Heeding the Call for Urgent Primary Care Payment Reform

What Do We Know About How to Get Started?

Stephanie B. Gold, MD; Larry A. Green, MD; John M. Westfall, MD, MPH

Disclosures

J Am Board Fam Med. 2021;34(2):424-429. 

In This Article

Abstract and Introduction

Abstract

The COVID-19 pandemic has added further urgency to the need for primary care payment reform. Fee-for-service payments limit the flexibility of practices to respond to crises and leave practices without sufficient revenues when visit volumes decrease. Historic fee-for-service payments have been inadequate, and prior implementations of prospective payments have encountered challenges; there is a need to bring forward the best available evidence on how to design prospective payments for payers and policymakers. Evidence suggests setting primary care investment at 10% to 12% of the total cost of care, approximately translating to an average $85 per member per month, with significant variation based on age and adjustment for medical and social measures of risk. Enhanced investment in primary care should be aligned across payers and support practice transformation to advanced models of care.

Introduction

Primary care is the foundation of a robust health care system, shown to lead to better health outcomes, decreased inequities,[1] higher quality of care, and lower costs.[2] Despite this evidence, primary care in the United States has been chronically underfunded and predominantly paid for via a flawed model. In the fee-for-service (FFS) model, practices code and bill for delivering specific services, collect applicable copays from patients, and are reimbursed by payers. This model is flawed because it is retroactive and transactional in nature, limiting flexibility in care design and incentivizing an increased volume of services. Further, billable services do not encompass all of the care provided in primary care,[3] and services may be billable only by certain provider types, constraining team-based care.

The COVID-19 pandemic has further revealed the weaknesses of FFS for primary care: the loss of visit-based revenue has led to practice furloughs, layoffs, and closures. As of late July, nearly 1 in 4 primary care clinicians reported recent layoffs or furloughs, and 1 in 5 were uncertain of the financial viability of their practice going forward.[4] Increased supply of primary care physicians per 10,000 people has been linked to lower mortality rates, longer life expectancy, better self-reported health, and reduced rates of low birth weight.[1,5] Higher proportions of primary care physicians have also been associated with reduced emergency department visits and hospitalizations.[6] Closures and loss of staffing in primary care practices place the health of communities at risk.

In the ongoing efforts to move away from FFS, policy experts and primary care providers are increasingly calling for the use of a global payment for primary care services, typically paid as a per-member, per-month (PMPM) amount. To facilitate this movement, an important question must be answered: how do we design an optimal primary care PMPM? Efforts to use capitation in the past failed in part because historic FFS reimbursements were used to determine the amount of payment in a PMPM. These amounts were not risk adjusted sufficiently to account for variation in patient needs and did not increase the overall investment in primary care to enable care transformation. As a result, payments were insufficient, and primary care practices faced unmanageable levels of financial risk. We consider several sources of data that can be used to inform the discussion of an appropriate PMPM for primary care with regard to its amount, risk, scope, and implementation.

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