Changing primary care compensation
by jerry on August 15, 2020
Physician compensation has changed over the years. For example, decades ago, compensation changed from fee-for-service (where physicians are paid per procedure or per service) to capitation (where primary care physicians are paid a monthly fee for each patient they see). The idea behind capitation was that physicians who were successful in managing the health of their patients would end up having to work less since healthier patients need fewer services; at the same time, healthier patients would mean that insurers would need to pay less, thus, theoretically leading to a win-win situation (plus a win for patients who themselves were healthier). Under the capitation payment model, doctors could be penalized if they had an excessive number of patients who needed more services. Many physicians complained about this risk, citing cases that were both out of their control and very expensive (e.g. a patient ends up with cancer). Physician compensation then moved back towards fee-for-service. Unfortunately, under this model, physicians frequently have a financial incentive to favor expensive treatments over inexpensive preventative measures. Over the last decade, Medicare has been trying to introduce more risk-based payments so that doctors with healthy patients could receive financial rewards for healthier patients. Some physicians rightfully have had reservations. Kaiser Health News reported on how the pandemic might be changing some physician attitudes.
Notably, many physician offices have had to shut down during the pandemic, but instead would have fared better financially if they received per-member per-month payments that doctors received under capitation payment models. Medicare will be launching a Primary Care First program in this vein, offering bonuses and penalties depending on how a doctor's patients rate on various criteria. The risk-based payment model may have its own risks, such as physicians becoming pickier when deciding whether to accept a patient (a patient mix that skews unhealthy could have a substantial financial impact). Nevertheless, the current trend lines appear to point towards risk-based payments.