Changes In Medicare Physician Payment Fee - For - Service Will Remain A Feature Of Major Payment Reforms , Requiring

Many health policy analysts envision provider payment reforms currently under development as replacements for the traditional fee-forservice payment system. Reforms include per episode bundled payment and elements of capitation, such as global payments or accountable care organizations. But even if these approaches succeed and are widely adopted, the core method of payment to many physicians for the services they provide is likely to remain fee-for-service. It is therefore critical to address the current shortcomings in the Medicare physician fee schedule, because it will affect physician incentives and will continue to play an important role in determining the payment amounts under payment reform. This article reviews how the current payment system developed and is applied, and it highlights areas that require careful review and modification to ensure the success of broader payment reform. T o many policy analysts, the term provider payment reform means abandoning the fee-for-service approach, which pays clinicians for each service rendered, in favor of broader units of payment—such as global payment or episode bundles—which either cover the whole person regardless of the number of services provided to that person, or cover the whole episode of care for a specific condition. These reforms are intended to replace the incentives inherent in fee-for-service medicine. Fee-for-service payment typically has meant that a provider, usually a physician, receives a set fee for a particular service—such as performing a physical exam or administering an inoculation—either directly from the patient or from an insurer or other payer. Fee-for-service thus generates payments driven by the volume of services produced. In payment reform models such as accountable care organizations, fee-for-service broadly will be replaced by new incentives that will reward appropriate, quality care—for example, a capitated payment made by the payer to the accountable care organization. However, when it comes to how the accountable care organization will pay individual physicians and other practitioners, most of the proposed payment reforms will still have a substantial role for fee-forservice payment. To be sure, physicians’ payments will be calculated not only according to volume, but also according tomeasures of physicians’ quality and efficiency. Both measurement and distribution of payment will be done by the organizations, or systems, such as the accountable care organizationwithinwhich the provider delivers care. As a result, for many physicians, these broad payment reforms, such as accountable care organizations, are more accurately seen as enhancements to fee-for-service, rather than as replacements.What’s more, in cases where fee-forservice is fully supplanted by a bundled payment for an episode of care, the structure of fee-forservice payment and the historical experience of payment within the fee-for-service approach will remain the basis for determining the bundled doi: 10.1377/hlthaff.2012.0350