The fee-for-service payment system has contributed to high health care costs and inconsistent quality of care and should be replaced with a blended payment model that includes fixed payments, according to a new report from a panel of physicians and health care experts.
In the report, released March 4, the National Commission on Physician Payment Reform recommended phasing out the current fee-for-service system over 5 years in favor of bundled payments, capitation, and increased financial risk-sharing.
"We can’t control runaway medical spending without changing how doctors get paid," Dr. Bill Frist, honorary chair of the commission and former Senate majority leader, said in a statement. "This is a bipartisan issue. We all want to get the most from our health care dollars and that requires rethinking the way we pay for health care."
But the 14-member commission predicted that fee-for-service would continue to play a large role. By the end of the decade, they called for a blended system of fee-for-service, fixed payments, and salary.
The commission also recommended eliminating the Sustainable Growth Rate (SGR) formula, which ties Medicare physician payments to changes in the gross domestic product (GDP). The Congressional Budget Office (CBO) recently estimated the price of eliminating the SGR at $138 billion over 10 years, which the commission said could be paid for by reducing overutilization of Medicare services and cutting down on fraud.
The commission, which was convened by the Society of General Internal Medicine last March, is chaired by Dr. Steven A. Schroeder, former president of the Robert Wood Johnson Foundation. The other members include physicians from various specialties, as well as experts in health care policy. The commission is funded in part by the Robert Wood Johnson Foundation and the California HealthCare Foundation.
Some of the commission’s other recommendations include:
– Increasing payments for evaluation and management codes, while freezing procedural diagnosis codes for 3 years.
– Eliminating higher payments for facility-based services that can be performed in lower-cost settings of care.
– Incorporating quality metrics into fee-for-service contracts.
– Using fixed payment models in areas such as the management of multiple chronic diseases and in-hospital procedures and follow-up.
– Changing the membership of the Relative Value Scale Update Committee (RUC) to make it more representative of the medical profession.