iProtean—Payment Reform and Physician Fee-for-Service

Under payment reform in the Accountable Care Act (ACA), accountable care organizations (ACO) will receive incentives that reward efficiency and quality care.  For the time being, ACOs will be paid based on DRGs, although it is expected there will be elements of capitation involved in the future.


However, when determining how the ACO will pay individual physicians, “most of the proposed payment reforms will still have a substantial role for fee-for-service payment,” according to Paul Ginsburg in a recent article in Health Affairs. (“Fee-For-Service Will Remain a Feature of Major Payment Reforms, Requiring More Changes in Medicare Physician Payment,” September 2012)


Fee-for-service payment means that a physician receives a set fee for a particular service, and it generates payments driven by the volume of service provided.  In an ACO, physicians’ payments will be calculated both according to volume and measures of physicians’ quality and efficiency.


For many physicians, broad payment reforms such as ACOs are more accurately seen as enhancements to fee-for-service rather than as replacements, Mr. Ginsburg wrote.  In the case of episodes of care (i.e., bundled payments), “the structure of fee-for-service and the historical experience of payment within the fee-for-service approach will remain the basis for determining the bundled payment amount.” (Ginsburg, Health Affairs)


Strategies underlying ACOs and episode bundles “will become a mandatory part of fee-for-service physician payment in Medicare, with a parallel programs for hospitals called ‘value-based purchasing,’” Mr. Ginsburg noted.


In the iProtean course The New Healthcare Business Model, healthcare experts Dan Grauman, Anjana Patel, Esq., Ken Kaufman, Lisa Goldstein and Jeff Bauer discuss the new payment reforms and their impact on hospitals and physicians.


Dan Grauman, DGA Partners 

The health reform law provides for paying hospitals in a very different way.  There will be budgeted amounts for a certain group of Medicare beneficiaries or enrollees.  When it trickles down to a hospital, that means that instead of being a volume based fee-for-service DRG-oriented system it could change the revenue model for the hospital and evolve to operating under a fixed budget.  The hospital has to figure out how to provide all the care that’s needed for patients under that fixed budget . . . So it’s a 180 in terms of your revenue stream.


The interesting thing is that hospitals can’t do this alone.  There’s a high interdependency between hospitals and those who control the utilization of services just by virtue of their pen by determining what’s needed for the patient, the physician.  So more than ever, hospitals and physicians need to work collaboratively in a very integrated fashion so that care is being delivered in an optimal way, not excessively, not less than is needed to treat the patient, but as efficiently as possible.


Anjana Patel, Esq., Sills Cummis

The goal behind the ACO is to have a group of providers working together in a coordinated fashion, and then CMS or Medicare will reward you if you meet certain cost cutting metrics and if you achieve certain quality measures.  The reward comes in the form of a bonus payment that will then be split up among the different providers within the ACO.


The reform law does not change the way hospitals and physicians will get paid for the day-to-day care they provide.  So even within an ACO, hospitals will continue to bill and get paid under part A and physicians will continue to bill and get paid under part B.  What the ACO model does at this point is if they work in a coordinated fashion then they are each eligible to receive a bonus payment, a single payment that’s made to the ACO and then the ACO participants split up that payment within the group.


Dan Grauman, DGA Partners

They want to start slow.  They want it to be successful.  They don’t want big failures on their hands, so what they’re talking about is having upside-only arrangements where you go into the arrangement and you’re responsible for managing the care of Medicare beneficiaries and you are working towards a fixed budget.  If you do better than that budget by a certain percent, then you get to share in those savings because you—the hospital and the doctors working collaboratively—have better managed utilization of those patients and have brought the cost under budget, and you can share in some of the savings.


Dan Grauman, DGA Partners, will have the latest information on accountable care organizations, bundled payments and value-based purchasing at the iProtean Symposium, October 10-12.


For a complete list of iProtean courses, click here.


iProtean Symposium & Workshop

Mark the Date!! October 10 – 12, 2012 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Barry Bader, Monte Dube, Esq., Lisa Goldstein, Dan Grauman, Marian Jennings and Brian Wong, M.D. For more information, click here.


For more information about iProtean, click here.