Provider Payment Reform: Right Course, Wrong Students?

Focus Area:
Primary Care Transformation

For the last eight years, the US health care system, led by Medicare, has been going to school, learning how to do comprehensive provider payment reform. The most important courses have focused on how to improve performance for entire populations of people. Efforts to promote accountable care organizations (ACOs) in particular have attempted to use payment changes to establish a seismic shift in the function of the health care provider: from an individual who produces successful patient encounters to a team member who improves outcomes for an entire population of people.

Recent evaluations of these efforts seem to indicate that some providers in these payment reform efforts are learning the course lessons better than others. While some poor performers might be making excuses and asking to be graded on a curve or making sure their poor grades don’t have significant consequences, others have figured out how to succeed without even taking the class. Policymakers should look for opportunities to act on these findings.

In a recent New England Journal of Medicine article, Michael McWilliams and colleagues looked at performance in the Medicare Shared Savings Program (MSSP), the flagship ACO effort, by sponsorship of the participating organization. They concluded that virtually all of the program’s financial savings were earned by physician-sponsored ACOs: “After 3 years of the MSSP, participation in shared-savings contracts by physician groups was associated with savings for Medicare that grew over the study period, whereas hospital-integrated ACOs did not produce savings (on average) during the same period.”

Another study, released in August by the Patient-Centered Primary Care Collaborative and sponsored by the Milbank Memorial Fund, showed similar, if less dramatic, results. Jabbarpour and her coauthors also looked at results by Medicare MSSP ACOs—and determined that those with primary care practices that had officially designated patient-centered medical homes (PCMHs) had lower costs and higher quality than those with no PCMH sites. However, the study did not see a “dose-response relationship”—with more savings accruing to greater PCMH presence.

A larger and more provocative study that examined the same issues was recently published by Lawrence Casalino and colleagues. Looking at Medicare results outside the ACO program, the researchers also examined the relationship between cost and quality outcomes of care and medical practices’ structure and use of organized care improvement processes. After attaching patients to primary care practices based on where they went for care and adjusting for differences in health status, the researchers found that practices that had a higher share of primary care physicians had lower costs and higher quality.

Most interestingly, they found that size matters—and not in accordance with conventional wisdom. Practices with just one or two physicians produced outcomes that were as good as those of their larger siblings and significantly better than practices with over 100 physicians. The superior performance of the one- to two-person physician practices grew for particularly ill patients. Apparently, complex practices are not healthy for complex patients.

While these findings are hardly uniform or definitive, they add to a growing body of evidence that points to several policy directions for public and private payers.

First, this is the right coursework. Delivering high value care to populations of people should be our collective health care goal, and some groups of practitioners clearly do that work better than others. We need to learn how and why that is the case and set up our systems of health care research, patient engagement, and provider education, organization, and payment to get more of it. The price of not doing so is money wasted in health care—a portion of the 17% of our GDP that could be more productively spent elsewhere.

Second, the coursework needs to focus on strengthening and enhancing the role of primary care teams. Efforts spent engaging specialists and hospitals as equal partners in the task of producing better overall population health are proving to be fruitless. Indeed, it is not even clear they should be in the class. These providers should be expected to be technically expert at the tasks that they have been trained to do—but those are not the same tasks as keeping groups of people healthy and coordinating their care effectively and efficiently when they are sick.

In real terms this means policymakers need to take a much harder look at provider consolidation efforts—which typically promote purported efficiencies but in reality have been shown to raise prices and lead to the larger practice group sizes and disintegrated care that Casalino’s research shows raises overall costs. Medicare and commercial payer ACOs or other provider accountability efforts should also focus on enhancing the roles, expectations, and centrality of primary care teams, perhaps starting with requiring that the governance and leadership of the ACOs come from the primary care community.

Finally, work needs to be done on how to make these primary care practices better and to understand how and how much payment practices matter in that effort. Casalino’s and McWilliams’ research shows that some primary care groups do a good job regardless of how they get paid. But what about the rest? Giving them more resources and raising primary care spend—the portion of money that goes into primary care—above the paltry 5% to 6% that it is in most of the United States is a good start. Rhode Island, Oregon, and Delaware have all taken state level action to do so.

But plowing money into primary care is only a start. The results of the Comprehensive Primary Care initiative and other PCMH projects show that paying primary care teams to provide better care inside their walls is necessary but not enough. They need to be put in the driver’s seat for what happens elsewhere, and held accountable in some way for results.

Much of what happens elsewhere is not in the specialist’s office but inside the patient’s head. Health care starts with patients’ attitudes and their interactions with the health care system. Too often, health care services are not patient-focused—and patients are rendered passive and helpless.

It is not rational, however, to expect a physically and mentally distressed person to consume medical services the way they do other services in our economy. They need guides and partners. Discussing their findings, Casalino et al. note that “smaller independent practices may support close relationships of mutual knowledge and trust among physicians, staff, and patients that may be associated with better outcomes.” Provider payment reform efforts—as well as other delivery system reforms—should be focused on helping primary care provider teams and patients achieve that lofty goal together.