Physicians grapple with new payment models

Even so, most practices are doing OK with pay-for-performance and other models

Just as hospitals and IDNs work overtime to adapt to new healthcare payment models intended to improve quality and reduce costs, so too are physician practices. Many doctors are finding that they need help managing increasing amounts of data and figuring out how to respond to the diversity of programs and quality metrics from different payers. Even so, most are faring well with the new models. These are among the findings of a joint study by the non-profit RAND Corporation and the American Medical Association.

Researchers studied 34 physician practices in six geographic markets to determine the effects of alternative healthcare payment models on physicians and medical practices in the United States. The payment models included episode-based and bundled payments, shared savings, pay-for-performance, capitation and retainer-based practices. Accountable care organizations and medical homes also were examined.

Among the practices surveyed, none had experienced financial hardship as a result of the new payment models. In fact, the overall financial impact – including practice stability — of the alternative payment models ranged from neutral to positive.

But changing the payment system probably isn’t enough to ensure that patient care will improve, said Dr. Mark W. Friedberg, the study’s lead author and a senior natural scientist at RAND, a nonprofit research organization. “For alternative payment methods to work best, medical practices also need support and guidance. It’s the support that accompanies a new payment model, plus how well the model aligns with all of a practice’s other incentives, that could determine whether it succeeds.”

Key findings:

  • Physicians agree that the transition to alternative payment models has encouraged the development of team-based care. Additional benefits for patients include increased access to care and physicians through telehealth or community-based care.
  • Most physician leaders are optimistic about alternative payment models, while physicians not in leadership roles have some apprehension, particularly with regard to new documentation requirements. For example, physicians are supportive of new patient registries that list patients with certain health conditions as a way to improve care. But they are skeptical about documentation whose link to better care is less clear.
  • Practices are investing significantly in information systems to analyze large amounts of data about practice patterns. But when crucial data (such as quality performance feedback and drug prices) are missing or inaccurate, they have difficulty using data analysis to improve care and reduce spending.
  • As physician practices make substantial investments in data collection, payers also should consider helping physician practices manage the information. Such investments could enhance the effectiveness of new payment models, and help medical practices make the best use of computerized health records and other health information technology.
  • Payers should consider ways to harmonize key components of alternative payment models, especially performance measures. Medical practices usually contract with many payers, each of whom may have different performance measures tied to payment rewards. So medical practices must cope with how to address hundreds of performance measures and create a coherent response.
  • Most medical practices have shielded individual physicians from direct exposure to the new financial incentives created by payers. While practices are paid more for improved performance, practices generally use nonmonetary incentives to encourage physicians to change their decision-making. Those methods often are intended to appeal to physicians’ sense of professionalism. “Despite the pressure to contain costs, practice leaders are trying to avoid creating situations where doctors are paid more when patients do not get the services they need,” said Friedberg.
  • Alternative payment models generally have not changed the core content of physicians’ clinical work. Efforts to improve efficiency by delegating some tasks to non-physicians have had the unintended consequence of increasing the intensity of physicians’ work, raising concerns about burnout.

The project conducted interviews between April and November 2014, speaking with 81 people from 34 physician practices in the following markets: Little Rock, Ark.; Orange County, Calif.; Miami, Fla.; Boston, Mass.; Lansing, Mich.; and Greenville, S.C. Researchers also spoke to leaders of 10 payers, nine hospitals or hospital systems, seven local medical societies, and five Medical Group Management Association chapters.

The report, “Effects of Health Care Payment Models on Physician Practice in the United States,” is available at