What’s the Right Primary Care Model?

Wellpoint announced on Friday, a major new initiative in the way primary care providers(PCPs) will be paid.  Sara Kliff highlighted the importance  of PCP payment reform but are Wellpoint’s reforms the right way to pay PCPs?

Broadly, the difficulty with PCP payment is that it is very difficult to measure PCPs effectively.  PCPs basically do three things: provide basic services, coordinating more advanced services, and manage chronic conditions.  Most PCP payment methods to date have targeted one of these functions but aren’t quite able to ensure that all of the roles are compensated.

Paying for basic services is one of the simplest and most intuitive model to implement.  Known as fee-for-service, this model does a good job of incentivizing provision of basic services.  However , the system fails PCPs for a variety of reasons.  The standardized compensated services reward action more than listening and consulting.  Most insurance companies and Medicare also only pay for face to face patient contact.  Planning, emails, even patient phone calls are considered indirect expenses and not directly compensated.  As the system has grown more complex, the coordination and management of patients has become more valuable but not compensated leading to feeling that fee-for-service is the cause of many of inefficiencies in the health care system.

To rectify some of these shortcoming, a newer payment model has been developed: medical homes. Medical homes build on top of the fee-for-service with most of a provider’s compensation coming from payment for specific services. On top of these payments providers are paid for specifically for care coordination.  These payments can take the form of either a monthly payment or specific payments to cover the additional tasks. One of the most important aspects of Wellpoint’s announcement was that Wellpoint’s move towards the medical home model as the basis for most PCP payment.

Paying for care coordination helps to share the value to system of PCP coordination with PCPs but does it transfer the real value of managing chronic conditions?  An additional revenue stream for PCPs in Wellpoint’s reforms include a shared savings component.  In addition to paying for developing plans for chronic cares, PCPs will be paid a portion for any savings on patients they manage encouraging PCPs to work with patients to enact the care plans.  But what if there are no savings? Why not pay PCPs directly based on the costs of the patients they manage?

This idea is much older than medical homes and called capitation.  Capitation is not used more because of two problems.  Since capitation profit is based on not providing services patients may have difficulty accessing services.  Capitated providers may be difficult to reach or take on too many patients without appropriate staffing.  A more difficult problem is setting the appropriate payment.  Since members with chronic conditions are more costly so should receive additional payments but how much?  Too high a payment and the savings to the system instead go to the PCP.  Too low and a PCP may not be able to cost of care.

Fee for Service, medical homes, and capitation struggle with rewarding all of the complexities of primary care.  The system has struggled to find the balance between the various activities of primary care. At the same time there is a struggle to capture what adds value to the health care system.  If the correct services are known in most cases, then it should be easy to modify fee-for-service to incentivize theses services.  This lack of clarity focuses some element of pricing risk and not healthcare in the alternate models.

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