A Better Way to Pay for Primary Care

Numerous reports describe the decline in health measures in the United States. As detailed in a 2022 report by the Commonwealth Fund,¹ among high-income countries, the US has the lowest life expectancy at birth, the highest death rates for avoidable or treatable conditions, the highest material and infant mortality rates, and among the highest rates of suicide. The rates of people with multiple chronic diseases and those with obesity are also highest in the US. 

These statistics are not new and don’t reflect the enormous amounts of money spent on health care in the US, which disproportionately pays for high-cost items such as advanced medical technologies, expensive drugs, and specialty care. Spending waste is also endemic.

Access to high-quality and accessible primary care is critical to the health of individuals and the population, yet there is too little money going into primary care to pay for the care needed and for the providers who deliver it.

Two things are clear: primary care is underfunded, and the way primary care is reimbursed is not working. In 2022, the National Academics of Sciences, Engineering, and Medicine (NASEM) issued a report² advocating for payment reform as one of the critical issues for implementing high-quality primary care. The report calls on adopting a hybrid payment model incorporating a mix of FFS and capitated payment that would become the default method of primary care teams over time. Reimbursement via this hybrid approach would be based on paying prospectively, be risk-adjusted for medical and social complexity, permit investment in primary care infrastructure, processes, and teams, and align with incentives for measuring and improving outcomes for patient populations assigned to physicians. The report also calls on the CMS to increase overall spending on primary care by developing better data collection and valuation tools to identify overpriced services, and restoring the relative value scale (RVS) update committee to an advisory role by developing and relying on additional experts and evidence.

Advocating for a hybrid payment model is not new. Several initiatives by the Center for Medicare and Medicaid Innovation (CMMI) tested this model for years, with the most recent demonstration project set to begin in July 2024. Billed as a 10.5-year multi-payment model, The Making Care Primary (MCP) Model³ will be tested in 8 states and builds on prior payment reform initiatives.

According to Russ Phillips, director of the Harvard Medical School Center for Primary Care, many of these models “have not really provided the resources for practices to succeed because there is not enough support within the models tested so far”.

Given the chronic and ongoing underfunding of primary care, many people and organizations are urging CMS to take more rapid action in transitioning to a hybrid payment and increasing primary care funding. A recent article by researchers at the Urban Institute Health Policy Center and Institute for Exceptional Care⁴ urged lawmakers to adopt the hybrid model within the Medicare fee schedule and not wait for further demonstration projects. In March 2023, 27 organizations collectively⁵ sent a letter to CMS urging the adoption of a hybrid payment model in the Medicare Shared Savings Program (MSSP).

Ann Greiner, president and CEO of the Primary Care Collaborative (PCC), one of the groups in which co-signed the letter, thinks the COVID-19 pandemic served as a catalyst for urging action on payment reform. She cited a report⁶ by the Harvard Center for the Center for Primary Care estimating that primary care lost about $15 billion during the pandemic due to an inability to provide and bill for in-person care. 

“We will continue to be on a downward slide with the health of the population if we don’t invest more in primary care,” said Ms Greiner. “We’re concerned that the front door of our health care system remains partially closed, particularly for people on the lower socioeconomic end of the scale.” 

Implementing a Hybrid Model

Edith Coakley Stowe, who worked for 10 years at CMMI and is now a managing director with Manatt Health, said recent hybrid payment models designed for primary care have been dominated by capitation, calculated on a practice’s revenue in the recent past historical period. Capitation, she said, offers the benefits of stability in revenue (allowing for fluctuations in volume) and flexibility to divert resources to services traditionally underfunded such as care management or virtual care. Services left in FFS are those, such as vaccines and wellness visits, for which volume incentives remain appropriate.

“The goal for practices is a different way of working that does not have to be based on maximizing fee-for-service revenues, and instead can be anchored to outcomes and have the freedom to try different care delivery approaches to make progress towards those outcomes,” Ms Coakley Stowe said.

Ms Greiner noted that under FFS in which primary care traditionally is reimbursed, about 25% of care is not paid for. This includes services such as coordination and care integration involving follow-up and monitoring of patients with complex chronic diseases, such as diabetes or hypertension. 

Ms Greiner emphasized that under a hybrid model, these services would be prospectively covered via capitation and FFS. Ms Greiner uses prospective instead of capitation to emphasize that the payment is dollars given in advance to keep people healthy versus the money spent. “This is not about moving the deck chairs,” she said. “This is not taking the same payment that is retrospective and making it prospective; it is about investing more prospectively.”

