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Report: Physician Practices Need Help With Alternative Payment Models

March 23, 2015
by Rajiv Leventhal
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Although physician practices are participating in new value-based healthcare payment models, they need help with successfully managing increasing amounts of data and figuring out how to respond to the diversity of programs and quality metrics from different payers, according to new research.

The joint report, "Effects of Health Care Payment Models on Physician Practice in the United States," from the RAND Corporation and the American Medical Association (AMA), aimed to describe the effects that alternative health care payment models (i.e., models other than fee-for-service payment) have on physicians and physician practices in the U.S. These payment models included capitation, episode-based and bundled payment, shared savings, pay for performance, and retainer-based practice. Accountable care organizations (ACOs) and medical homes, which are two recently expanding practice and organizational models that frequently participate in one or more of these alternative payment models, were also included. Researchers performed case studies of 34 physician practices in six diverse geographic markets.

According to the report, many physician practices are responding by partnering or merging with other medical practices or hospitals in order to better support the investments necessary to succeed in new payment models, such as care managers and information technology. Practices say that realigning their operations to the goals of the new payment strategies can be challenging when necessary data are not available or different payment models conflict with each other.

The report found the effect that alternative payment models have on practice stability, including the overall financial impact, ranged from neutral to positive. Among the practices surveyed, none had experienced financial hardship as a result of involvement in new payment models. There was general agreement among physicians that the transition to alternative payment models has encouraged the development of collaborative team-based care to prevent the progression of disease. Additional benefits for patients include increased access to care and physicians through telehealth or community-based care.

What’s more, most physician leaders were optimistic about alternative payment models, while physicians not in leadership roles expressed some apprehension, particularly with regards to certain new documentation requirements. For example, physicians were supportive of new patient registries that list patients with certain health conditions as a way to improve care. But they had concerns about documentation requirements where the link to better care was less clear.

Researchers concluded that the operational details of alternative payment models can either help or hinder practices' efforts to improve their own processes. For example, practices are investing significantly in information systems to analyze large amounts of data about practice patterns. But when crucial data (like quality performance feedback and drug prices) are missing or inaccurate, it is difficult for physician practices to use data analysis to improve care and reduce spending.

While physician practices are making substantial investments in data collection, payers also should consider investing in the capability of physician practices to manage the information.  Such investments could enhance the effectiveness of new payment models, and help medical practices make the best use of computerized health records and other health information technology, according to researchers.

In addition, the researchers noted that payers should consider ways to harmonize key components of alternative payment models, especially performance measures. Medical practices usually contract with many payers, who each may have different performance measures tied to payment rewards. So medical practices must cope with how to address hundreds of performance measures and create a coherent response.

If the cacophony of requirements can be eased —and if government regulations can be aligned with alternative payment models—physician practice leaders can devote their attention more fully to making meaningful changes to processes that benefit patient care, the researchers said.

Researchers also found that most medical practices have shielded individual physicians from direct exposure to the new financial incentives created by payers. While practices are paid more for improved performance, practices generally use nonmonetary incentives to encourage physicians to change their decision making. Those methods include efforts such as providing performance feedback to individual doctors and are intended, in many cases, to appeal to physicians' sense of professionalism.

The study further found that alternative payment models generally have not changed the core content of physicians' clinical work. Efforts to improve efficiency by delegating some tasks to non-physicians had the unintended consequence of increasing the intensity of physicians work, raising concerns about burnout.

"We found that changing the payment system probably isn't enough to ensure that patient care will improve," Dr. Mark W. Friedberg, the study's lead author and a senior natural scientist at RAND, said in a statement. "For alternative payment methods to work best, medical practices also need support and guidance. It's the support that accompanies a new payment model, plus how well the model aligns with all of a practice's other incentives, that could determine whether it succeeds."



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