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Physicians adverse to the financial risk of payment models that penalize for cost overruns

Many physician practices lack the experience with data management and analysis needed to perform well in alternative payment methods, study says.

Jeff Lagasse, Associate Editor

Physician payment models are becoming more complex and the pace of change is increasing, creating challenges for physician practices that might hamper their ability to improve the quality and efficiency of care despite their willingness to change, according to a new joint study by the RAND Corporation and the American Medical Association.

The study is a follow-up to a similar one conducted in 2014 to assess how physician practices were responding to alternative payment models. These models are changing how physicians are compensated for the care of their patients to create stronger incentives for efficient, high-quality medicine. They often involve either bonuses for meeting quality goals or penalties for falling short.


The Centers for Medicare and Medicaid Services is moving providers towards taking on more risk in payment models. As an incentive, physicians who participate in programs that qualify as an advanced alternative payment model under MACRA don't have to meet measures for MIPS - the merit-based incentive system. They also have as incentive the 5 percent bonus payment.

But the study found that medical practices are increasingly averse to the financial risks posed by alternative payment methods that include penalties for cost of care overruns. In some cases, practices renegotiated contracts with payers to reduce their downside risk or transferred some of that risk to partners such as hospitals or device manufacturers.


Researchers from RAND examined 31 physician practices in six geographic markets to describe the effects of alternative healthcare payment models on physician practices. Whenever possible, researchers re-interviewed the same physicians and practice leaders that participated in the previous study.

Across the markets studied, leaders perceived an acceleration in the pace of change in alternative payment models from both private insurers and government programs since 2014, at least partially driven by MACRA.

As in 2014, many physician practices -- especially those that are small and independent -- reported that they lacked the skills and experience with data management and analysis that are needed to perform well in alternative payment methods.

Building in methods to help these practices master the use of health data would improve the potential success of many alternative payment methods, the study said.The findings also suggest that a slower and more predictable pace of change might benefit medical practices, payers and other stakeholders.

As in their previous study, researchers found that physicians were broadly supportive of alternative payment methods that enabled their practices to make noticeable improvements in patient care. They voiced satisfaction with clinical improvements, even when they did not result in financial bonuses.

But when the alternative payment methods created new reporting and documentation burdens or when they created no perceptible improvements in patient care, physicians reported disengagement and skepticism.


The Centers for Medicare and Medicaid Services will be releasing new payment models, CMS Administrator Seema Verma said last month. Some may even be mandatory, which the Department of Health and Human Services said could be necessary to determine whether a model truly works.


"Physicians tell us that it's more difficult than ever to understand the growing complexity of payment models and they are straining against a conflicting muddle of public and private value-based policies and rules that are continually in flux," said AMA President Dr. Barbara L. McAneny. "The resulting administrative burdens take physicians away from patient care."


Allowing practicing physicians and other practice leaders to help design alternative payment methods might help improve physician engagement and improve the likelihood that such strategies will produce improvements in patient care.

Twitter: @JELagasse

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