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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making This article reviews the recent research, policy and conceptual literature on the effects of payment policy reforms on evidence-based clinical decision-making by physicians at the point-of-care. Payment reforms include recalibration of existing fee structures in fee-for-service, pay-for-quality, episode-based bundled payment and global payments. The advantages and disadvantages of these reforms are considered in terms of their effects on the use of evidence in clinical decisions made by physicians and their patients related to the diagnosis, testing, treatment and management of disease. The article concludes with a recommended pathway forward for improving current payment incentives to better support evidence-based decision-making.
Timothy K Lake1, Eugene C Rich*1, Christal Stone Valenzano1 & Myles M Maxfield1 Mathematica Policy Research, Inc., 1100 First St NE, 12th Floor, Washington, DC 20002, USA *Author for correspondence: Tel.: +1 202 484 9220 Fax: +1 202 863 1763 [email protected] 1
KEYWORDS: comparative effectiveness research n evidence-based decision-making n incentive n physician payment reform
In a companion article published in this issue of the Journal of Comparative Effectiveness Research, we presented a conceptual framework for understanding clinical decision-making by physicians at the point-of-care, and analyzed how incentives in the existing fee-for-service (FFS) payment system can encourage decisions that run counter to evidence established through comparative effectiveness research [1]. The underlying motivation for the companion article derived from the observation that availability of research evidence alone is not sufficient to bring about evidence-based decision-making at the point-of-care, and that payment incentives in particular may be a key tool for enhancing use of comparative effectiveness research [101]. We concluded in the companion article that existing FFS payment can result in a number of problems with clinical decision-making at the point-of-care, including over- and under-diagnosis, over- and under-treatment, and undermanagement of care. In this article, we turn our attention to the analysis of several prominent healthcare payment-reform options that have been proposed and are now increasingly being implemented in pilot forms throughout the USA. We limit our attention to payment arrangements between a payer (e.g., an insurer) and healthcare providers that are presumed to remain independent of payers; thus, our analysis does not include salary as a payment option. However, it should be recognized that larger provider organizations may choose this option for paying individual clinicians, based, in part, on arrangements they have with payers, and that these arrangements may also provide distinct incentives for or against evidence-based care. This analysis, while important, is beyond the scope of this article, which instead only focuses on reforms to existing payer–provider arrangements. Our analysis focuses on what theory, as identified in our framework in the companion article, predicts the ability of these reform options to enhance evidence-based decision-making, and on their relative advantages and disadvantages for addressing the problems of over- and under-diagnosis, over- and under-treatment, and undermanagement of care. Our emphasis is primarily on the effects of payment arrangements on clinical decision-making, but we also consider administrative feasibility of reforms and other behaviors including ‘gaming’, such as new billing or coding
10.2217/CER.13.27 © 2013 Future Medicine Ltd
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practices in response to reforms. The findings from this article are drawn from both theory and selected empirical evidence from the literature. The article is primarily structured as a policy analysis of payment-reform options, derived from the conceptual framework developed in the companion article noted above, and supported by examples from the published literature based on searches of PubMed using keywords including ‘financial incentives’, ‘physician payment’, ‘physician characteristics’, ‘physician workload’ and ‘physician experience’, with a focus on the relationship of these factors to decision-making or physician practice. We generally restricted our attention to examples of published work from the past 10 years, although we included older key publications as appropriate. An overarching conclusion of our analysis is that no single provider payment-reform option will consistently reward evidence-based decisions and ensure that clinicians are not at a financial disadvantage when providing evidencebased care. Thus, we conclude our analysis with a proposed pathway forward that combines a recalibration of the existing fee structure in FFS with other target payment reforms where needed, such as pay-for-quality, episode-based payments or global payments. Effects of payment reforms on evidence-based decision-making
In the following policy analysis, we review prominent approaches proposed to reform the current FFS payment system, discussing their advantages and disadvantages relative to rewarding evidence-based decisions at the point-of-care. ■■ Adjusting FFS payment Adjusting fees relative to costs
A first step in the reform of FFS is to adjust incentives so economic margins (revenues in excess of costs) are at least equal, regardless of decision-making at the point-of-care. This would help eliminate disincentives for evidence-based decision-making, such as inadequate compensation or even negative margins for delivering evidence-based care. The Medicare Physician Fee Schedule was structured to reflect the relative costs of providing any service (thus providing equal economic margins), but the fee structure for many parts of the current fee schedule no longer achieves this goal [2,102]. Our analysis suggests that reforms involving a restructuring of fees to provide equal, but
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reasonably high margins for all services may be a useful way to address underuse of services. Research studies indicate that if revenues are increased and are reasonably high compared with the cost of services, physicians will be more likely to increase the provision of currently underused services [1]. On the other hand, reduced payment for high-margin, overutilized tests or treatments may be necessary in the long term but may have more limited effects on overuse in the short term, especially without other consequences. In particular, depending on the alternative choices available, overuse may persist in the short term, unless payments were reduced dramatically, below costs. In this case, large reductions in payment levels may result in more than just reduction in overuse, but substantially reduced access to, or possibly complete unavailability of, a particular service. In the example of imaging studies for low back pain, there probably are patients for whom the test is indicated [103]; these individuals could be adversely affected by ‘below cost’ reimbursement for imaging tests if clinicians decide to no longer offer imaging for certain types of patients across the board. The same might also occur for surgical procedures that are currently routinely provided, and sometimes overused, but that may be dramatically curtailed if reimbursement rates fall well below costs. Other overuse problems (such as antibiotic overuse) are not incentivized by current physician FFS payment and, therefore, are not easily ameliorated through fee-schedule revisions. In addition, certain types of management activities to promote more evidence-based chronic-illness care (like ongoing drug management of patients with gastroesophageal reflux disease [GERD]) may be difficult to target with piecework FFS payments. For example, incentivizing communication and follow-up with GERD patients outside of the office setting (such as through e-mail or telephone calls) may be difficult to achieve with FFS payments as these are highly discrete and variable activities that are difficult to track and document individually [3,4]. Finally, it should be noted that margins associated with fees for particular services are not necessarily static over time. For example, cataract removal surgery has become much less expensive over time as the procedure has become more efficient. In response, Medicare, for example, recently reduced fees for this procedure by 13% [104]. While overuse may not apply to this
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
particular clinical example, reductions in the cost of procedures may increase margins, which in turn may lead to overuse. Adjusting fees relative to effectiveness
As indicated above, adjustments of FFS payments so that margins are equal for each service can be effective for addressing certain situations where evidence-based care is not provided. Some experts have proposed taking this further by recalibrating payments so that they reflect not only the relative costs of services, but also the evidence of one service’s effectiveness relative to another [5,102]. If margins are higher for highly effective services and lower for less-effective services, physicians would have a stronger incentive for evidence-based decision-making. Examples in Medicare include increasing payments for primary care services, preventive care tests and care coordination [102]. Other possibilities that are not currently implemented include paying relatively low fees for services recognized as not having a strong evidence base, such as use of implantable cardioverter–defibrillator for primary prevention in patients recovering from heart attack or bypass surgery, or with severe heart failure, compared with alternative treatments [6]. This approach of increasing or decreasing fees for services based on evidence of effectiveness, rather than just relative costs, may further incentivize decisions based on evidence, but also raises some key design and implementation challenges. For example, there may be strong evidence of effectiveness for one decision choice but a widely used alternative may have been subjected to relatively little study. Adjusting fees based on evidence of effectiveness could influence where comparative effectiveness research efforts are focused in ways that are not related to otherwise important clinical priorities. Additional problems with this approach to FFS reform include the difficulty in establishing a fee structure that accounts for the fact that care shown to be effective for one group of patients may be less so for others. Determining the extent to which ‘highly effective’ services will be reimbursed more generously through higher fees presents yet another policy challenge. In particular, how much would one value greater effectiveness? Finally, regularly adjusting the fee schedule based on the latest studies and evidence should be required, but policy-makers would need to assess how frequently this would occur and determine when evidence is sufficiently strong to make adjustments.
