Outcomes-based reimbursement: Do the codes support it?


This article was originally posted to Becker’s Healthcare on October 2, 2014

There are 24 hours in a day, and when you’re a physician, you have to think about how to best work those hours to take care of your patients — and yourself. Back in the day, when the fee-for-service model was alive and kicking, physicians would charge what were ostensibly market rates for the care they delivered to patients. Insurers reimbursed physicians for all or some portion of these charges. With this model, physicians had the authority to treat patients as they deemed appropriate. But insurers — both public and private — lamented the lack of controls on the system, so they instituted their own.

That shift ushered in an era where medical practice has been deconstructed down to its myriad diagnoses, and built back up again with scads of associated codes and reimbursement rates. The unintentional effect of this administrative superstructure has been a payment system that incents healthcare practitioners to increase the volume of prescribed activities. The more patients seen, the more tests ordered, the more surgeries completed…the more reimbursement a provider receives.

We now know this approach isn’t improving the healthcare of Americans. The Commonwealth Fund recently released a study comparing healthcare in the United States to 10 other industrialized nations. The U.S. spent the most money ($8,508 per capita) and had the least effective system. This isn’t a new problem; the U.S. has maintained its lowly position in similar studies dating back to 2004.

Spurred by our country’s aging population, a broadening economic divide, an increase in consumer awareness, and by legislation such as the Patient Protection Affordable Care Act, the model for healthcare reimbursement in America is changing again. Now, it’s all about outcomes.  Preventive care

The philosophy behind this shift is that providers should be incented not to order more tests, but to deliver care in an efficient way that ensures the wellness of their patients. While we at Avanza support this focus on patient outcomes, we advise our clients to be aware of some of the potentially negative incentives that may result from this shift.

Though the focus is now on outcomes, the reimbursement structure hasn’t fully changed to support it. So while a physician may believe that certain courses of action, perhaps diet and exercise, may be the best prescription for improved patient health, most insurers don’t have a reimbursement code for these recommendations. Not only does a physician not get financial payment for making the recommendation, she also may not receive “credit” for making it. Reimbursement agencies won’t know that the physician even tried to pursue these alternative options.

Holding providers accountable for outcomes also transfers a potentially unfair element of risk from the patient to the provider. How will a provider get penalized for not achieving targets in, say, reducing rates of COPD, if their patients refuse to quit smoking? This risk profile may incent providers to recommend courses of action which they can control: medications and surgical procedures.

Case in point: Last year, the American Medical Association officially recognized obesity as a disease. In doing so, their recommendation for treatment calls for modifications to patients’ diet and exercise regimes. If providers are rewarded on reducing rates of obesity, and there are no documentable means by which they can demonstrate that their patients tried diet and exercise, how long will a physician wait to recommend anti-obesity drugs or surgery?

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