Saturday, June 13, 2009

Medicare Reform Part 3 - New Model For Reimbursement

I ended the last blog talking about how the regional differences in spending seem inexplicable as the more you spend, the lower the quality. Huh? It's true. This excellent article talks more about this:

There's controversy as to how to turn the high-spending areas into low-spending areas. Everyone agrees the problem is with incentives. I'd like to take it a step further - there are no incentives towards cooperation. While there are excellent organizations like the Mayo clinic that work that way, as I said in my previous blog, it takes a long time and a lot of resources to set up one Mayo clinic (10 years to be fully functional and efficient).

The above article points out that many physicians in an effort to compete have become businessmen, and have learned what to do to maximize compensation. There is little if any cooperation between primary care and specialists; it is a disconnected system where physicians and administrators have no concept of their costs (relative to others) and their quality.

If you don't create a zillion mini-mayos, how to you realign the payment structure so that it naturally allows higher quality, more cooperative care?

Here's my plan:
  • Assume that Doctors in "high supply-high cost" areas have incentives that get them this way, i.e. cardiology clinic work is not valued monetarily in remimbursement as a cardiac catheterization and stenting.
  • Also, primary care visits in general, monetarily, are not valued as highly as procedural work - despite concrete proof that primary care coordination of care increases quality and lowers costs. For hospitals, ORs and Procedure centers are the only money-makers. Caring for patients in the Emergency Department and on the floors and ICUs are money-losers.
  • And you assume that: Physician's most valuable asset is their skill set and their time with which to use that. Currently physicians with 20 years experience are not valued more under Medicare than a new graduate.
  • Then also: Through the administrative hassels of Medicare (and other insurance), much time is wasted.
  • You can conclude: paying physicians for their time and complexity of patient care, plus their experience, and coordination of care, would align physicians with what they actually do, and at the same time reduce the need for supplementation with higher cost care of questionable benefit.
Thus, I have a new, simpler physician payment system that will drastically reduce administrative costs, and realign incentives that would pay physicians for their skills and time.
  1. There will be a base hourly rate that will be paid to all physicians for their time spent with the patient. Physicians with longer training, board certification, longer years of experience, proper CME [and conceivably incentives for EMR use] will receive a higher hourly rate from the base.
  2. Added to the base also will be for Docs that participate in a cooperative group (also called Accountable Care Organizations), that I liken to the spokes of a wheel, with primary care docs (PMD) in the center, and specialists they work with forming the spokes. Peer review time they spend working with each other to track and optimize quality will be paid.
  3. The hourly is then multiplied by a complexity factor that is determined by age of patient (very old and very young are higher complexity), and number of medical problems (including social issues like smoking, drug usage, and alcoholism which complicate medical diagnosis and treatment).
  • How will this work? A primary care doc treating a hypertensive patient who is 70, with 8 medical problems, will get a higher rate (and consequently require more time spent) than for a hypertensive patient who is 20 and no other medical problems. A surgeon's complex followup on a diabetic food that won't heal will get paid based on time, not based on whether they went to surgery. No longer will one diagnosis be valued higher than another.
  • It is assumed that a doctor can treat a diagnosis in their field. More complex diagnoses take more time to treat and thus will pay more. Diagnoses will only be used for statistical tracking. If a physician spends time on the phone dealing with their patient concerns (easily verifiable by answering service and phone records), they should be paid for that service. Because studies show that time spent with the patient equals better patient care, and cheaper patient care.
  • I know what you are thinking. Doctors are going to be like lawyers and start billing 25 hours in a day. Or will say they are spending all this extra time with their patients to get more hours. I've got a simple solution for that: To prevent physician abuse, each patient submitted for payment will have a complexity code that is determined not by the physician but by a simple billing computer algorithm based on age and medical problems. An average time spent per diagnosis and complexity level will be computed on a national basis. Any physician with more than 20% of their charts 2 standard deviations above the mean will have a one year probationary period where they will only be paid for the mean time for a given diagnosis complexity. If they can bring their average back, they can receive normal billing. If not, they will have a 3 year period where they will only be able to bill for the mean time spent per complexity level.
  • In a special situation, hospitalists, and emergency physicians, will be paid an additional complexity assessment for numbers of patients seen in a shift that exceeds the "maximum" recommended number of their respective boards (in EM that is 2.5/hour) since those specialties can not control the flow of patients that come to them. Those specialties, primary care specialties, as well as on-call physicians who are called or called in, will get a complexity boost for patients seen on weekends, holidays, and between the hours of 5pm and 8am.
Why have I created this reimbursement system? For one, it is simpler - one that a computer algorithm could do the necessary calculations. Plus, it allows physicians to take more time with complex patients with chronic problems, which saves costs and improves care.
  • There will be no need to have "medicare police" to incarcerate physicians for Medicare fraud. Especially since physicians are not the drivers of fraud (from OIG Testimony on Medicare Fraud - July 25, 2000, which said of all the examples of types of fraudulent and abusive activities mentioned in the report, NONE of them were individual physicians.) Typically, they are fraudulent companies finding creative ways to game the system. Largest example of fraud: Rick Scott's Columbia/HCA paid a fine of 1.7 Billion dollars
This blog is longer than I thought, so I will end it here and address the hospital payment system changes in my next (and I think last) blog on Medicare Reform.


  1. I have a bit of a bone to pick with the experience increase for base pay. There are many physicians who should have long ago retired and are not practicing evidence based medicine. To punish younger physicians just because they have not been around as long, even though they were trained to evaluate the evidence for or against a course of treatment is not fair. I have had patients state that they actually picked a younger physician because they felt I was more familiar with the most recent and up to date treatments. I agree with CME and board certification but time in practice should not be determining factor in your base rate.

