Analyzing the complexities of the current Medicare Physician Fee Schedule, two healthcare policy researchers are recommending that officials at the Centers for Medicare and Medicaid Services (CMS) substantially rework, the current Physician Fee Schedule, moving away from the current model, and towards a hybrid model that also incorporates population-based payment. Writing in the July issue of Health Affairs under the headline, “The Road To Value Can’t Be Paved With A Broken Medicare Physician Fee Schedule,” Robert A. Berenson and Kevin J. Hayes state that “[V]alue-based payment and the fee schedule should be viewed as complementary, rather than separate silos.
And the article’s authors state that, “First, the Centers for Medicare and Medicaid Services should correct misvalued services and establish a hybrid payment for primary care that blends fee-for-service and population-based payment. Second, Congress should alter the thirty-five-year-old statutory basis for setting Medicare fees to allow CMS to explicitly consider policy priorities such as workforce shortages in refining fee levels.” Robert A. Berenson is an institute fellow at The Urban Institute (Washington, D.C.).
In the first part of their article, Berenson and Hayes trace the evolution of Medicare physician payment and the creation of the Physician Fee Schedule in 1992. “Initially,” they write, “the fee schedule advanced the desired shift of payment from procedural and imaging services toward primary care and other specialties for which most of the work involves patient visits, while also minding the goals of beneficiary access and geographical equity in payment. After initial progress, however, evidence grew that inadequate updating of RVUs [relative value units] recreated payment distortions that favored procedures at the expense of office and hospital visits.”
As a result, the authors assert, a new path must be created. “The National Academies of Sciences, Engineering, and Medicine have advanced the notion of a ‘hybrid’ payment model consisting of a mix of fee-for-service and population-based payment intended for Medicare Physician Fee Schedule adoption,” they write. “In particular, a composite population-based payment is appropriate to pay for ongoing communication between patients and practices, now including not only telephone and email but also patient portals and text messaging, as well as telehealth services.”
Importantly, they note, “At the time of its enactment more than three decades ago, the Medicare Physician Fee Schedule was a welcome improvement over the existing charge-based reimbursement system. A modernized fee schedule, especially given its integral role in APMs [alternative payment models], can meet the expectation to incentivize value, but congressional action is needed to authorize CMS to improve long-standing payment inaccuracies and to design payment to meet policy objectives based on value.” They offer a number of specific suggestions, including estimating relative resources based on valid and reliable data; reducing code proliferation by consolidating some of the 10,000-plus payment codes; and reducing over-reliance on the Relative Value Scale Update Committee of the American Medical Association, for the effective determination of work RVUs.
“The road to value has proved to be long and winding, with detours frequent and inevitable,” they write. “However, the obvious flaws in the Medicare Physician Fee Schedule are a roadblock, and there are no detours available. Although worthy Alternative Payment Models are being tested, the simple fact remains that the large majority of revenues that clinician practices receive from Medicare and other payers are based on a Medicare fee schedule containing embedded incentives that do not promote value.”
Indeed, the authors conclude, “Reform requires greater reliance on timely, empirical data for determination of both work and practice expenses, to replace flawed estimates by self-interested clinicians while also reducing the mind-numbing fee schedule complexity of coding and payment. CMS’s dependence on the RUC, and the RUC’s resistance to long-needed reforms in how it determines relative clinician work, undermines the search for value. Value must be sought in both the fee schedule and APMs. The current fee schedule reflects the values of organized medicine, rather than those of the patients they care for. It is time,” they insist,” to repudiate the judgment that fee-for-service has no link to quality and value.”
