What’s Wrong With Obama’s Rush to Change Doctors’ Medicare Payments

John O'Shea, M.D.

"Health and Human Services Secretary Sylvia Burwell has unveiled a major initiative to push Medicare physicians and other medical professionals out of fee for service (FFS), which pays based on specific services rendered, and into alternative payment models (APMs).

Before deciding that all Medicare providers must abandon Medicare fee-for-service, the Obama administration should make sure they have somewhere else to go."

Early studies and pilot programs reveal that APMs are exceedingly difficult to implement and there are few indicators that it will improve quality of care.  

"APMs generally include models such as Accountable Care Organizations (ACOs), 

Patient-Centered Medical Homes (PCMHs), 

Bundled Payments (BP) and various Pay for Performance (P4P) programs that emphasize aggregating payments and making doctors and other medical professionals accountable for the quality as well as the cost of patient care. The goal is better quality, more efficient health care."

"But make no mistake: the results to date on the performance of APMs do not support the administration’s enthusiasm. For example, a 2014 RAND study that extensively reviewed the performance of APMs found little, if any, effect in terms of quality improvement or cost reduction. In a separate report, “Modern Healthcare noted that, “The launch and operation of Medicare ACOs has been somewhat rocky, exposing flaws that some experts and providers worry will undermine participants’ ability to succeed."

According to early Centers for Medicaid and Medicare Services results, less than half (54) of the initial 114 organizations that participated in ACOs achieved savings and of those, just 29 saved enough money to receive “shared savings” bonuses. In addition, for the 29 participating pioneer ACOs (more experienced organizations), the results showed that only nine achieved significant savings.

In addition to results in terms of quality and costs–results that are mixed at best–medical professionals have found that ACOs are exceedingly difficult to implement. Research by the Medical Group Management Association found implementing and/or optimizing an accountable care organization was one of the top five challenges for members, with 60.2 percent of respondents to one survey saying implementing ACOs was one of the biggest challenges, making it the fifth most challenging issue overall. In fact, of 44 issues facing medical practices, the top challenge for Medical Group Management Association members was preparing for new reimbursement models that include greater financial risk for practices.

There is another reason for caution. The reality is this: APMs as they currently exist are not available to all medical professionals. ACOs and PCMHs, two of the most common APMs are primary care-based models that have yet to encompass specialty care. Given the complex compliance requirements, physicians in smaller practices and rural settings will find it financially and administratively difficult, if not impossible to participate, leading more doctors to forgo private practice, exacerbating the trend toward market consolidation.

Granted, fee for service may have its flaws, but before blindly pushing Medicare doctors and other medical professionals out of fee for service and over the cliff, the Obama administration should be sure they have a safe place to land. The Brave New World of APMs may not be the panacea that Team Obama seems to think it is.

The current, previous administrations and congress failed to anticipate administrative barriers to proposed programs.