
The second issue is that most APMs, Medicare or private payer, are still voluntary. That means that many providers are not engaged and the reasons are multi-factorial. If we can improve the underlying FFS system to generate closer-to-value-based practice patterns, this would help for a variety of reasons. For example, providers wouldn’t need to sign up for financial risk necessarily, and these fee schedules would give them incentive to start shifting their practice patterns. Either this means this will serve as a potential transition to APMs, or encourage the provision of high-value care even if they stay in FFS.
You’re currently working on a project that seeks to rebalance the fee schedule. Tell us a little about the project. How do you hope it will advance the current payment reform conversation?
Dr. Amol Navathe
As we discussed earlier, the fee schedule is loaded with bad incentives because the traditional system has focused on paying for time, resources, and effort, not in terms of health care value to the payment. The goal of rebalancing the fee schedule is to address this misallocation and drive dollars toward the most high-value activities and services and away from those that are low value. If we do this through the fee schedule, we should directly create incentives that providers will respond to in shifting patterns toward higher value care.
One challenge here is how to assess whether services are higher or lower value. The innovation in this project is that we are using novel data and methods to exploit practice patterns in contracts where the providers are at full financial risk – they are truly managing the health and spending of patient populations. When we have previously looked at the practice patterns for these providers and under these arrangements, we see starkly different usage patterns of services. For example, knee arthroscopy is a procedure that has been ‘debunked’ in medical studies convincingly, yet is still performed pervasively under FFS. When we look under these full financial risk contracts, it is rarely used, if ever. By leveraging our methods, we aim to provide benchmark assessments of value-based patterns that we could use to design a value-based fee schedule – meaning one that would in concept produce practice patterns as if a provider is in an APM!
This will serve to advance payment reform in multiple ways. First, it make value-based practice patterns less contingent on APMs and offers a path for every provider in the country to stay financially sustainable while shifting practice patterns. Second, it reforms the most pervasive payment system that is the foundation for most of our APMs too. In some sense, this is an effort to reform the ‘root cause’ itself and catalyze broad scale payment reform!