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■■ FFS with pay-for-quality
Adding payments (e.g., in the form of bonuses) for physicians who perform well on quality measures or imposing penalties for those failing to meet standards, known as pay-for-quality (P4Q), could address some of the limitations of simply recalibrating FFS payments. P4Q is a more specific application of pay-for-performance or value-based purchasing strategies that may also include incentives for cost containment in addition to evidence-based care. For example, physicians who prescribe antibiotics appropriately or manage chronic conditions, such as GERD, more effectively could be rewarded by appropriate P4Q. For use of pulmonary function testing (PFT) in asthma, P4Q could reward evidence-based test ordering. However, adherence to current quality measures does not always represent strong evidencebased or patient-centered care. The first problem is that many quality measures are based on clinical practice guidelines that may rely on a rationale other than strong research evidence [7]. This may, in part, derive from the problem that many point-of-care research questions have not been adequately studied, a problem that comparative effectiveness research and patientcentered outcomes research are intended to solve [8]. However, an equally difficult problem is that many quality measures make inadequate allowance for heterogeneity of treatment effects and, therefore, promote the ‘nonevidence-based’ application of tests or treatment to patients. In some cases, certain patient groups have been understudied and, thus, the benefits of the recommended intervention are unclear [9,10]. In other cases, subgroup analysis has demonstrated important subgroup differences that have not been adequately addressed in the published quality measure [11]. Finally, there may be circumstances where patient preferences regarding different treatment outcomes may be an important consideration [12,13]. For these reasons, the Patient-Centered Outcomes Research Institute has made it a priority to investigate the relative effectiveness of interventions from the individual patient perspective. The primary solution to these problems is to continue to improve the current state of quality measurement and their usability for rewarding evidenced-based point-of-care decisions. In particular, measures may be defined in more specific and flexible ways, including better use of inclusion and exclusion criteria to address
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clinical heterogeneity. However, this is a highly resource-intensive and time-consuming process, given the need to achieve consensus on measures and to carry out adequate testing of measures, even when the underlying evidence base is well established. Indeed, the ongoing evolution of the evidence relative to point-ofcare decision-making imposes its own daunting challenge. As with any effort to recalibrate FFS payments, for P4Q incentives to consistently reward evidence-based decisions at the pointof-care, they must be continually revised with the changes in the current evidence. Even when quality measures are developed that address these challenges, to be effective in guiding point-of-care decisions, such P4Q incentives will need to be focused on high-priority areas. Physicians typically make thousands of decisions each day so attempts to incentivize all clinical decisions through P4Q are likely to fail [14–16]. Furthermore, potentially conflicting incentives provided by individual payers must be addressed to ensure strong and consistent efforts to promote evidence-based decision-making. P4Q design is also challenged by often limited patient sample sizes for each physician or group, and the resulting statistical imprecision [17,18]. In addition, appropriate P4Q approaches require that the right patients (and associated measures) are attributed to the right physicians, especially for sicker patients who often receive care from multiple physicians during the year or episode of care. Finally, appropriate risk adjustment and benchmarking are necessary to enhance fairness and transparency. However, it is important to note that optimal approaches for these technical aspects of P4Q are still in developmental stages and continue to be refined [105]. ■■ Episode-based bundled payment
Other payment-reform approaches, including episode-based bundled payments, essentially replace the current FFS system. Under episodebased payment arrangements, payments are paid not for individual services but for a larger ‘bundle’ of services provided in an episode of care or illness [106,107]. As with current FFS, bundled payments are not specifically designed to reward specific evidence-based decisions; however, they provide incentives for overall constraint of the volume of all services identified within the bundle or episode, with incentives for constraint highest for the most expensive services.
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Episode-based payment can provide physicians with incentives to reduce unnecessary services, such as the prescribing of overused tests for back pain. With a fixed revenue for an episode of illness, physicians could face more neutral incentives for evidence-based (vs nonevidence-based) recommendations for services since they are no longer receiving a fee for each service delivered. However, payment reform designers should also recognize that episode-based payments introduce new distortions in incentives; thus, they should carefully consider the use and design of episode-based reforms use for enhancing evidence-based care. For example, one challenge is that episodebased payments could increase overdiagnosis since payments are tied to new episodes of illness, and this is especially true when episodes have high overall economic margins. In these circumstances, providers would be rewarded for increasing patient awareness of symptoms and expanding the use of tests to detect illness episodes. At the same time, for these reasons, episode-based payments may be an effective tool for addressing problems of underdiagnosis of certain conditions. Episode-based payments may also create new incentives to underuse tests or treatments in patient management within an episode (such as the PFTs in asthma or medication adjustment in GERD). Application of episode-based payments to address the problem of overused treatments is further complicated by the fact that treatment decisions, and not just diagnoses, may also define certain episodes. For example, episode-based payments may also be based on a hospitalization decision; in others, it may be based on surgical decisions. Of course, in others, the definition of an episode is linked directly to the diagnosis of an illness. Generally speaking, episodebased payments can incentivize evidence-based decision-making about overused services during an illness episode, but may lead to overuse of the tests or procedures that can initiate or define episodes of care in the first place. A significant challenge in the design of episode-based, bundled payments is to define an adequate clinical and cost-of-service basis for assigning a payment to a bundle. This includes defining the appropriate mix of services to be delivered during an episode, ideally based on evidence-based practice, and defining the appropriate costs associated with these mix of services. However, for the most part, the main sources of
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
data for constructing episode bundle and payment rates are current healthcare delivery patterns and payment rates, which may be distorted in the first place as we discuss above. Moving beyond this ‘normative’ approach for setting evidence-based, episode-based payment rates requires substantial resources, including conducting new empirical research, especially considering the large number of different e pisode types that may need to be created. As with any new payment reform, episodebased payments may introduce new ‘gaming’ patterns, where providers respond by changing billing or coding patterns within acceptable rules to enhance payments; however, that would not necessarily affect clinical care. This may include more thorough coding and collecting of information on diagnoses and procedures that would tend to place patients in higher-paying episode categories than might otherwise occur. Incentives in episode-based payments to reduce the volume of services can also be combined with P4Q incentives to deliver evidencebased care. P4Q adjustments may be particularly useful to counterbalance the general incentive to reduce the volume of services during an episode of care. For example, payers could combine episode-based payments with P4Q to incentivize indicated use of PFTs in asthma patients or appropriate adjustments of GERD treatment [19,108]. Episode-based payment designs could also exclude certain evidence-based services from the bundle (such as PFTs in asthma or visits for medication adjustment in diabetes or GERD) so that they are reimbursed on a FFS basis. This approach could ensure that the volume of these services is not reduced unnecessarily, or possibly even enhanced, analogous to current approaches to adjusting end-stage renal disease bundled payments in the Medicare program [20]. Even if these adjustments could address specific problems of incentivizing undertesting or undertreatment in bundled payments, the risk of episode definitions leading to overdiagnosis and overtreatment would remain. Episode-based payment may not directly reward as many discrete point-of-care decisions as FFS; there are still numerous judgments regarding problem identification, test choice and diagnosis and treatment selection that can lead to differential financial incentives under episode-based payment. Indeed, under this payment approach, these judgments at the point-of-care might
