Medical homes aren't enough. Payment reform must follow. All at once.

Among the work going on around the country to reform health care is a grand experiment to transform primary care in America. The name of this effort is the “patient-centered medical home” or PCMH. This transformation is happening in various locales around the country--in Michigan, Pennsylvania, New York, Arizona, Minnesota and elsewhere. Health insurers like United, Aetna and Cigna, as well as Blue Cross plans are funding pilot programs and working directly with physician practices to do two things:


1. Pay them more
2. Increase their collective capacity

On the pay front, it has become apparent to a growing cadre of academics, employers and others that the disparities among physicians has created disincentives for med school grads to go into primary care while creating huge incentives to practice in a high paid specialty like radiology, cardiology, surgery or emergency medicine. For those who believe in the free market this disparity may not be much a concern--one could rationally argue that it is the market that is deciding who gets paid what. So a non-interventionist radiologist (quite a mouthful; a doctor who reads films from x-rays, MRI and CT scans) will make perhaps $350,000 right out of med school while a general internist is paid $150,000 or $160,000.

It’s the free market working, no? Well, therein lies a complex story.

Many if not most fee schedules in the U.S. are tied to something called the Resource-based Relative Value Scale, otherwise known in the health care industry as RBRVS. Medicare adopted this methodology in the early nineties in an attempt to develop an objective way to compensate physicians. I won’t bore my readers with the details of this undertaking, but RBRVS has exacerbated a number of the problems in health care. One of the most compelling is the disproportionate increase in pay to specialty care physicians at the expense of primary care (PCP) over the past 10 years.

Consider the writings of Tom Bodenheimer, MD, and others writing the Annals of Internal Medicine in 2007:

“A large, widening gap exists between the incomes of primary care physicians and those of many specialists. This disparity is important because non-competitive primary care incomes discourage medical school graduates from choosing primary care careers. The Resource-Based Relative Value Scale, designed to reduce the inequality between fees for office visits and payment for procedures, failed to prevent the widening primary care–specialty income gap for 4 reasons: 1) The volume of diagnostic and imaging procedures as increased far more rapidly than the volume of office visits, which benefits specialists who perform those procedures; 2) the process of updating fees every 5 years is heavily influenced by the Relative Value Scale Update Committee, which is composed mainly of specialists; 3) Medicare’s formula for controlling physician payments penalizes primary care physicians; and 4) private insurers tend to pay for procedures, but not for office visits, at higher levels than those paid by Medicare.”

Consider this conclusion in a GAO report on primary care released in 2008:

“Under this [RBRVS] structure, in which physicians receive a fee for each service provided, a financial incentive exists to provide as many services as possible, with little accountability for quality or outcomes. Because of technological innovation and improvements over time in performing procedures, specialist physicians are able to increase the volume of services they provide, thereby increasing revenue.”

And this:

“To illustrate, in one metropolitan area, Boston, Massachusetts, Medicare’s fee for a 25 to 30-minute office visit for an established patient with a complex medical condition is $103.42;23 in contrast, Medicare’s fee for a diagnostic colonoscopy—a procedural service of similar duration—is $449.44.”

To emphasize, this is only one problem with payment to physicians and primary care, but RBRVS has contributed to significant imbalances that are now proving difficult to overcome. In part, this has given rise to the aforementioned PCMH.

It turns out, though you will get argument about this, that the RBRVS system is deeply flawed in that it values procedures and diagnostic tests at a higher value that it does thinking. Primary care physicians are valuable, if they are good, because they can piece together the history, lifestyle and medical conditions of individuals and help guide them through a process of caring for themselves, managing their conditions and referring them to appropriate specialty or hospital care when necessary. The RBRVS system under values this cognitive work because it was developed using resource and cost inputs not quality outputs. Thus, in the RBRVS world, a visit to a primary care physician isn’t worth much. It doesn’t help that the folks who manage RBRVS are from the AMA and represent a lot of medical specialties.

The effect RBRVS has had is insidious: Primary care physicians rush patients through exams so that they can be paid adequately thus limiting their effectiveness. In fact, PCPs too often simply refer patients to specialists because they cannot spend enough time to make an informed judgment about a concern that he or she may have.

It is widely recognized around the world that having adequate numbers of primary care is tantamount to producing much better outcomes for patients at dramatically lower costs. In the U.S. the ratio of primary care to specialty is about 1 to 2.1. In many countries around the world it is 50:50 or more, though finding a source for this is difficult. Barbara Starfield has done more research on this than anyone and she consistently finds that in both foreign countries or U.S. states with high levels of primary care, costs are lower and outcomes better.

That brings me back to PCMH. While it is certainly important that we somehow shore up primary care, it is just as important to reform payment. It has been my point for years that reforming payment is going to have be done universally, not one health plan, one state at a time. If we don’t reform payment “all at once” PCMH won’t ever come into being because the resources won’t be there from payers to sustain it. Medicare and Medicaid will need to participate as well. If we continue with the RBRVS method of fee-for-service, the system is finally going to collapse.