  2. I agree that older docs can sometimes be behind the times, and younger docs can be up on the latest. However, medicine is the only field I know of where your experience is not valued at all. And so much about medicine is the art of medicine, not the science. The art takes more time to learn. I am not saying to lower pay for those who start out. But in nearly every other job, you start off lower at first and get raises from year to year. In medicine, it often is the opposite (due to medical malpractice rates increasing with more patients seen) - you make less with more experience, which to me seems perverse. Thank you for sharing your opinion.

  3. First, we have got to lose the notion that medical students would actually choose primary care over a specialty with greater frquency if the reimbursements were different.

    Specialty medicine is interesting and satisfying. Primary care, not so much.

  4. Dr. Thom, I am not a primary care doc so while I personally agree with your interpretation of primary care medicine, I have a number of friends who chose that and really do enjoy it. Many doctors do enjoy that one-on-one contact, getting to know the patient as a person, their family and watching them grow.

    To say that primary care is less interesting is not fair to the profession, and I imagine a large number of docs would take umbrage with your opinion. That being said, it is your opinion and your right.

    There will always be students who like procedures and specialties, and others who like old fashioned primary care. However, many are driven to specialty forms of medicine for financial reasons. Do MDs really dream about doing colonoscopies in med school? Or of becoming urologists? Usually it is a lifestyle choice.

  5. Dr. Thom, your comments remind me of what I heard 2 different doctors say:

    Surgeon, "There are only two kinds of doctors, those who are surgeons and those who want to be surgeons."

    Internist, "There are only two kinds of doctors, surgeons and doctors that think."

    It all depends on your perspective.

  6. Interesting stuff here:

    My thoughts:

    1)I'm a Family Physician (Midwest, small town, I do everything from deliveries and c-sections to inpatient care of severe medical illnesses and cover ER call frequently). I work 12 hour days or more and I don't get paid a fraction of most specialists. I graduated from med school only 5 years ago, and I CHOSE family medicine because I want to make a difference, use my brain, and not become suicidal from doing boring assembly-line specialty care medicine. I made this choice NOT because I want to be wealthy.

    So I do this instead of making a mint doing factory work like so many specialists do. Does somebody out there really think that specializing (doing just one thing all day) is somehow more exciting than what I do? Is that person really serious? REALLY?

    Of course increased primary care reimbursement would increase primary care as a choice of new physicians. Always follow the money, and you'll find interest.

    2) I wholeheartedly agree that we need to find a way to pay physicians who use their brains in some kind of equitable fashion. I understand your "computer algorithm" thing. I have a couple thoughts about it, though. The first is that it seems complicated, and prone to massive mistakes and over-generalization. There are certain patients who demand or need more time, despite the absence of 12 diagnoses (say a depressed and suicidal patient, or a healthy teen needing counselling due to recent sexual abuse). The second is, that it will give more money to to the doctors who go faster. There is evidence that haste makes waste when it comes to this quality/quantity argument. So your hospitalist and ER doc get paid more when they get dumped on on a particular day, since that's beyond their control, and I get that. However, what about the consiencious doctor who refuses to see more than 20 patients a day. If the algorithm says that since all the other doctors see 25, he must be too slow. No--maybe the others are too fast.

    This "computer algorithm" has no way of sorting the good from the bad, and might actually incentivize the bad.

    The more I think about it, I still think we need to get out of this mindset where we have to have a complicated payment system. Instead, I'm getting comfortable thinking that if instead we give some kind of health savings account money to people, and let the market forces sort all this complicated mess out.

    What I mean, is that if I go slow and do a great job taking care of people, i can charge whatever I want, and my patients can decide if it's worth it. If I'm not worth it, I'll go broke, and will have to adjust my prices accordingly. At the same time, if another doctor can run 40 patients through, but they don't feel that the 2 minutes they got with him or her was worth the bill, he'll feel the heat too. I think the market would sort this out. The problem is how to pay for it.

    If we have to have a massive gov't giveaway, then just give away catastrophic health coverage and then let the savings accounts pay for the day to day stuff, and let the market sort it out.

    I know I'm over-simplifying this, but I think our problem could bear some simplification. Thank you for starting this discussion.

  7. Vance thank you for your comments. The point of this was just as you said, starting a discourse. I see over and over docs saying I don't want salary, fee-for-service is bad, etc...But I don't see people thinking of solutions and discussing them.

    I had a feeling some primary care doc would be offended by the perception that primary care isn't as "interesting" as a specialty...that's why there are so many different fields - "there's a cover for every pot" my HS teacher used to say.

    Re: your comments about over generalizations and missing out on complex patients. It was impossible (and would be unreadable) if I listed every situation that would garner an increased complexity.

    Basically, if you spend more time with a patient bc they are suicidal, you get paid for your time. If you counsel a rape victim, you get paid for your time. But if that suicidal patient also has high blood pressure and diabetes and requires more time dealing with that on a "mental level" as you accurately pointed out does not get its due appreciation in the payment system, then there would be an additional complexity multiplier.

    My system is inherently simple as the more time a pt requires, the more time a pt gets. And the more medically complex they are, the more per hour the doctor gets for using their brain power.

    The computer algorithm is just for the billing determination: your doctor base rate adjusted on a yearly basis, muliplied by a complexity number based on age and number of complicating medical problems. Also, it is useful for compiling graphics that assess if docs are charging appropriate amounts of time compared to their colleagues for similar situations - with the outliers getting paid on an average basis.

    I welcome all opinions to this discussion. I wish there were more discussion beyond the I hate this but I have nothing better to offer that most docs are spewing.

    Thank you for taking the time to comment.