Beyond Fee-For-Service: Creating Incentives for Cost-Effective Care

Douglas Brosnan , MD, JD

Director of Provider Relations

Bing Pao , MD

Director of Provider Relations

Published October 19, 2013

In our previous post, we discussed the limitations of medicine's current fee-for-service pricing model. "Cognitive" services such as diagnosis, consultation and follow-up communication are poorly compensated under the current system. This could lead to inequitable payments to primary care physicians, who will take on increased responsibility for care coordination under healthcare reform.

When it comes to creating incentives for cost-effective care, reimbursement is only part of the picture. We also need to create a legal and regulatory climate that discourages waste, promotes evidence-based practice and rewards physicians who spend more time on patient care.

Some key steps:

Protect physicians from baseless malpractice suits. As it stands, physicians order certain tests on the one-in-a-thousand chance they could miss something and open themselves to a lawsuit. One way to promote cost-effective practice would be to offer some form of malpractice protection to physicians who follow evidence-based care guidelines.

Damage caps and tort reform laws don't necessarily change the way physicians practice, because liability caps don't prevent them from being hauled into court. The difficulty and expense of responding to a baseless lawsuit — which still takes an emotional toll and involves depositions, missed work and lost income — contributes to the practice of defensive medicine.

Mechanisms that screen out baseless suits at an early stage would allow physicians to apply reasonable clinical judgment, not to mention promote adherence to evidence-based care guidelines.

One step in this direction would be to extend federal liability protection to federally mandated care under the EMTALA mandate.

Unhitch compensation from patient satisfaction. Patient-physician relationships can play an important role in medicine and healing. But on a clinical level, it's very difficult for patients to know what good care is. They may know how the doctor made them feel, but they don't know whether he has good clinical judgment or follows evidence-based practices.

Linking compensation to patient satisfaction drives up costs. Let's say a patient comes in expecting a certain test. The physician tries to explain why he doesn't need it, but the patient wants it anyway.

Well, in the current regulatory climate, chances are he's going to get it. The doctor can't afford to deal with a patient complaint or a poor evaluation.

Unhitching patient satisfaction from reimbursement would promote more balanced conversations between doctors and patients, leading to fewer duplicative and valueless procedures.

In the meantime, patients and doctors can utilize resources from Choosing Wisely, an initiative that aims to educate consumers about the risks and costs of unnecessary procedures.

Ensure that core measures are evidence-based. There's a certain power to data collection. As business administration professor H. Thomas Johnson put it:

"Perhaps what you measure is what you get. More likely, what you measure is all you get. What you don't (or can't) measure is lost."

Given this wisdom, it's no surprise that Centers for Medicare & Medicaid is so focused on metrics and measures. What's surprising is that some of the things they measure (and tie reimbursement to) have a shaky basis in science.

For example, take blood cultures in cases of community-acquired pneumonia. They're very expensive, and they rarely change the management of the patient. But if you don't get blood cultures, your hospital can be penalized for not meeting its core measures.

After physicians raised concerns about this particular measure set for nearly a decade, The Joint Commission recently announced its intention to retire it.

Every procedure we perform in the name of accountability has both direct costs to the patient and payer and administrative costs to the physician and hospital. If we're truly concerned about reducing waste and providing cost-effective care, we must choose our measures carefully, and let go of those that confer only questionable benefits.

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