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make the difference between a US$1000 and a US$20,000 episode (in contrast with current FFS decisions that might affect decisions about whether to provide a US$100 vs a US$200 service). The widespread application of robust appropriateness criteria to episode definitions may address some of the risks of overtreatment incentives, but the problem of overdiagnosis might pose an ongoing challenge and place similar cost–growth pressure as current FFS. Quality metrics may also be used to encourage evidence-based use of services during an episode. In particular, episode-based payments could be adjusted based on quality measures to address the potential for underused tests and treatments, as well as undermanaged therapy during an illness episode. However, as with P4Q incentives in FFS reform, such quality measures would have to focus on high-priority decisions within each episode, and conflicting incentives from multiple payers would have to be avoided. Finally, experience with episode-based payments is relatively limited to date, and it is uncertain how and whether various technical, logistical and financial challenges will be addressed in different approaches [106,109]. For example, decisions will need to be made about who (which physicians or other providers) should receive payment and how payments will be divided up when care in an episode is provided by multiple physicians. Pricing, updating and risk-adjusting payments for episodes, especially across diverse populations, are also significant challenges. Finally, there may also be significant information technology, cash flow and data-reporting challenges that may emerge when transitioning from FFS to episode-based bundled payments. ■■ Global payment (capitation)
In global payment, or capitation, which also replaces FFS, providers receive fixed payments per patient for all services provided to that patient during a given time period. Under this arrangement, many of the physician behaviors at the point-of-care that are rewarded under FFS become potential sources of financial loss for physicians paid on a capitated basis. Similar to episode-based payments, global payments can clearly reward providers for more parsimonious use of services. However, unlike episode-based payments, the focus for global payment is the cost for care of a population of patients rather than of specific illness events. Given this population focus, some have
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argued that global payments may reward more evidence-based decision-making, particularly related to prevention and chronic-illness care. Various analyses have demonstrated, however, that many effective interventions for adults are not cost saving, but ‘cost effective’ instead, conferring substantial benefits to patients relative to their additional cost. Thus, while there may be a few care management initiatives that reward the capitated practice with near-term financial savings, in many other circumstances, global payment does not provide clear incentives for more evidence-based decisions at the point-of-care. With global payment, the physician has an incentive to reduce patient access to expensive clinical services, such as imaging for patients with low back pain. Nonetheless, if the patient visits a physician with this concern, capitated payment will also incentivize the physician not to identify conditions that might require further testing or expensive treatment. Physicians receiving capitation may also have incentives to convince patients of the risks of additional imaging or other costly treatments. Capitation has often been tied with other approaches designed to either control costs and/or improve management of care, particularly for chronic illness. This includes assignment of patients to a primary care physician who is primarily responsible for managing services and referrals for patients (sometimes referred to as a gatekeeper), as well as other utilization-management and care-management approaches. In addition, capitation or global payment has been associated with the development of ‘integrated delivery systems’ and, more recently, ‘accountable care organizations’ [21–24]. The relationship between these financial risksharing arrangements and broader healthcare delivery system reforms and cost containment strategies is a well-studied and complex topic that is beyond the scope of this article, which focuses more specifically on how these incentives affect individual clinician decision-making at the point-of-care. Concerns about incentives for inaction and ‘undertreatment’ are at the core of physician and patient anxiety about capitation as a mechanism for compensating medical care [25,26]. Consider examples of spirometry in patients with asthma or medication adjustment in GERD; only if the cost savings for appropriate management are sufficient will providers have a financial incentive to manage these chronic conditions at an appropriate level.
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Examples of overuse of antibiotics highlight another important nuance in the incentives for promoting more evidence-based recommendations through global payment. Little additional direct cost may be experienced by the capitated provider practice when generic antibiotics are unnecessarily prescribed. Occasional costs asso ciated with antibiotic side effects could be a consideration in addition to the costs of patients with more serious infections whose treatment might be delayed. Policy-makers may not be able to rely on the incentives of capitation to ensure an organization provides the physician (or other clinician) the time and resources to properly evaluate each patient, and identify, for treatment, those patients most appropriate for antibiotic therapy, and successfully educate the others on the risks of unneeded antibiotics. Quality report cards and P4Q incentives can help with the concern about the tendencies for underuse of effective services inherent in capitated payment. Research conducted by Song and colleagues found that a global budget combined with P4Q reduced some utilization costs but improved quality in chronic care management, adult preventive care and pediatric care [27]. The National Committee on Quality Assurance (NCQA) was established, in part, to monitor managed-care entities for underuse of needed services, and the techniques for quality measurement are much more numerous and sophisticated than those that were available at its founding in 1990. Nonetheless, there are daunting limitations in using P4Q to provide consistent rewards to capitated providers for evidence-based care. As discussed previously, physicians make numerous decisions during each patient encounter that can represent incremental costs to an organization reimbursed through global payment. The proper measurement, monitoring and reward of these innumerable patient-centered, yet evidencebased decisions at the point-of-care is a technical problem far beyond current capabilities. Summary of reform options & their effects on evidence-based decision-making
Options for reforming physician payment vary in their ability to promote evidence-based decision-making at the point-of-care (Table 1). A recalibrated fee schedule in FFS (providing equal margins and, thus, more neutral incentives for decision-making) can most readily and consistently address the problems of underused services (tests or treatments) and the underuse of
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
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Table 1. Summary of payment reform effects. Clinical decision-making issue
Revised FFS
FFS with P4Q
Episode-based payment
Global payment
Overused test
±
±
±
Underused test
±
±
Over Dx
±
±
±
Under Dx
±
Overused Rx
±
±
±
Underused Rx
±
±
±
±
±
Undermanaged Rx
: Identifies reforms that, compared with fee-for-service, consistently address a particular problem; ±: Identifies reforms that can sometimes address a problem; Dx: Diagnosis; FFS: Fee-for-service; P4Q: Pay-for-quality; Rx: Treatment.
diagnostic testing, but in the long term, it may also affect overtesting, overdiagnosis and overuse of services. Further, revisions to FFS that provide explicit incentives for evidence-based decision-making and disincentives for nonevidence-based decisions could further enhance these effects; however, there are significant design challenges to accomplishing this. Similarly, P4Q approaches can further provide the incentives for evidence-based decision-making; these approaches are most consistently able to address problems of undertesting and underuse. P4Q also has the potential to address undermanagement of care in ways that may not be possible with FFS. Global payment is most likely to effectively address the overuse of diagnostic tests and services, but it also introduces new distorted incentives for evidence-based care as it is primarily designed to reduce costs. In particular, it provides the strongest incentives to limit expensive services, regardless of evidence of their effectiveness. Similarly, although episode-based payment can address the overuse of diagnostic testing or procedures within episodes, it can also provide incentives to reduce effective but expensive services within the episode, leading to underuse. Moreover, episode-based bundled payments can encourage the overuse of diagnostic testing and overdiagnosis for conditions associated with an episode. Whether episode-based payments affect the overuse of tests and treatments depends, in large part, on how diagnoses and treatments are incorporated into the definition of an episode. The P4Q strategies can also be added to episode-based and global payment to counterbalance some of the disincentives to evidence-based decision-making. However, in order to be effective, they will need to be carefully prioritized and executed.
