The History of Good Deal Bad Deal Payment Designs

The various leaders of medical associations are lining up to defend the latest "Good Deal" as the reality of a not so good trade is apparent.

Our designers and our leaders understand history so poorly that they are doomed to repeat it over and over, especially for primary care and all physicians paid on the lower end of the payment scale.
  • Good Deal Start Bad Deal End Number 1  was the original Medicare and Medicaid falling behind in about a decade
  • Good Deal Start Bad Deal End Number 2 - 1990s "reforms" - falling behind in about 5 years
  • Good Deal Start Bad Deal End Number 3 - MACRA - few if any years ahead (but better than a 21% cut?)
The AMA actually rented out the auditorium where Kennedy announced what would become Medicare and Medicaid to lodge its protest. Fifty years ago there were at least some leaders raising concerns regarding what would happen. Now with Medicare and Medicaid so much of the payment design, matters are worse.
  • By the 1980s, primary care payment was insufficient to the cost (rampant inflation, liability cost, lower pay going up lower), primary care choice was going down fast, and primary care retention dropped.
The 1990s reforms did initially adjust primary care pay higher, but set it lower than non-primary care. Managed care threats scared more students into primary care. Primary care choice rose and internal medicine grads returned from 44% to 54% in office primary care - for a short time.
  • By the late 1990s, internal medicine office primary care retention was dropping 3 to 4 percentage points a year down to below 20% where it has stayed. 
  • Family medicine had a few years over 3000 annual graduates before dipping back below 3000, the level that it has remained essentially since 1980. The lack of family medicine expansion is an overall measure of payment design failure and failure of payment where care is needed - since 1980. 
  • The internal medicine retention in office primary care also tracks the same failure as does physician assistant primary care. The doubling of PA annual graduates (100% more from 1998 to 2008) resulted in over 200% increase in entry into non-primary care with just a small (and disappearing) 30% gain in entry to primary care. 
  • More specialties are added with more added to each new specialty for NP and PA - by payment design. Over 30,000 were added to teaching hospitals due to better pay and also resident work hours restrictions (higher cost, no increase in quality, bad value change).
The 2015 MACRA deal, is another bad deal that fails to acknowledge the cost of health care delivery rising much faster than inflation.
  • The fact that the CMS Actuary actually states this is quite interesting. Someone doing his job and away from political gain!
Steadily Shorter Time Periods Before Payment Failure

For primary care/basic services paid by Medicare and Medicaid since 1965, the period of time before any design has resulted in insolvency has been shrinking (10 years to 5 years to 1 year).

Payment Failure is Most Evident Where Workforce Fails - By Design

Sadly most Americans and the small practice and small hospital providers that they need the most are falling steadily behind by design.

Insurance reform fails when payment design fails, and payment design that costs providers even more and can pay small providers even less - fails to an even greater degree and where most needed - by design.
Buck Up Leaders

When our physician leaders fail to acknowledge these failures, they fail at leadership. They have failed with bad assessments of payment and bad assessments of workforce due to bad assessments of payment plus bad assumptions. It may be tough to inform political leaders and the public, but that is the job of physician leaders.

In the past few years it has become more difficult to critique health care delivery design. Political polarization has made this worse. It is possible to be highly critical of ACA and be appropriate. Complicating the problem is research failure. As Science pointed out, few studies of health care delivery are randomized. This allows too many assumptions, too many consequences, and implementation of new policy too fast and too dangerous while claiming success.

One main failure of ACA has been financial instability in the design:
  • Cost of delivery increased too high
  • Decreases in productivity due to ACA and rapid change
  • Distractions from care delivery due to ACA and rapid change
  • Confusion of public and providers due to ACA and rapid change
  • Revenue increasing less than inflation and far less than cost of delivery
Delays and mistakes by CMS and Congress have also caused problems - holding up payment.

Who cares how payment occurs if it supports health care delivery, avoids needless distractions, and supports care delivery where care is needed? Why change if you really do not know the consequences and you do know that change and rapid change are harmful?

Payment Design Failure Due to Failure to Support Care Delivery

Frankly since 1980 the new payment designs have abandoned all resemblance to payment for the support of health care delivery. The payment designs have been based upon cost cutting. The carnage has been seen in small hospital closures and small practice deficits with more and more territory and higher proportions of the population found where concentrations of clinicians are lowest. About 40% of Americans reside in 2621 counties lower to lowest in concentrations of  clinicians where 41 - 45% of older Americans, poor Americans, Medicare and Medicaid populations, diabetics, smokers, and those with poor to fair health are found. These populations:
  • Are being left behind by design and 
  • Their providers are paid less by design and 
  • They will be paid less by new design including penalties
Bonuses and Penalties, Quality or Not, Are About Populations not Providers

It is ludicrous to think that payment can be adjusted for the incredible complexity range of the American population - particularly those elderly or poor. Hong in JAMA demonstrated the discrimination of pay for performance.

