New Physician Payment Models: Judge Not, Health Policy Makers, That You Be Judged

Let us judge not, that we be judged.

Abraham Lincoln, Second Inaugural Address

I have just finished reading 2 articles in the September 25 NEJM – “Leap of Faith – Medicare’s New Physician Payment System,” and “Physician Payment after the SGR – The New Meritocracy,” by health policy academics from North Carolina, New York, and Boston.

Both articles ruminate on the new physician payment systems. Both say the “merit” of future physician payment will be based on 4 domains – quality of care, resource use, meaningful use of electronic health records, and participation in clinical practice improvement activities.

Both comment on the commonly held notion among policy wonks that cost-containment will success if we move away from fee-for-service notion.

Although it is not explicitly stated, new payment models – primarily Accountable Care Organizations and Medical Homes, are based on the premise that physicians do an excessive number of unnecessary tests and procedures because doing so lines their already overfilled pocketbooks.

Of the two articles, I find the first, The "Leap of Faith" piece, the more honest and forthcoming. Its two authors, Jonathon Oberlander of the University of North Carolina and Miriam Laughesen of Columbia University, say the move towards new payment models and away from fee-for-service has five fundamental problems.
One, other countries who spend far less than the U.S. has fee-for-service systems.

Two, under the new system, cost will still depend on volume and mix of procedures do, not on how physicians are paid..

Three, the new systems, primarily ACOs and Medical Homes, are unproven and may fail, and are therefore a “leap in faith.”

Four, the switch to value-based systems, or a “meritocracy,” are front-loaded with bonuses and extra physician payments through 2024, and will fail if too many or not enough physicians jump on the incentive bandwagon.


Five, these incentives, bonuses, or bribes, whatever you wish to call them, may cost the government more rather than less, and may not keep pace with increases in medical expenses required to comply with them, leading physicians to demand more in fees.

If the conversion to new payment models falters, as it may indeed be the case if other payment schemes like the Sustainable Growth Rate (SGR) formula is an example, government policy makers, not physicians, may be judged to be a fault.

“Value,” or “Merit,” or “Quality,” based on data and technical formulas , is an elusive concept. In the words of authors of the Leap of Faith article, “It’s unclear that we have the appropriate measures to accurately, meaningfully, or comprehensively evaluate the quality of physicians’ care, let alone to render such a judgment in a single score.”