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Physicians in organizations: implications for evidence-based decisions
We have discussed episode-based payment and global payment assuming that these method ologies could be applied to individual physicians. In theory, individual physicians (or practices) could control all the resources (e.g., imaging centers, hospitals and postacute care facilities) applicable to managing a relevant episode of illness or a population of patients. In practice, however, most physicians operating under such payment systems would be paid by a larger entity receiving such payments and managing all the needed facilities and personnel. Efforts to reform the payment system may not be effective if the larger managing entities continue to reimburse their individual physicians using FFS payments, which would negate the impact global payment or episode-based payment would have on incentives [28]. Thus, the incentives presented to this larger entity would have to be translated through internal management to the physician or other clinician making decisions at the point-of-care. This is also true for entities receiving FFS and/or P4Q incentives, but larger entities are less necessary for receiving and distributing payments under these arrangements. As noted in Figure 1, there are numerous levels of potential organizational influence on physicians’ point-of-care decisions, whether they are employees of a provider organisation or have a contractual relationship with the organization. In this complex environment, there are diverse mechanisms that such organizations can use to transmit incentives to physician ‘employees’ that promote (or interfere with) evidence-based practice, as discussed in detail in our companion article [1]. Large provider organizations will not necessarily be more committed to evidence-based
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Market environment Patients
Networks and affiliations Practice organization Outcomes
Practice site Payment and regulatory policies
Individual physician
Figure 1. Organizational context for clinical decision-making. Reproduced with permission from [101].
point-of-care decisions than will the individual physicians directly engaged with their patients. Indeed, even among academic medical centers, with their commitment to research and to the application of science to medical care, examples abound of practices that deviate from currently available evidence [29]. Therefore, policy-makers should assume that large provider organizations, like any other enterprise, will respond to the incentives presented to them and will act to influence point-of-care decision-making by their employees according to their organizational interests. Conclusion
In conclusion, our analysis demonstrates that a recalibration of FFS to provide equal financial margins for all clinical services should be the foundation for reforms designed to improve evidence-based care. With this foundation, the use of any further incentive reforms can be guided by the assessment of patterns of care relative to the current evidence regarding appropriate clinical practice. Armed with information from this assessment, payers can make targeted use of additional reforms, such as P4Q, or further FFS adjustments to pay more for evidence-based care than nonevidence-based care. Episode-based payments and global payments may also be tools for addressing certain problems involving persistent deviations from evidence-based practice. These approaches may be particularly appropriate for addressing ongoing problems of service overuse. Nonetheless, payers employing these approaches must be aware of the challenging design decisions involved, since these approaches confer clear incentives to reduce costs rather than promote evidence-based decision-making. Indeed, robust P4Q may need to be an essential element of these payment arrangements to minimize the disincentives to evidence-based decisions.
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Our analysis indicates that no single payment reform will consistently reward decision-making accordant with clinical evidence. Nonetheless, through appropriate blending and targeted selection of relevant approaches, stakeholders can utilize the most relevant strengths of each option, and mitigate its potential adverse consequences. A well-designed payment reform with these features has the potential to support clinicians in achieving their desired goal – recommending to patients those services that will effectively address their individual health concerns. Future perspective
No single approach to payment reform can be expected to consistently reward evidence-based decision-making at the point-of-care. Nonetheless, the principles described above offer a strategy that can be applied by payers and by practice organization leaders to improve incentives to better reward evidence-based care. Our analysis indicates that the best pathway forward would involve: revising existing fee structures, particularly in cases where relatively low fees lead to underuse of certain evidence-based services, combined with targeted reforms involving P4Q and bundled payments to address significant problems of lack of coordination of care and overuse of tests of services that may not be adequately or consistently addressed by FFS revisions alone. FFS payment will probably remain an element of physician reimbursement by payers for years to come [2]. Therefore, rebalancing these fees to reflect true physician cost (and, therefore, remove incentives for nonevidence-based decisions) will be important. In addition to initial recalibration of physician fees, efforts at physician payment reform will be aided by ongoing assessment of physician practice trends relevant to evidencebased diagnosis and management. Where there are signs of overuse of services of unclear value, current fee schedules should be reassessed for the emergence of unrecognized overpayment. Recent research has demonstrated several mechanisms whereby this may occur [30,110]. Where there is persistent underuse of highly effective services, fees must also be re-evaluated. Special circumstances may even justify additional incentives to overcome clinical inertia and ‘jumpstart’ more evidence-based practice. Addressing currently overvalued FFS payments could ameliorate incentives contrary to evidence-based practice, but as discussed in our antibiotic-overuse example, recalibration of FFS
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
will not address all of these problems. For persistent service overuse, other incentives may be needed to promote more evidence-based pointof-care decisions. P4Q rewards (or penalties) tied to overuse measures could be one approach. Targeted use of bundling of existing physician fees (like the ‘global surgical fee’) or broader episode-based payments could also be helpful in managing some overuse. In designing episodes to limit the expenditures relevant to an illness event, policy-makers should consider whether the incentives for evidence-based care to the intermediary organization receiving the bundled payment will ultimately be transmitted to clinicians at the point-of-care, with attended influence on evidence-based practice. Capitation may provide the most reliable incentive to reduce the volume of services, but it does not consistently reward evidence-based care. For some chronic conditions, the entity receiving capitation can obtain shortterm financial gains through improved chronic disease management. However, in many cases, evidence-based decisions can incur short-term costs, with savings realized only in the distant future, or not at all [111]. Thus, a blending and targeted selection of payment reforms to address particular problems may be the best strategy to promote evidence-based decisions at the point-of-care. To address persistently overused services, FFS payments to providers could be adjusted based on expected utilization for the local population. This approach has similarities to the value-based modifier under development by Centers for Medicare and Medicaid Services, as well as the application of ‘shared savings’ within FFS payment to accountable care organizations. To avoid (or redress) underuse,
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episode-based or capitation payments directed toward large provider organizations could be combined with FFS rewards for the use of highly evidence-based services (such as PFTs in asthma or visits for medication adjustment in GERD). This is analogous to current approaches to adjusting end-stage renal disease bundled payments for provider visits in the Medicare program [31]. Targeted use of P4Q can also be employed o address key evidence-based services at risk for underuse. Payment strategies currently used to reward primary care practices in several demonstrations to test the ‘patient-centered medical home’ model offers examples of how a combination of revised FFS, P4Q and global payments may be used to better reward evidence-based care. Enhanced FFS payment rewards, timely patient-centered assessment of patient health concerns and P4Q payments provide incentives for appropriate evidence-based services. ‘Per member per month’ care management payments can help finance the care coordination resources and information technology infrastructure needed to improve chronic disease care and provide enhanced remote monitoring and communication not easily or efficiently reimbursed on a FFS basis [3,4]. Financial & competing interests disclosure The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties. No writing assistance was utilized in the production of this manuscript.
Executive summary This article reviews the potential effects of several payment reforms on evidence-based clinical decision-making at the point-of-care. ■■ Adjustments to fees in fee-for-service (FFS) to better reflect the cost of care can address problems of underuse of services, but this reform may be more limited in its effects on overuse of services. Adjusting fees based on relative effectiveness of services can also be a potentially powerful reform, but it also has significant design and technical challenges. ■■ Adding pay-for-quality reforms (e.g., bonuses for quality performance) with adjusted FFS may address certain problems not well addressed by FFS reforms alone. ■■ Episode-based bundled payment reforms may encourage reductions in overuse of services within episodes. However, they may also contribute to overdiagnosis and overtesting if these decisions tend to lead to establishment of new episodes (particularly when episode-based payments lead to high financial margins). ■■ Global payment (capitation) may provide incentives to reduce the overuse of certain services, but this reform may also cause underuse or underdiagnosis. In general, capitation alone does not provide incentives for evidence-based care. ■■ In conclusion, no single payment reform consistently addresses all problems related to evidence-based care, including overuse or underuse of services. We recommend a pathway forward that combines adjusted FFS with other targeted reforms, including pay-for-quality and episode-based payments. ■■
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making This article reviews the recent research, policy and conceptual literature on the effects of payment policy reforms on evidence-based clinical decision-making by physicians at the point-of-care. Payment reforms include recalibration of existing fee structures in fee-for-service, pay-for-quality, episode-based bundled payment and global payments. The advantages and disadvantages of these reforms are considered in terms of their effects on the use of evidence in clinical decisions made by physicians and their patients related to the diagnosis, testing, treatment and management of disease. The article concludes with a recommended pathway forward for improving current payment incentives to better support evidence-based decision-making.