For decades, the payment designs have continued to pay more where care is concentrated and less where care is needed. Another decade of this design will continue.
  • More lines of revenue and higher pay rates continue where care is concentrated
  • Fewest lines of revenue, few codes, and lowest pay rates continue where clinicians are least concentrated
  • Bonuses are only for those caring for the advantaged or Medicare Advantaged.
  • Penalties are for those taking care of populations behind by design.
Primary Care Investment Pays and Saves

The evidence builds for investment in primary care as a solution for better quality of primary care, better organization, and same cost of delivery. There can be no resolution of primary care without 20 - 30% more in payment support. Michigan recently had a demonstration project that fit these criteria with enough payment to cover increased costs of delivery and this resulted in overall savings of 1% regarding overall costs.
  • If you can pay primary care more to deliver better primary care and hold costs the same over years of time and not require a change to a more complicated and confusing payment design - why delay implementation?
Primary care delivery capacity is a function of primary care revenue minus the cost of delivery minus distractions from productivity.

Five Periods of Primary Care Payment Consequences           Individual Graphics

Internal medicine once contributed 65% of graduates into primary care. This resulted in internal medicine as the most important source with steadily over 3000 per class year added - for over 110,000 at one point. Sadly the consistent level of over 3000 in primary care per class year has become 1400 for primary care a year under the past decades of payment design.

Numerous distractions continue. Hospitalist workforce has claimed over 37,000 internal medicine graduates. Subspecialty fellowship positions increase by 4% per year and subsubspecialty fellowships by 11% a year (AAMC, Jolly). And our leaders still claim internal medicine as primary care training? And our researchers claim that internal medicine will contribute 90,000 for primary care. Try a maximum level of 40,000 for active office primary care by 2030 which is about all that 1400 per class year for 30 class years can provide.

Frozen family medicine, frozen pediatrics, and declining internal medicine translate to gaps in care and care where needed. Massive expansions of NP and PA have barely kept up with the declining internal medicine because fewer and fewer enter and remain in primary care. Expansions fail for primary care because of payment design. Failure in payment design also means more cost of delivery in areas such as primary care where needed. Locums costs, recruitment and retention bonuses, payment to brokers and headhunters, advertising costs, and administrative costs increase at federal, state, and local levels.

As usual, the graduates fail for locations of need - also due to poor support. Even worse,
populations are increasing fastest (twice as fast) where care is needed and where family medicine is most in demand. NP and PA are leaving family practice and primary care for better support and pay in non-primary care areas.

Marketing Has Become the Focus; Failure to Understand the Market Continues

The market interpretation is quite obvious. Pay is insufficient for primary care and for care where needed. The data is extensive and dates back for decades of class years.

Frustrated leaders appear to have turned to marketing. Marketing is needed where physicians try to crowd into locations with too many physicians. This is of course driven by payment design and better paying patients that also are easier to care for.

Marketing is not needed where care is needed. What is needed where people need care is higher payment, better support, lower cost of delivery, permanent family practice and permanent general surgical specialties (surgery, orthopedics, ob-gyn) - all falling further behind by payment and training design.

Primary care leaders, true to primary care, must have one major focus - pay for primary care consistently above the rising cost of care delivery.

Primary care leaders were able to take the debacle of the 1950s and 1960s and recover some level of primary care by 1980. The failures have been steady for primary care and for health access since that time.


Oops We Did It Again in Payment Design

Lack of awareness continues to add consequences by design.

Variation in the Ecology of Health Care

Revisiting Physician Distribution by Concentration Coding

Ecology of Health Care for a Disadvantaged Population - Native Americans

Perverse Health Payment Dividing US - More for Fewer and Less for More, and Penalties for Those Caring for Those Most in Need

Open Season Upon Small Health Care

Improving Health Care is Not Likely for 2600 Counties

Global Fails Local But Local Focus Succeeds Globally

Domino Decline By Design - as ERs Close, Those Nearby Face Challenges, as Small or Rural Hospitals Close or Practices Where Needed...


Blogs indicate that primary care can be recovered and should be recovered.

Dr. Bowman is the North American Co-Editor of Rural and Remote Health. He was the founding chair of the Rural Medical Educators Group of the National Rural Health Association and the long term chair of the STFM Group on Rural Health

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