Are we about to see the death of fee-for-service?

For years, policy experts have been predicting the end of fee-for-service.  Yet it can be said of fee-for-service that, like Mark Twain’s alleged demise, reports of its death have been greatly exaggerated. (Actually, this is an often-used misrepresentation of what Twain actually said. After the New York Herald incorrectly reported that he was “grievously ill and possibly dying,” an “amused” Mark Twain wrote that “the report of my death has been exaggeration” — an error that was promptly corrected by the newspaper).

On Monday, though, the Department of Health and Human Services announced ambitious goals to mostly replace pure Medicare fee-for-service — that is, paying physicians and hospitals a set amount per unit of service — with value-based payments. Not over many years, but in three years.

 According to the announcement by HHS Secretary Burwell, the agency “has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.  HHS also set a goal of tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.  This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments.”

If tying 90 percent of Medicare payments to quality or value by 2019 doesn’t count as the end of traditional fee-for-service, it comes pretty darn close to it.  (To be clear, even if Secretary Burwell’s goal is met, FFS won’t be completely eliminated.  Rather, 90% of FFS payments would be linked to measures of quality and value, so that the usual per-unit fixed payment would be increased or decreased depending on how well the “provider” does on the applicable performance measures.  Also, half of Medicare payments would go to innovative payment models, like Patient-Centered Medical Homes, Accountable Care Organizations, or bundled payments.  Even in these ‘alternative’ models, a good part of the payment will likely continue to be fee-for-service, but with opportunities to share in savings that the models are able to achieve, and with other performance-based payment incentives.  The more advanced models will require that the APMs accept financial risk, so if the performance metrics aren’t met, they lose money, but if they meet or exceed the metrics, they will come out ahead).

Yet there is no question that HHS’s goals are audacious ones that will fundamentally change, within a few short years, how most doctors and hospitals are paid.  And given the evidence that many physicians aren’t participating in, or not have been able to successfully participate in, the existing Medicare quality reporting programs, there is reason to worry that many of them will be left behind and not able to catch up, potentially exposing them to large performance-based payment cuts.

I have been advising physicians for years that they need to be ready for the end of fee-for-service—while explaining why physicians own professional societies, including ACP, are among those who have been advocating for such a shift to value-based payments.  When I wrote in this blog in May 2011 that “doctors call for an end to fee-for-service,” citing testimony from the  American Medical Association, American College of Physicians, American Academy of Family Physicians, American College of Surgeons, and American Osteopathic Association that called for a staged process that would result in the current Medicare FFS system being replaced with new, value-based payment models, I received among the largest number of comments ever on an ACP Advocate blog post.

In response to this week’s HHS announcement, ACP President David A. Fleming, MD, FACP issued an official statement on Tuesday that expressed support and agreement with the “ambitious but achievable” goals set by Secretary Burwell, while noting that “several critical steps will be required to achieve these goals” including:

1.   Congress needs to pass legislation to repeal the Medicare SGR formula and create a clear pathway to a new merit-based incentive payment program and alternative payment models including PCMHs and ACOs, as specified in the bipartisan, bicameral SGR Repeal and Medicare Provider Payment Modernization Act.
2.   HHS should work to harmonize and prioritize the measures used in the current Medicare reporting programs—PQRS, Medicare value-modifier, meaningful use, and e-prescribing—with each other and with the measures used by private payers, to reduce the burden of reporting based on inconsistent and sometimes conflicting and inappropriate measures.
3.   HHS should partner with professional medical membership societies to support and prioritize efforts to develop guidelines and measures relating to high value care, to simplify reporting, and to support physician practices as they transition to new payment and delivery models associated with value.
4.   HHS should ramp up and expand the programs funded by the Center of Medicare and Medicaid Innovation, including the Comprehensive Primary Care Initiative.
5.   HHS should continue to make improvements in traditional fee-for-service that will facilitate the transition to value-based models, including improving on the new Medicare payment policy for managing care of patients with chronic illnesses.
6.   HHS should continue to work on improving the functionality of electronic health records, including making changes in the meaningful use program.
7.   HHS and Congress should ensure that all performance measures are validated through the National Quality Forum, a “not-for-profit, nonpartisan, membership-based organization that works to catalyze improvements in healthcare.” The NQF “endorses consensus standards for performance measurement; ensures that consistent, high-quality performance information is publicly available; and seeks real time feedback to ensure measures are meaningful and accurate.” [Quotes excerpted from NQF website].
8.   HHS and Congress should ensure that all of the programs and agency initiatives involved in achieving Secretary Burwell’s goals recognize and support the critical role that primary care physicians will play in ensuring that payments are aligned with value.

HHS’s announcement appropriately establishes measurable goals of transitioning away from FFS to value-based payments by defined dates, but the agency can’t bring about the necessary changes on its own.

It will need to partner with physicians and their professional societies, because it is physicians, not the government, who bring value to health care.  It is physicians, not the government, who can learn from each other about what works best to improve outcomes.  It is physicians, not the government, who know best what should be measured, and how, and what should not.  The government can do much to facilitate physician-led improvements in care, not just by setting goals and providing funding, but also by simplifying reporting requirements, harmonizing and prioritizing measures, eliminating poor or redundant measures, easing counterproductive regulations like meaningful use, and by helping physicians do what they are intrinsically motivated to do, which is to provide the best possible care to their patients.

So the real test of HHS’s new goal of replacing FFS with value-based payments is not just whether 50, or 60, or 90 percent of payments are based on value and quality in the next few years, but whether the changes required really help sustain the most important component of the value equation, which is the value that caring physicians provide to their patients each and every day.  This transcendent value—the hallowed patient-doctor relationship—may be hard to measure, but it is the foundation of good medical care.   As organizations like ACP work with the administration and Congress to advance the goals of value-based payments, we need to do everything possible to ensure that this, the most important value, is not forgotten along the way, as we try to measure everything else that can be measured, whether it improves care or not.

Today’s question: What do you think of HHS’s goals to transition away from FFS to value-based payments over the next three years, and ACP’s response?