Timothy K Lake1, Eugene C Rich*1, Christal Stone Valenzano1 & Myles M Maxfield1 Mathematica Policy Research, Inc., 1100 First St NE, 12th Floor, Washington, DC 20002, USA *Author for correspondence: Tel.: +1 202 484 9220 Fax: +1 202 863 1763 [email protected] 1
KEYWORDS: comparative effectiveness research n evidence-based decision-making n incentive n physician payment reform
In a companion article published in this issue of the Journal of Comparative Effectiveness Research, we presented a conceptual framework for understanding clinical decision-making by physicians at the point-of-care, and analyzed how incentives in the existing fee-for-service (FFS) payment system can encourage decisions that run counter to evidence established through comparative effectiveness research [1]. The underlying motivation for the companion article derived from the observation that availability of research evidence alone is not sufficient to bring about evidence-based decision-making at the point-of-care, and that payment incentives in particular may be a key tool for enhancing use of comparative effectiveness research [101]. We concluded in the companion article that existing FFS payment can result in a number of problems with clinical decision-making at the point-of-care, including over- and under-diagnosis, over- and under-treatment, and undermanagement of care. In this article, we turn our attention to the analysis of several prominent healthcare payment-reform options that have been proposed and are now increasingly being implemented in pilot forms throughout the USA. We limit our attention to payment arrangements between a payer (e.g., an insurer) and healthcare providers that are presumed to remain independent of payers; thus, our analysis does not include salary as a payment option. However, it should be recognized that larger provider organizations may choose this option for paying individual clinicians, based, in part, on arrangements they have with payers, and that these arrangements may also provide distinct incentives for or against evidence-based care. This analysis, while important, is beyond the scope of this article, which instead only focuses on reforms to existing payer–provider arrangements. Our analysis focuses on what theory, as identified in our framework in the companion article, predicts the ability of these reform options to enhance evidence-based decision-making, and on their relative advantages and disadvantages for addressing the problems of over- and under-diagnosis, over- and under-treatment, and undermanagement of care. Our emphasis is primarily on the effects of payment arrangements on clinical decision-making, but we also consider administrative feasibility of reforms and other behaviors including ‘gaming’, such as new billing or coding
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practices in response to reforms. The findings from this article are drawn from both theory and selected empirical evidence from the literature. The article is primarily structured as a policy analysis of payment-reform options, derived from the conceptual framework developed in the companion article noted above, and supported by examples from the published literature based on searches of PubMed using keywords including ‘financial incentives’, ‘physician payment’, ‘physician characteristics’, ‘physician workload’ and ‘physician experience’, with a focus on the relationship of these factors to decision-making or physician practice. We generally restricted our attention to examples of published work from the past 10 years, although we included older key publications as appropriate. An overarching conclusion of our analysis is that no single provider payment-reform option will consistently reward evidence-based decisions and ensure that clinicians are not at a financial disadvantage when providing evidencebased care. Thus, we conclude our analysis with a proposed pathway forward that combines a recalibration of the existing fee structure in FFS with other target payment reforms where needed, such as pay-for-quality, episode-based payments or global payments. Effects of payment reforms on evidence-based decision-making
In the following policy analysis, we review prominent approaches proposed to reform the current FFS payment system, discussing their advantages and disadvantages relative to rewarding evidence-based decisions at the point-of-care. ■■ Adjusting FFS payment Adjusting fees relative to costs
A first step in the reform of FFS is to adjust incentives so economic margins (revenues in excess of costs) are at least equal, regardless of decision-making at the point-of-care. This would help eliminate disincentives for evidence-based decision-making, such as inadequate compensation or even negative margins for delivering evidence-based care. The Medicare Physician Fee Schedule was structured to reflect the relative costs of providing any service (thus providing equal economic margins), but the fee structure for many parts of the current fee schedule no longer achieves this goal [2,102]. Our analysis suggests that reforms involving a restructuring of fees to provide equal, but
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reasonably high margins for all services may be a useful way to address underuse of services. Research studies indicate that if revenues are increased and are reasonably high compared with the cost of services, physicians will be more likely to increase the provision of currently underused services [1]. On the other hand, reduced payment for high-margin, overutilized tests or treatments may be necessary in the long term but may have more limited effects on overuse in the short term, especially without other consequences. In particular, depending on the alternative choices available, overuse may persist in the short term, unless payments were reduced dramatically, below costs. In this case, large reductions in payment levels may result in more than just reduction in overuse, but substantially reduced access to, or possibly complete unavailability of, a particular service. In the example of imaging studies for low back pain, there probably are patients for whom the test is indicated [103]; these individuals could be adversely affected by ‘below cost’ reimbursement for imaging tests if clinicians decide to no longer offer imaging for certain types of patients across the board. The same might also occur for surgical procedures that are currently routinely provided, and sometimes overused, but that may be dramatically curtailed if reimbursement rates fall well below costs. Other overuse problems (such as antibiotic overuse) are not incentivized by current physician FFS payment and, therefore, are not easily ameliorated through fee-schedule revisions. In addition, certain types of management activities to promote more evidence-based chronic-illness care (like ongoing drug management of patients with gastroesophageal reflux disease [GERD]) may be difficult to target with piecework FFS payments. For example, incentivizing communication and follow-up with GERD patients outside of the office setting (such as through e-mail or telephone calls) may be difficult to achieve with FFS payments as these are highly discrete and variable activities that are difficult to track and document individually [3,4]. Finally, it should be noted that margins associated with fees for particular services are not necessarily static over time. For example, cataract removal surgery has become much less expensive over time as the procedure has become more efficient. In response, Medicare, for example, recently reduced fees for this procedure by 13% [104]. While overuse may not apply to this
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particular clinical example, reductions in the cost of procedures may increase margins, which in turn may lead to overuse. Adjusting fees relative to effectiveness
As indicated above, adjustments of FFS payments so that margins are equal for each service can be effective for addressing certain situations where evidence-based care is not provided. Some experts have proposed taking this further by recalibrating payments so that they reflect not only the relative costs of services, but also the evidence of one service’s effectiveness relative to another [5,102]. If margins are higher for highly effective services and lower for less-effective services, physicians would have a stronger incentive for evidence-based decision-making. Examples in Medicare include increasing payments for primary care services, preventive care tests and care coordination [102]. Other possibilities that are not currently implemented include paying relatively low fees for services recognized as not having a strong evidence base, such as use of implantable cardioverter–defibrillator for primary prevention in patients recovering from heart attack or bypass surgery, or with severe heart failure, compared with alternative treatments [6]. This approach of increasing or decreasing fees for services based on evidence of effectiveness, rather than just relative costs, may further incentivize decisions based on evidence, but also raises some key design and implementation challenges. For example, there may be strong evidence of effectiveness for one decision choice but a widely used alternative may have been subjected to relatively little study. Adjusting fees based on evidence of effectiveness could influence where comparative effectiveness research efforts are focused in ways that are not related to otherwise important clinical priorities. Additional problems with this approach to FFS reform include the difficulty in establishing a fee structure that accounts for the fact that care shown to be effective for one group of patients may be less so for others. Determining the extent to which ‘highly effective’ services will be reimbursed more generously through higher fees presents yet another policy challenge. In particular, how much would one value greater effectiveness? Finally, regularly adjusting the fee schedule based on the latest studies and evidence should be required, but policy-makers would need to assess how frequently this would occur and determine when evidence is sufficiently strong to make adjustments.