Ms Greiner also said this distinction is critical, citing unsuccessful payment reforms tried in the 1990s in which payment for primary care didn’t increase but simply was moved from retrospective to prospective payment. “We didn’t have good data and analytics to manage patient populations or to know how we were doing,” she said. “But now we have better data and analytics; we also have measures and, although they need improvement, they can tell if we are getting improved patient outcomes by investing more through value-based payment models.”

For Harold Miller, president and CEO of the Center for Healthcare Quality and Payment Reform, the main barrier to implementing the hybrid payment method is the need for greater specificity. “If you’re going to implement a different payment system, you have to be specific about how much will be paid and what will be done in return for the payment,” he said. 

Mr Miller cited the ambiguous language used, for example, in the NASEM report about how much should be paid for office visits and other services, how much should be paid on per-patient basis, and how payments will be adjusted for patients with different characteristics. For example, the report says, ‘CMS should make a per visit payment at a reduced, but reasonable level’. “What is reasonable?” said Mr Miller. “The challenge for primary care is that reasonable depends on whether the practice is getting enough revenue in total to cover the time and costs of delivering care to the practice’s patients.”

“That is why under the current system, there are multiple levels of payment for office visits because of different levels of time and resources for different patients,” Mr Miller added. 

Under a hybrid payment system, Mr Miller disagreed with having a single small payment for all office visits because that could discourage longer office visits for patients who need them or could even discourage practices from taking on sicker and more complex patients.

Mr Miller also highlighted problems with per-patient payments for care management that Medicare started paying for a few years ago. “The problem is that they defined the code for care management so narrowly that physician practices don’t have the flexibility to provide the care patients need,” he said. For example, he noted that the payment requires the practice staff to spend 20 minutes per month on a given patient to be paid for that month. “If you spend 30 minutes one month, and 10 minutes the next, you only get paid for 20 minutes for one month even though you spent 40 minutes in total,” he said.

Overall, Mr Miller said that current versions of a hybrid model are problematic. “What people are doing in most cases is adding a small monthly payment on top of existing fees, or they are reducing the office visit payment and adding a bigger per-month payment,” he said, adding that there are 2 problems with that. “The physician practice is still penalized financially if patients are healthy and need fewer office visits, and the amount of the monthly payment is usually very small and is not based on what it actually costs to deliver the care management services that the payment is supposed to support,” he said. 

Based on his discussions with physicians, self-insured employers, and patients, Mr Miller thinks a better way to implement a hybrid payment system is to separate the payment type by the type of care: diagnosis and treatment of an acute condition (ie, a new problem) should continue to be paid for by a fee for the encounter with the patient, whether it is via an in-office visit or through telehealth, since that helps ensure the practice can see patients quickly. Management for chronic conditions and preventive care should be paid through a monthly per-patient payment rather than encounter fees so the practice has the flexibility to provide proactive care designed to reduce chronic condition exacerbations and prevent new problems from developing. 

“This distinction between acute care, chronic care, and preventive care is not made in the payment system today,” Mr Miller said, “but it’s a distinction that every good primary care practice needs to make in the way it schedules its time and delivers services.”

Mr Miller prefers to use “patient-based payment” instead of capitation to describe payment more accurately under his framework, and to adjust payments based on patient needs rather than using current risk adjustment system that were designed to predict total Medicare spending. “What matters from the primary care practice is not how much Medicare spends on non-primary care services, but how much the primary care practice staff are spending with the patient,” he said, adding that the primary care practice should be paid more if the practice needs to spend more time caring for patients to achieve good outcomes. 

Increasing Payment for Primary Care

Hand-in-hand with payment reform is the need to increase funding for primary care as a whole. Mr Phillips emphasized that how primary care is paid is only one part of the equation. How much is paid is the essential other part. 

Mr Phillips said that primary care receives about 5% of the total health care spend, with most experts thinking it should be at least double that. “No one really knows what it costs to provide comprehensive primary care, but we know it should be closer to 10-12% of total health care spend,” Mr Phillips said, citing legislation in a number of States asking for 12%.

Mr Phillips noted that primary care has been devalued by the current payment system based on Relative Value Units (RVUs) that has widened the disparities between procedural and nonprocedural (eg, primary care) specialties. 

