Commission issues 12 recommendations to enhance physician and patient satisfaction, while creating a financially sustainable healthcare system

How quickly will fee-for-service disappear as a primary source of reimbursement for clinical laboratories, pathologists, hospitals, and physicians? If the recommendation of one credible group of physicians has its way, fee-for-service reimbursement could disappear in as little as five years.

This recommendation was made by National Commission on Physician Payment Reform as part of a report it issued in May. In its press release, the commission issued a call “for eliminating stand-alone fee-for-service payment by the end of the decade.” The group urges a transition over five years to a blended payment system that will yield better results for both public and private payers, as well as patients.”

Call to End Fee-for-Service Payment Comes from Credible Group

This is a bold recommendation. It comes from a credible organization. Its honorary chairman was former Senate Majority Leader Bill Frist, M.D., and other members of the commission included representatives from Harvard School of Public Health, Tufts Medical Center, CVS Caremark and WellPoint.

“The way we pay doctors is profoundly flawed,” stated Commission Co-Chairman Steven A. Schroeder, M.D., in the Commission’s press release. He is a professor of health and health care at the University of California, San Francisco. “We need to move rapidly away from fee-for-service and embrace new ways of paying doctors that encourage cost-effective, high-quality care. The commission’s recommendations put us on that path.”

12 Different Calls to Action by the Commission

The commission recognized the need for a transition period as healthcare moves away from fee-for-service as a dominant model for provider reimbursement. Further, there were some other interesting calls to action within the 12 recommendations it issued in its report. For example, the commission recommended that the higher payments for treatments performed in a hospital and that can be done in a physician’s office should be leveled. It also advised that quality metrics should play a greater role in different forms of reimbursement.

Pictured here Steven A. Schroeder, MD, a professor at the University of California San Francisco and former chair of the Robert Wood Johnson Foundation. As Chair of the National Commission on Physician Payment Reform Commission, he is leading physician payment reform. (Photo copyright University of California San Francisco.)

Pictured here Steven A. Schroeder, MD, a professor at the University of California San Francisco and former chair of the Robert Wood Johnson Foundation. As Chair of the National Commission on Physician Payment Reform Commission, he is leading physician payment reform. (Photo copyright University of California San Francisco.)

It was last year when the Society of General Internal Medicine convened the National Commission on Physician Payment Reform (NCPPR). The goal of the commission was to make reimbursement recommendations that enhance physician and patient satisfaction and autonomy, while providing cost-effective care solutions that are sustainable.

An article published in the May 29, 2013, issue of the New England Journal of Medicine (NEJM), noted that formation of the Commission came with recognition by the Society that the level of U.S. healthcare spending is unsustainable, return on investment is poor, and the way physicians are paid is a major factor in driving medical expenditures higher.

The Commission’s report also cited, as important factors in escalating costs:

  • reliance on technology
  • expensive care
  • higher payments for medical services performed in hospital facilities than independent outpatient facilities
  • the high proportion of specialist physicians compared to generalists

After a year of deliberation, the 14-member Commission developed an aggressive blueprint for a new physician reimbursement system, which sets forth 12 recommendations to contain costs and improve patient care.

Commission Recommendations Will Phase Out Fee-for-Service

The Commission’s recommendations would eventually phase out FFS as the primary payment method for physicians, replacing it with reimbursement methods that cap costs and spread financial risk among providers, while encouraging coordination of care, disease prevention and better management of chronic conditions.

Here are four of the Commission’s recommendations:

Payment reform should begin by testing new models of care over a 5-year period. The long-range solution is a system that provides appropriate and high-quality care, emphasizes disease prevention and the management of chronic conditions rather than treatment of illness, and values examination and diagnosis. The end point of this transition period will likely be a blended system with some payment based on the FFS model, along with other capitated pay models or salary.

Increase reimbursement for evaluation and management (E&M) services. The Commission recommended that payers increase the fee for patient evaluation and management (E&M) codes to reflect the importance of these activities in disease prevention and keeping people with chronic conditions well. Conversely, they suggested freezing fees for procedural diagnostic codes, which the Commission contended are generally overvalued.

The Commission pointed out paying for technical and surgical procedures at a much higher rate than E&M services, such as preventive health care or an office visit to discuss diabetes management, discourages doctors from spending time with patients, particularly those with complex chronic illness, and has fueled the widening pay gap between specialties that has contributed to the nation’s primary care shortage. For example, in 2011, a radiologist, on average, earned $315,000 a year, while a family doctor on average earned $158,000.

Pay equal rates for the same physician services regardless of specialty or setting. Over the past years, there has been a trend to reimburse medical services performed in outpatient facilities at a lower rate than those same services when provided in hospitals. For example, Medicare pays $450 for an echocardiogram done in a hospital and only $180 for the same procedure in a physician’s office.

Abolish Medicare’s Sustainable Growth Rate (SGR). The Commission believes that the $138 billion that the Congressional Budget Office estimates it will cost to repeal the SGR can be found entirely by reducing overutilization of medical services within Medicare.

Why this Matters to Clinical Laboratory Professionals

Since physicians are the primary customers of medical laboratories, lab professionals might want to follow the impact of the Commission’s recommendations. That is because this commission was chartered by a national physician association, and its recommendations have not been publicly criticized by major physician organizations.

Further, the fact that NEJM provided this information to its readers is evidence of the clout behind the movement to reform the physician payment system. These developments represent further progress on the path to reform how the American healthcare system reimburses providers—including pathologists and clinical laboratories.

—Patricia Kirk

Related Information:

Phasing Out Fee-for-Service Payment

National Commission, Led by Frist and Schroeder, Calls for Phasing out of Fee-for-Service Pay within Five Years; Report from nonpartisan panel urges fundamental change in how doctors get paid

Commission advocates ending fee-for-service system

Recommendations of the National Commission on Physician Payment Reform


Fast Increase in the Number of Medical Homes Creates New Business Opportunities for Clinical Pathology Laboratories

In Boston this week, the Association of Pathology Chairs Looks at Healthcare’s Transformation and How It May Reshape Laboratory Medicine