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■■ FFS with pay-for-quality
Adding payments (e.g., in the form of bonuses) for physicians who perform well on quality measures or imposing penalties for those failing to meet standards, known as pay-for-quality (P4Q), could address some of the limitations of simply recalibrating FFS payments. P4Q is a more specific application of pay-for-performance or value-based purchasing strategies that may also include incentives for cost containment in addition to evidence-based care. For example, physicians who prescribe antibiotics appropriately or manage chronic conditions, such as GERD, more effectively could be rewarded by appropriate P4Q. For use of pulmonary function testing (PFT) in asthma, P4Q could reward evidence-based test ordering. However, adherence to current quality measures does not always represent strong evidencebased or patient-centered care. The first problem is that many quality measures are based on clinical practice guidelines that may rely on a rationale other than strong research evidence [7]. This may, in part, derive from the problem that many point-of-care research questions have not been adequately studied, a problem that comparative effectiveness research and patientcentered outcomes research are intended to solve [8]. However, an equally difficult problem is that many quality measures make inadequate allowance for heterogeneity of treatment effects and, therefore, promote the ‘nonevidence-based’ application of tests or treatment to patients. In some cases, certain patient groups have been understudied and, thus, the benefits of the recommended intervention are unclear [9,10]. In other cases, subgroup analysis has demonstrated important subgroup differences that have not been adequately addressed in the published quality measure [11]. Finally, there may be circumstances where patient preferences regarding different treatment outcomes may be an important consideration [12,13]. For these reasons, the Patient-Centered Outcomes Research Institute has made it a priority to investigate the relative effectiveness of interventions from the individual patient perspective. The primary solution to these problems is to continue to improve the current state of quality measurement and their usability for rewarding evidenced-based point-of-care decisions. In particular, measures may be defined in more specific and flexible ways, including better use of inclusion and exclusion criteria to address
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clinical heterogeneity. However, this is a highly resource-intensive and time-consuming process, given the need to achieve consensus on measures and to carry out adequate testing of measures, even when the underlying evidence base is well established. Indeed, the ongoing evolution of the evidence relative to point-ofcare decision-making imposes its own daunting challenge. As with any effort to recalibrate FFS payments, for P4Q incentives to consistently reward evidence-based decisions at the pointof-care, they must be continually revised with the changes in the current evidence. Even when quality measures are developed that address these challenges, to be effective in guiding point-of-care decisions, such P4Q incentives will need to be focused on high-priority areas. Physicians typically make thousands of decisions each day so attempts to incentivize all clinical decisions through P4Q are likely to fail [14–16]. Furthermore, potentially conflicting incentives provided by individual payers must be addressed to ensure strong and consistent efforts to promote evidence-based decision-making. P4Q design is also challenged by often limited patient sample sizes for each physician or group, and the resulting statistical imprecision [17,18]. In addition, appropriate P4Q approaches require that the right patients (and associated measures) are attributed to the right physicians, especially for sicker patients who often receive care from multiple physicians during the year or episode of care. Finally, appropriate risk adjustment and benchmarking are necessary to enhance fairness and transparency. However, it is important to note that optimal approaches for these technical aspects of P4Q are still in developmental stages and continue to be refined [105]. ■■ Episode-based bundled payment
Other payment-reform approaches, including episode-based bundled payments, essentially replace the current FFS system. Under episodebased payment arrangements, payments are paid not for individual services but for a larger ‘bundle’ of services provided in an episode of care or illness [106,107]. As with current FFS, bundled payments are not specifically designed to reward specific evidence-based decisions; however, they provide incentives for overall constraint of the volume of all services identified within the bundle or episode, with incentives for constraint highest for the most expensive services.
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Episode-based payment can provide physicians with incentives to reduce unnecessary services, such as the prescribing of overused tests for back pain. With a fixed revenue for an episode of illness, physicians could face more neutral incentives for evidence-based (vs nonevidence-based) recommendations for services since they are no longer receiving a fee for each service delivered. However, payment reform designers should also recognize that episode-based payments introduce new distortions in incentives; thus, they should carefully consider the use and design of episode-based reforms use for enhancing evidence-based care. For example, one challenge is that episodebased payments could increase overdiagnosis since payments are tied to new episodes of illness, and this is especially true when episodes have high overall economic margins. In these circumstances, providers would be rewarded for increasing patient awareness of symptoms and expanding the use of tests to detect illness episodes. At the same time, for these reasons, episode-based payments may be an effective tool for addressing problems of underdiagnosis of certain conditions. Episode-based payments may also create new incentives to underuse tests or treatments in patient management within an episode (such as the PFTs in asthma or medication adjustment in GERD). Application of episode-based payments to address the problem of overused treatments is further complicated by the fact that treatment decisions, and not just diagnoses, may also define certain episodes. For example, episode-based payments may also be based on a hospitalization decision; in others, it may be based on surgical decisions. Of course, in others, the definition of an episode is linked directly to the diagnosis of an illness. Generally speaking, episodebased payments can incentivize evidence-based decision-making about overused services during an illness episode, but may lead to overuse of the tests or procedures that can initiate or define episodes of care in the first place. A significant challenge in the design of episode-based, bundled payments is to define an adequate clinical and cost-of-service basis for assigning a payment to a bundle. This includes defining the appropriate mix of services to be delivered during an episode, ideally based on evidence-based practice, and defining the appropriate costs associated with these mix of services. However, for the most part, the main sources of
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data for constructing episode bundle and payment rates are current healthcare delivery patterns and payment rates, which may be distorted in the first place as we discuss above. Moving beyond this ‘normative’ approach for setting evidence-based, episode-based payment rates requires substantial resources, including conducting new empirical research, especially considering the large number of different e pisode types that may need to be created. As with any new payment reform, episodebased payments may introduce new ‘gaming’ patterns, where providers respond by changing billing or coding patterns within acceptable rules to enhance payments; however, that would not necessarily affect clinical care. This may include more thorough coding and collecting of information on diagnoses and procedures that would tend to place patients in higher-paying episode categories than might otherwise occur. Incentives in episode-based payments to reduce the volume of services can also be combined with P4Q incentives to deliver evidencebased care. P4Q adjustments may be particularly useful to counterbalance the general incentive to reduce the volume of services during an episode of care. For example, payers could combine episode-based payments with P4Q to incentivize indicated use of PFTs in asthma patients or appropriate adjustments of GERD treatment [19,108]. Episode-based payment designs could also exclude certain evidence-based services from the bundle (such as PFTs in asthma or visits for medication adjustment in diabetes or GERD) so that they are reimbursed on a FFS basis. This approach could ensure that the volume of these services is not reduced unnecessarily, or possibly even enhanced, analogous to current approaches to adjusting end-stage renal disease bundled payments in the Medicare program [20]. Even if these adjustments could address specific problems of incentivizing undertesting or undertreatment in bundled payments, the risk of episode definitions leading to overdiagnosis and overtreatment would remain. Episode-based payment may not directly reward as many discrete point-of-care decisions as FFS; there are still numerous judgments regarding problem identification, test choice and diagnosis and treatment selection that can lead to differential financial incentives under episode-based payment. Indeed, under this payment approach, these judgments at the point-of-care might
