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By Casey Ross @caseymross

Federal health officials on Monday unveiled a new primary care experiment that seeks to pay doctors for providing stepped-up services that keep patients healthy and out of the hospital, an effort they say will transform basic medical services for tens of millions of American patients.

The initiative, called CMS Primary Cares, includes five new payment options for small and large providers, allowing them to take varying levels of financial responsibility for improving care and lowering costs. It broadly seeks to change how primary care is delivered in the U.S. by rewarding doctors for improving management of patients with chronic illnesses such as diabetes and high blood pressure, and averting expensive trips to the hospital.

Health and Human Services Secretary Alex Azar called the program “an historic turning point in American health care” that is projected to enroll a quarter or more of the 44 million Americans served by traditional Medicare.

“This initiative will radically elevate the importance of primary care in American medicine,” Azar said, adding that it will “move [the nation] toward a system where providers are paid for outcomes rather than procedures, and free up doctors to focus on the patients in front of them, rather than the paperwork we send them.” STAT Plus: Exclusive analysis of biotech, pharma, and the life sciences.

The effort to implement value-based care is a popular talking point in American medicine, but has yet to be fully implemented. This new initiative is the most sweeping attempt to date to change primary care, an area that accounts for about 3 percent of costs but influences the trajectory of illnesses that account for a much greater percentage of expenses.

Whether this experiment will induce large numbers of providers to participate, or result in significant changes, remains to be seen. Participation is voluntary, so officials will have to convince large numbers of primary care physicians that it will benefit them. They projected Monday that a quarter of primary practices will join. The federal Centers for Medicare and Medicaid Services will allow primary care practices to apply for the new programs this summer, with the goal of implementing them in 2020.

The initiative may spur physicians to increase the use of technology, telehealth services, and remote patient monitoring to deliver stepped-up care to patients. It does not expressly say that Medicare will pay providers for responding to weekend emails or text messages from chronically ill patients, or for doing online or in-home visit to address emergent problems as soon as they arise. But those are the kinds of measures health officials want to encourage primary care doctors to take.

“Providers will have greater flexibility to spend these resources how they want, allowing them to come up with innovative ways to care for patients — and receive significant savings if they keep patients healthier than expected,” Azar said. Related: Medicare’s solution for saving primary care: blow up the office visit

The need for reforming America’s system of paying for health care was reinforced by recent CMS projections that U.S. spending on medical services will grow 5.5 percent annually over the next eight years, reaching nearly $6 trillion by 2027. That would equate to 19.4 percent of the nation’s total economic output.

But transforming to a value-based system of care is especially difficult because it requires setting a clear and universal definition of what value is, and then figuring out how to measure it. The task also requires adjusting for variability among providers’ populations of patients — some doctors take care of sicker patients, overall, than others — as well as differences in the size of their practices and the underlying social and economic needs of their patients.

Past attempts to reform primary care payments have generated widespread complaints from physicians who argued that the government failed to recognize the cost of collecting and reporting a wide array of new data on patients, which made it all but impossible for smaller practices to participate. For example, participation in Comprehensive Primary Care Plus required many practices to update their electronic health systems, but did not provide them with adequate funding to do so.

The new payment programs unveiled Monday create two basic pathways called Primary Care First and Direct Contracting. Here’s how they work:

Primary Care First

The model, designed for small practices, will include a monthly per-patient payment to providers to cover the total cost of caring for patients, eliminating the need to manage fluctuations in revenue. Providers would be paid a bonus for keeping patients healthy, but could lose a certain share of their practice’s revenue if they get sicker. It also creates a payment option that authorizes higher payments for practices that specialize in care of high-need patients with chronic conditions. Related: Drug spending could rise 6.1 percent annually by 2020, federal projections show

The program will be tested for five years and is scheduled to begin in January 2020.

“Providers will be eligible for significant payments if their patients stay healthy and at home,” said Adam Boehler, director of Medicare’s innovation institute. He said the model creates a risk that participants could lose 10 percent of their revenue, but gain as much as 50 percent, with performance to be measured based on “risk adjusted hospitalizations.”

Boehler added that doctors who earn $200,000 today could earn up to $300,000, depending on their ability to keep patients healthier.

Direct Contracting

This model is designed for larger provider organizations and serves as a replacement for a program known as Next Generation ACO (Accountable Care Organization). It includes three payment options with varying levels of financial risk.

One option allows for a provider to share financial risk with the government by receiving a fixed monthly payment for total costs or a portion of anticipated primary care costs, while another option allows a provider to take full risk for managing the monthly payment. If the practice keeps patients healthy and out of the hospital, they profit. If not, they lose money and must cover the extra costs of caring for their patients.

“It’s time that we put patients in the driver’s seat so that providers can compete for their loyalty through a combination of service, price, and overall experience,” Boehler said. “When you pay for quality outcomes, instead of volume, you transform a health care system that caters to special interests into a market-based system in which providers compete for the right to take care of each patient.”

A third option is designed to allow the provider to accept the full financial risk of caring for patients in a defined geographic region. The program is designed to focus on large organizations with experience in managing the needs of their local populations, as opposed to national providers that may deal with patients across many markets. Officials said they are still soliciting public feedback on details of the model and will seek to launch it in the middle of 2020.

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