There is an accepted storyline in American health care that is so ingrained in our culture that it is almost beyond question. It goes like this. The chief culprit underlying the high-cost, low-quality American health care system is the traditional fee-for-service payment model, which rewards physicians for the volume of services they provide with no consideration for the quality of care being delivered.
The answer, the story goes on to say, is a value-based payment model (also known as pay-for-performance), where quality and cost metrics are used to measure the value of a physician’s care, and payment (in the form of incentives and penalties), is based on the results. The problem is that this narrative is essentially a myth. Like most myths, it contains grains of truth. But overall, it is an inaccurate and distorted view. In other words, the fee-for-service payment model is not the problem, and this value-based payment model is not the answer.
It is interesting that the fee-for-service payment model, universally used in every other industry and business transaction, has become so demonized when it applies to health care. It is the American way. No one seems offended that McDonald’s sells billions of burgers. And if you don’t like their burgers, you don’t buy them. If a patient doesn’t like my care, they are (usually) free to go to another physician.
And, just like in other industries, the fee-for-service system has some very positive effects in health care. Knowing that I get paid by the appointment does incentivize me to make more appointments available for sick patients. My office squeezes in same-day appointments every day, and we see patients early and late. We do this because we are committed to providing that service to our patients. But it doesn’t hurt that we make more money for the effort.
More important, though, research shows that rising volume does not explain the increasing cost of American health care. A study in the November 7, 2017 issue of JAMA, “Factors Associated With Increases in U.S. Health Care Spending, 1996-2013,” concludes that “increases in U.S. health care spending from 1996 through 2013 were largely related to increases in health care service price and intensity.” Higher prices and intensity of care (the variety and complexity of the treatments patients receive) accounts for 50 percent of the spending increase, followed by the increase in the size of the US population (23.1 percent), and the aging of the population (11.6 percent). “Changes in service utilization were not associated with a statistically significant change in spending.”
So the notion that the fee-for-service payment model is the problem, repeated constantly by bureaucrats and health care administrators, and now parroted by everyone else, is largely wrong. That is a big deal!
The second part of the argument, that value-based payment is the answer, doesn’t hold up either. A study in the March 7, 2017 Annals of Internal Medicine, “The Effects of Pay-for-Performance Programs on Health, Health Care Use, and Processes of Care: A Systematic Review,” concludes that “pay-for-performance programs may be associated with improved processes of care in ambulatory settings, but consistently positive associations with improved health outcomes have not been demonstrated in any setting.”
And I repeat, the fee-for-service payment model is not the problem, and value-based payment is not the answer.
This is hugely important because the entire American health care system, at the behest of the Centers for Medicare and Medicaid Services (CMS), based on a myth, is now being forced to adopt value-based payment programs. The most egregious example of this is the government’s new MACRA (The Medicare Access and CHIP Reauthorization Act of 2015, or MACRA) value-based payment program, which is literally an amalgam of every past failed effort to do the same thing. This new payment system carries a vast new layer of bureaucracy and technical and administrative hassles. It is a terrible plan that must be canceled.
MedPAC, Congress’s own Medicare advisory board, agrees. In January 2018, MedPAC recommended the program’s cancellation, saying it is “burdensome and complex” and “replicates flaws of prior value-based purchasing programs.”
Administrative overload is already at epidemic levels in American health care. Studies have famously shown that for every hour of clinical care, American doctors must spend two hours doing administrative work. Not surprisingly, doctors cite burnout as their number one concern. The burdens of value-based care are wrecking American medicine.
Maybe the most interesting question is why MACRA, and other programs like it, still exist under such circumstances? Why does the bureaucracy keep flogging the dead horse that is value-based pay? We can only conjecture. I actually believe they have heard the myth so often that they are incapable of questioning it.
We must once and for all dispel this harmful myth before it does more harm. When the supposed experts repeat it, we must refute it. Everyone, say it after me, “The fee-for-service payment model is not the problem, and this value-based payment model is not the answer.”
Matthew Hahn is a family physician who blogs at his self-titled site, Matthew Hahn, MD. He is the author of Distracted: How Regulations Are Destroying the Practice of Medicine and Preventing True Health-Care Reform.
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