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make the difference between a US$1000 and a US$20,000 episode (in contrast with current FFS decisions that might affect decisions about whether to provide a US$100 vs a US$200 service). The widespread application of robust appropriateness criteria to episode definitions may address some of the risks of overtreatment incentives, but the problem of overdiagnosis might pose an ongoing challenge and place similar cost–growth pressure as current FFS. Quality metrics may also be used to encourage evidence-based use of services during an episode. In particular, episode-based payments could be adjusted based on quality measures to address the potential for underused tests and treatments, as well as undermanaged therapy during an illness episode. However, as with P4Q incentives in FFS reform, such quality measures would have to focus on high-priority decisions within each episode, and conflicting incentives from multiple payers would have to be avoided. Finally, experience with episode-based payments is relatively limited to date, and it is uncertain how and whether various technical, logistical and financial challenges will be addressed in different approaches [106,109]. For example, decisions will need to be made about who (which physicians or other providers) should receive payment and how payments will be divided up when care in an episode is provided by multiple physicians. Pricing, updating and risk-adjusting payments for episodes, especially across diverse populations, are also significant challenges. Finally, there may also be significant information technology, cash flow and data-reporting challenges that may emerge when transitioning from FFS to episode-based bundled payments. ■■ Global payment (capitation)
In global payment, or capitation, which also replaces FFS, providers receive fixed payments per patient for all services provided to that patient during a given time period. Under this arrangement, many of the physician behaviors at the point-of-care that are rewarded under FFS become potential sources of financial loss for physicians paid on a capitated basis. Similar to episode-based payments, global payments can clearly reward providers for more parsimonious use of services. However, unlike episode-based payments, the focus for global payment is the cost for care of a population of patients rather than of specific illness events. Given this population focus, some have
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argued that global payments may reward more evidence-based decision-making, particularly related to prevention and chronic-illness care. Various analyses have demonstrated, however, that many effective interventions for adults are not cost saving, but ‘cost effective’ instead, conferring substantial benefits to patients relative to their additional cost. Thus, while there may be a few care management initiatives that reward the capitated practice with near-term financial savings, in many other circumstances, global payment does not provide clear incentives for more evidence-based decisions at the point-of-care. With global payment, the physician has an incentive to reduce patient access to expensive clinical services, such as imaging for patients with low back pain. Nonetheless, if the patient visits a physician with this concern, capitated payment will also incentivize the physician not to identify conditions that might require further testing or expensive treatment. Physicians receiving capitation may also have incentives to convince patients of the risks of additional imaging or other costly treatments. Capitation has often been tied with other approaches designed to either control costs and/or improve management of care, particularly for chronic illness. This includes assignment of patients to a primary care physician who is primarily responsible for managing services and referrals for patients (sometimes referred to as a gatekeeper), as well as other utilization-management and care-management approaches. In addition, capitation or global payment has been associated with the development of ‘integrated delivery systems’ and, more recently, ‘accountable care organizations’ [21–24]. The relationship between these financial risksharing arrangements and broader healthcare delivery system reforms and cost containment strategies is a well-studied and complex topic that is beyond the scope of this article, which focuses more specifically on how these incentives affect individual clinician decision-making at the point-of-care. Concerns about incentives for inaction and ‘undertreatment’ are at the core of physician and patient anxiety about capitation as a mechanism for compensating medical care [25,26]. Consider examples of spirometry in patients with asthma or medication adjustment in GERD; only if the cost savings for appropriate management are sufficient will providers have a financial incentive to manage these chronic conditions at an appropriate level.
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Examples of overuse of antibiotics highlight another important nuance in the incentives for promoting more evidence-based recommendations through global payment. Little additional direct cost may be experienced by the capitated provider practice when generic antibiotics are unnecessarily prescribed. Occasional costs asso ciated with antibiotic side effects could be a consideration in addition to the costs of patients with more serious infections whose treatment might be delayed. Policy-makers may not be able to rely on the incentives of capitation to ensure an organization provides the physician (or other clinician) the time and resources to properly evaluate each patient, and identify, for treatment, those patients most appropriate for antibiotic therapy, and successfully educate the others on the risks of unneeded antibiotics. Quality report cards and P4Q incentives can help with the concern about the tendencies for underuse of effective services inherent in capitated payment. Research conducted by Song and colleagues found that a global budget combined with P4Q reduced some utilization costs but improved quality in chronic care management, adult preventive care and pediatric care [27]. The National Committee on Quality Assurance (NCQA) was established, in part, to monitor managed-care entities for underuse of needed services, and the techniques for quality measurement are much more numerous and sophisticated than those that were available at its founding in 1990. Nonetheless, there are daunting limitations in using P4Q to provide consistent rewards to capitated providers for evidence-based care. As discussed previously, physicians make numerous decisions during each patient encounter that can represent incremental costs to an organization reimbursed through global payment. The proper measurement, monitoring and reward of these innumerable patient-centered, yet evidencebased decisions at the point-of-care is a technical problem far beyond current capabilities. Summary of reform options & their effects on evidence-based decision-making
Options for reforming physician payment vary in their ability to promote evidence-based decision-making at the point-of-care (Table 1). A recalibrated fee schedule in FFS (providing equal margins and, thus, more neutral incentives for decision-making) can most readily and consistently address the problems of underused services (tests or treatments) and the underuse of
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
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Table 1. Summary of payment reform effects. Clinical decision-making issue
Revised FFS
FFS with P4Q
Episode-based payment
Global payment
Overused test
±
±
±
Underused test
±
±
Over Dx
±
±
±
Under Dx
±
Overused Rx
±
±
±
Underused Rx
±
±
±
±
±
Undermanaged Rx
: Identifies reforms that, compared with fee-for-service, consistently address a particular problem; ±: Identifies reforms that can sometimes address a problem; Dx: Diagnosis; FFS: Fee-for-service; P4Q: Pay-for-quality; Rx: Treatment.
diagnostic testing, but in the long term, it may also affect overtesting, overdiagnosis and overuse of services. Further, revisions to FFS that provide explicit incentives for evidence-based decision-making and disincentives for nonevidence-based decisions could further enhance these effects; however, there are significant design challenges to accomplishing this. Similarly, P4Q approaches can further provide the incentives for evidence-based decision-making; these approaches are most consistently able to address problems of undertesting and underuse. P4Q also has the potential to address undermanagement of care in ways that may not be possible with FFS. Global payment is most likely to effectively address the overuse of diagnostic tests and services, but it also introduces new distorted incentives for evidence-based care as it is primarily designed to reduce costs. In particular, it provides the strongest incentives to limit expensive services, regardless of evidence of their effectiveness. Similarly, although episode-based payment can address the overuse of diagnostic testing or procedures within episodes, it can also provide incentives to reduce effective but expensive services within the episode, leading to underuse. Moreover, episode-based bundled payments can encourage the overuse of diagnostic testing and overdiagnosis for conditions associated with an episode. Whether episode-based payments affect the overuse of tests and treatments depends, in large part, on how diagnoses and treatments are incorporated into the definition of an episode. The P4Q strategies can also be added to episode-based and global payment to counterbalance some of the disincentives to evidence-based decision-making. However, in order to be effective, they will need to be carefully prioritized and executed.
