Reforming the Primary Care Physician Payment System- Eliminating E&M Codes and Creating the Financial Incentives for an “Advanced Medical Home

Prelude: Norbert Goldfield, M.D., who heads up the 3M Informatics Group, and who practices primary care in Springfield, Massachusetts, and six associates affiliated with 3M have come up a report that says, in essence:


• Let’s pay primary care physicians for what they do – providing comprehensive and coordinated care for patients – rather than by fee-for-service for individual acts.


• Let’s tie this payment into the severity and complexity of the illness.


• Let’s encourage the primary care specialists to become involved in coordinating care with the specialists to whom they refer.


This report is in response to the growing crisis and potential collapse of primary care. The payment gap for primary care physicians and specialists, now approaching 1:2 to 1:4, is a problem gnawing at the underside of American medicine. No amount of primary care “efficiency” can overcome this gap. Only patient volume - seeing more and more patients with less and less time devoted to each – can solve the income problem for most practitioners. Various piecemeal innovations – more procedures by primary care doctors, better coding, computer interviewing of patients, payments for email communication with patients, EHRs, and office dispensing by doctors have been tried, but nothing seems to overcome the gap.


Some sort of more systematic approach may be needed, and that is what Norbert Goldfield and his associates have come up with. Here, in brief, are elements of their overall plan, along with their definition of the problem.

Excerpts from Report


“The problem facing primary care physicians (PCPs) is that they can only maintain or increase their (inflation adjusted) incomes by increasing the volume of visits and associated services. The fundamental flaw in a fee-for-service system is that if you only pay for individual services, you get more services. “


“In addition, to the financial incentive to generate more visits and services, there is no financial benefit to a PCP, should they reduce their use of ancillary services, control the number of referrals to specialists, refer to less expensive specialists, or invest in better coordinating care so as to reduce hospital admissions and readmissions. Thus, PCPs have the financial incentive to increase the services and volume of visits they provide and no financial incentive to decrease the services they order.”


“This problem is clearly due to the unit of payment for PCPs (i.e., individual visits and services). Fee-for-service payment creates a situation where physician and payer incentives are completely misaligned. Payers want PCPs to use resources efficiently while rewarding inefficiency by paying for every additional service utilized on the RBRVS fee schedule.’


“PCPs who attempt to become more efficient can only do so by reducing their already none-too-high incomes. There currently does not exist an effective financial mechanism to foster the goals of both consumers and PCPs – an “advanced medical home” for patients which provide physicians with the incentive to increase coordination of care for their entire panel of patients. “


“The American College of Physicians (ACP) has introduced the term “advanced medical home” to describe physician groups that practice patient-centered care promoting improved outcomes in terms of quality and resource use (value). “


“The following details a series of payment reforms that adhere to these goals while heeding the call for fundamental payment redesign to achieve them.”


“Reform of the payment system for PCPs with the ultimate objective of facilitating the “advanced medical home” concept is centered on four principal objectives:


1. Financially reward PCPs for providing coordinated care to their patients by having PCP payment be, in part, based on the overall health care resource use of their patients.


2. Reform the current visit based PCP payment system that pays for reported physician effort using the CPT E&M codes to a transparent system that is based on the patient’s condition.


3. Do not increase the administrative burden on PCPs.



4. Provide a continuum of options in terms of the level of financial risk a PCP accepts for the coordination of care of their patients.”


What is your response to such a plan? Is it too radical? Does abandoning FFS for a quasi-capitated payment for comprehensive and coordinated care based on severity and complexity of illness make sense? Is it workable?

For publications related to this topic, see Sailing the Seven “Cs” of Hospital Physician Relationships, The Voices of Health Reform, Innovation-Driven Health Care, And Who Shall Care for the Sick?