The challenge is where to find the funds to increase payment to primary care. Rhode Island, which more than doubled its spending on primary care from 5% to around 12% in 2010, put a cap on the growth of inpatient expenses and transitioned the money into supporting the growth of primary care. Mr Phillips said it turned out to be a reasonable strategy. 

Mr Phillips also noted that reducing the 20%-25% of health care waste, by reduction of administrative costs and unnecessary specialty visits, emergency room visits, and hospital stays, could be used to fund primary care. “But there also has to be a commitment on the part of the healthcare system to support reducing waste and putting that funding into primary care,” he said.  

As to the impact of increased funding for primary care on overall health care spend, Mr Phillips pointed to a study⁷ in California showing that provider organizations who spent more on primary care had lower total health care spend compared to those spending less on primary care. The study calculated that California could save over $2 billion if all of California increased their spending on primary care. 

Mr Phillips cautioned, however, that increasing primary care funding is not the full picture of what is needed to deliver better health to individuals and populations. “There are so many things that are critically important to the health of our population, and that contribute to the huge disparity in life expectancy that we see across communities,” he said. “Even if we double our spending in primary care, we still are only about 10% of a very large health care system that needs to join with primary care in improving the health of the population and larger community that we are intended to serve.” 

Moving Forward

From her experience working at CMMI, Ms Coakley Stowe said she sees a “collective action” dynamic in the work to reform payment for primary care. “There appears to be a first mover disadvantage, but a huge advantage when everyone takes the same action collectively,” she said, adding that government can’t solve all problems but can help by being the first mover.  For example, Ms Coakley Stowe says that primary care payment models tested through CMMI in 7 regions of the country accelerated the development of similar models in those regions by other participating payers.

“I think in 2010, we at Medicare had hoped that the scaling would be further along by now, but I do have hope that Medicare will be able to scale its methodologies into more of a mainstream approach available in all states before another decade goes by,” Ms Coakley Stowe said.

In 2022, the PCC launched Better Health Now,⁸ a campaign that includes a policy plank to work with CMS to scale up the hybrid payment model. Ms Greiner said PCC and its partners are trying to get a hybrid payment model into the MSSP so that it is a permanent program. She said CMS wants to layer on a CMMI model on top of MSSP to test the payment model, and if the payment model enhances performance, then it will be folded into MSSP. 

“There is a really good reason to believe that this would enhance performance because if you look at the recent evaluation of the MSSP results, the organizations that are either physician-led, or even more dramatically, predominantly primary care doctors, on a population-basis, hit it out of the park in terms of savings,” Ms Greiner said. “CMS has some confidence that this could be a workable model.”

Ms Greiner said that they are pressing CMS for an announcement of this model, and hopes it will be forthcoming in 2024. 

References 

1. Gunja MZ, Gumas ED, Williams RD. US Health care from a global perspective, 2022: accelerating spending, worsening outcomes. The Commonwealth Fund. Issue Brief. Published online January 31, 2023. Accessed March 4, 2024. doi:10.26099/8ejy-yc74 
2. National Academies of Sciences, Engineering, and Medicine. Implementing high-quality primary care: rebuilding the foundation of health care. The National Academies Press. 2021. doi:10.17226/25983
3. Making Care Primary (MCP) Model. CMS. Accessed January 9, 2024. https://www.cms.gov/priorities/innovation/innovation-models/making-care-primary
4. Berenson RA, Shartzer A, Pham HH. Beyond demonstrations: implementing a primary care hybrid payment model in Medicare. Health Affairs Scholar. 2023;1(2):1-6. doi:10.1093/haschl/qxad024 
5. Fowler E, Seshamani M. RE: principles for a hybrid primary care payment option in the Medicare Shared Savings Program. https://thepcc.org/sites/default/files/news_files/PCC%20NAACOS%20Sign%20On%20Letter%203.22.23%20FINAL_0.pdf
6. Basu S, Philips RS, Philips R, et al. Primary care practice finances in the United States amid the COVID-19 pandemic. Health Affairs. 2020;39(9). doi:10.1377/hlthaff.2020.00794 
7. Yanagihara D, Hwang A. Investing in primary care: why it matters for Californians with commercial coverage. California Health Care Foundation. April 2022. Accessed March 4, 2024. https://www.chcf.org/wp-content/uploads/2022/04/InvestingPrimaryCareWhyItMattersCommercialCoverageES.pdf
8. Primary care matters. Primary Care Collaborative. Accessed January 9, 2024. https://thepcc.org/better-health-now