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Physicians in organizations: implications for evidence-based decisions
We have discussed episode-based payment and global payment assuming that these method ologies could be applied to individual physicians. In theory, individual physicians (or practices) could control all the resources (e.g., imaging centers, hospitals and postacute care facilities) applicable to managing a relevant episode of illness or a population of patients. In practice, however, most physicians operating under such payment systems would be paid by a larger entity receiving such payments and managing all the needed facilities and personnel. Efforts to reform the payment system may not be effective if the larger managing entities continue to reimburse their individual physicians using FFS payments, which would negate the impact global payment or episode-based payment would have on incentives [28]. Thus, the incentives presented to this larger entity would have to be translated through internal management to the physician or other clinician making decisions at the point-of-care. This is also true for entities receiving FFS and/or P4Q incentives, but larger entities are less necessary for receiving and distributing payments under these arrangements. As noted in Figure 1, there are numerous levels of potential organizational influence on physicians’ point-of-care decisions, whether they are employees of a provider organisation or have a contractual relationship with the organization. In this complex environment, there are diverse mechanisms that such organizations can use to transmit incentives to physician ‘employees’ that promote (or interfere with) evidence-based practice, as discussed in detail in our companion article [1]. Large provider organizations will not necessarily be more committed to evidence-based
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Market environment Patients
Networks and affiliations Practice organization Outcomes
Practice site Payment and regulatory policies
Individual physician
Figure 1. Organizational context for clinical decision-making. Reproduced with permission from [101].
point-of-care decisions than will the individual physicians directly engaged with their patients. Indeed, even among academic medical centers, with their commitment to research and to the application of science to medical care, examples abound of practices that deviate from currently available evidence [29]. Therefore, policy-makers should assume that large provider organizations, like any other enterprise, will respond to the incentives presented to them and will act to influence point-of-care decision-making by their employees according to their organizational interests. Conclusion
In conclusion, our analysis demonstrates that a recalibration of FFS to provide equal financial margins for all clinical services should be the foundation for reforms designed to improve evidence-based care. With this foundation, the use of any further incentive reforms can be guided by the assessment of patterns of care relative to the current evidence regarding appropriate clinical practice. Armed with information from this assessment, payers can make targeted use of additional reforms, such as P4Q, or further FFS adjustments to pay more for evidence-based care than nonevidence-based care. Episode-based payments and global payments may also be tools for addressing certain problems involving persistent deviations from evidence-based practice. These approaches may be particularly appropriate for addressing ongoing problems of service overuse. Nonetheless, payers employing these approaches must be aware of the challenging design decisions involved, since these approaches confer clear incentives to reduce costs rather than promote evidence-based decision-making. Indeed, robust P4Q may need to be an essential element of these payment arrangements to minimize the disincentives to evidence-based decisions.
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Our analysis indicates that no single payment reform will consistently reward decision-making accordant with clinical evidence. Nonetheless, through appropriate blending and targeted selection of relevant approaches, stakeholders can utilize the most relevant strengths of each option, and mitigate its potential adverse consequences. A well-designed payment reform with these features has the potential to support clinicians in achieving their desired goal – recommending to patients those services that will effectively address their individual health concerns. Future perspective
No single approach to payment reform can be expected to consistently reward evidence-based decision-making at the point-of-care. Nonetheless, the principles described above offer a strategy that can be applied by payers and by practice organization leaders to improve incentives to better reward evidence-based care. Our analysis indicates that the best pathway forward would involve: revising existing fee structures, particularly in cases where relatively low fees lead to underuse of certain evidence-based services, combined with targeted reforms involving P4Q and bundled payments to address significant problems of lack of coordination of care and overuse of tests of services that may not be adequately or consistently addressed by FFS revisions alone. FFS payment will probably remain an element of physician reimbursement by payers for years to come [2]. Therefore, rebalancing these fees to reflect true physician cost (and, therefore, remove incentives for nonevidence-based decisions) will be important. In addition to initial recalibration of physician fees, efforts at physician payment reform will be aided by ongoing assessment of physician practice trends relevant to evidencebased diagnosis and management. Where there are signs of overuse of services of unclear value, current fee schedules should be reassessed for the emergence of unrecognized overpayment. Recent research has demonstrated several mechanisms whereby this may occur [30,110]. Where there is persistent underuse of highly effective services, fees must also be re-evaluated. Special circumstances may even justify additional incentives to overcome clinical inertia and ‘jumpstart’ more evidence-based practice. Addressing currently overvalued FFS payments could ameliorate incentives contrary to evidence-based practice, but as discussed in our antibiotic-overuse example, recalibration of FFS
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Paying more wisely: effects of payment reforms on evidence-based clinical decision-making
will not address all of these problems. For persistent service overuse, other incentives may be needed to promote more evidence-based pointof-care decisions. P4Q rewards (or penalties) tied to overuse measures could be one approach. Targeted use of bundling of existing physician fees (like the ‘global surgical fee’) or broader episode-based payments could also be helpful in managing some overuse. In designing episodes to limit the expenditures relevant to an illness event, policy-makers should consider whether the incentives for evidence-based care to the intermediary organization receiving the bundled payment will ultimately be transmitted to clinicians at the point-of-care, with attended influence on evidence-based practice. Capitation may provide the most reliable incentive to reduce the volume of services, but it does not consistently reward evidence-based care. For some chronic conditions, the entity receiving capitation can obtain shortterm financial gains through improved chronic disease management. However, in many cases, evidence-based decisions can incur short-term costs, with savings realized only in the distant future, or not at all [111]. Thus, a blending and targeted selection of payment reforms to address particular problems may be the best strategy to promote evidence-based decisions at the point-of-care. To address persistently overused services, FFS payments to providers could be adjusted based on expected utilization for the local population. This approach has similarities to the value-based modifier under development by Centers for Medicare and Medicaid Services, as well as the application of ‘shared savings’ within FFS payment to accountable care organizations. To avoid (or redress) underuse,
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episode-based or capitation payments directed toward large provider organizations could be combined with FFS rewards for the use of highly evidence-based services (such as PFTs in asthma or visits for medication adjustment in GERD). This is analogous to current approaches to adjusting end-stage renal disease bundled payments for provider visits in the Medicare program [31]. Targeted use of P4Q can also be employed o address key evidence-based services at risk for underuse. Payment strategies currently used to reward primary care practices in several demonstrations to test the ‘patient-centered medical home’ model offers examples of how a combination of revised FFS, P4Q and global payments may be used to better reward evidence-based care. Enhanced FFS payment rewards, timely patient-centered assessment of patient health concerns and P4Q payments provide incentives for appropriate evidence-based services. ‘Per member per month’ care management payments can help finance the care coordination resources and information technology infrastructure needed to improve chronic disease care and provide enhanced remote monitoring and communication not easily or efficiently reimbursed on a FFS basis [3,4]. Financial & competing interests disclosure The authors have no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties. No writing assistance was utilized in the production of this manuscript.
Executive summary This article reviews the potential effects of several payment reforms on evidence-based clinical decision-making at the point-of-care. ■■ Adjustments to fees in fee-for-service (FFS) to better reflect the cost of care can address problems of underuse of services, but this reform may be more limited in its effects on overuse of services. Adjusting fees based on relative effectiveness of services can also be a potentially powerful reform, but it also has significant design and technical challenges. ■■ Adding pay-for-quality reforms (e.g., bonuses for quality performance) with adjusted FFS may address certain problems not well addressed by FFS reforms alone. ■■ Episode-based bundled payment reforms may encourage reductions in overuse of services within episodes. However, they may also contribute to overdiagnosis and overtesting if these decisions tend to lead to establishment of new episodes (particularly when episode-based payments lead to high financial margins). ■■ Global payment (capitation) may provide incentives to reduce the overuse of certain services, but this reform may also cause underuse or underdiagnosis. In general, capitation alone does not provide incentives for evidence-based care. ■■ In conclusion, no single payment reform consistently addresses all problems related to evidence-based care, including overuse or underuse of services. We recommend a pathway forward that combines adjusted FFS with other targeted reforms, including pay-for-quality and episode-based payments. ■■
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