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Payment Reforms/Pay-For-Performance

Why Employers Care

Pay-for-performance (P4P) programs (including payment bundling for episodes of care, medical homes for care coordination, accountable care organizations for closer alignment between providers, and payment reductions for avoidable readmissions) demonstrate that health care quality, safety and efficiency can be improved with provider payment incentives. Although early initiatives received mixed reactions, performance incentives are becoming widely used with major insurers sponsoring P4P programs, hospital and physician organizations participating in setting measures, and CMS implementing a performance-based reimbursement standard in 2009.

Provider payment is also central to the health system reform debate. Our current system rewards volume and procedures, while prevention, chronic illness management, care coordination and efficiency go unrecognized.

Further, at a time when demand for primary care services is increasing, the supply of primary care doctors is shrinking in large part due to the growing income gap between primary care and specialty physicians. Primary care doctors are significantly under-compensated compared to specialists and are not paid for many cognitive services integral to good health outcomes and efficient use of technology, such as coordinating care across settings/practitioners and patient self-care education.

The Patient Protection and Affordable Care Act includes provisions that will increase pay-for-performance measures in Medicare. Additionally, the National Business Group on Health continues to submit comments to CMS to urge payment reform based on quality and efficiency.

In addition, in November of 2013 a bipartisan group of members of Congress (primarily House Ways and Means and Senate Finance Committee members) have introduced bills to change how Medicare reimburses physicians from a fee-for-service to a pay-for-performance (P4P) model in order to pay for the so-called "Doc Fix".

As Congress continues to delay Medicare physician payment cuts, the Business Group strongly recommends that Congress ties pay-for-performance to any restoration of planned Medicare physician reimbursement cuts.

What Can Employers Do?

P4P is not a silver bullet, but a key component of health system reform. Employers can participate in P4P efforts like Bridges to Excellence and work with vendors to incorporate incentives that encourage primary care capabilities, eliminate waste and overuse, and improve patient safety.

Some specific examples:

  • Ask health plans to redesign network contracts directing payment and utilization to primary care. Make sure plans use the most recent Medicare's resource-based relative value scale (RBRVS) Relative Value Units.
  • Ask your health plan to implement non-payment for never event policies.
  • Pay for telephone and online services with CPT codes introduced in 2008. Telephone calls and e-visits can provide patients with greater access to their physicians. Employee education and communications about the services will encourage appropriate use.
  • Ask your health plans to report on primary care performance at the practice level. Many major health plans already evaluate performance using clinical measures, infrastructure assessment and utilization in several areas such as generic drugs, ER use and imaging.
  • Ask your health plan how it is managing commonly overused procedures identified by the National Priorities Partnership.

Relevant Tools and Resources Include:



Page last updated: September 29, 2014

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