Feds Set Explicit Goal to Eliminate Fee For Service in Self Funded Plans.

Federal reforms under the Patient Protection and Affordable Care Act (PPACA) and Centers for Medicaid Services (CMS) continue to regulate material change to the status quo.  Federal Exchange plans at 24,500 members and growing slowly.  Enrollments by state can be found at:  http://www.healthcare.gov/news/factsheets/pcip06102011a.html

Centers for Medicare Innovation have stated their goal to eliminate fee-for-service medicine in 30 new Accountable Care Organizations (ACO).  Noteworthy is a CMS stated goal of also directing same ACO’s into “population based reimbursement” or capitation for Part A and Part B medical expenses.  CMS is explicitly directing selected ACO’s to also modify existing contracts with both Medicaid and Commercial Self funded medical populations.  Several well organized medical centers are eagerly applying for ACO participation by deadline in August.

CMS states, “The goal of population-based payment is to allow Pioneer ACOs the revenue flexibility to provide services not currently paid for under FFS, and to invest in infrastructure to support care coordination. This particular approach to population- based payment exposes the Pioneer ACO to the same level of financial risk as in the payment arrangement in the second performance period. The Innovation Center is open to testing a different form of population-based payment in the Alternative Payment Arrangement that would offer the Pioneer ACO greater levels of financial risk and reward.”

For many metropolitan medical practices relying on Medicare (and eventually Medicaid), this means real change to the status quo. CMS is heavily targeting member assignment to experienced primary care physician patient management as their foundation to lower cost.  CMS states, “Pioneer ACOs must commit to entering outcomes-based contracts with other purchasers (private health plans, state Medicaid agencies, and/or self-insured employers) such that the majority of the ACO’s total revenues (including from Medicare) will be derived from such arrangements, by the end of the second performance period in December 2013.”  Merger or management of primary care function favors early adopters with clear vision, facilities and leadership.

Many commercial and self funded plans are currently in place nationwide.  Traditionally compensated fee-for-service medicine follows the practice of delivering care at disease onset with no payment for organized prevention.  In a very real sense, we do not have health care plans, but we have disease care plans.  The directly stated goal of converting entitlement reimbursement to capitation represents real change for doctors and hospitals who are unable to organize or manage the quality measurement standards mandated by CMS  and ACO compliance.  Primary care physicians have been complaining for years that the current fee-for-service neglects to compensate wellness-counseling that averts the very expensive and serious health attack.  Capitated care is designed to pay doctors and their ancillary services personnel to stay in regular contact with higher risk patients and keep them healthy.  Many have criticized inherent conflict of interest issues with fee-for-service payment; Conflicts that reward higher profits for unnecessary care.  The capitated model represents a method to combat runaway medical expenses by rewarding physicians who are able to deliver care under a budget by keeping people healthy.  The philosophical position by some to declare capitation an incentive to restrict care for higher profits, must also claim the opposite position of fee-for-service incenting excessively prescribed procedures.  The Federal Government has stated their belief in setting budgets, and ACO’s will deliver or lose up to 10-15% of total Part A and Part B reimbursements under one of five Pioneer ACO risk contract options.

Where there is risk, there is potential reward.  The upside bonus is shared savings of 50%-70% for managing care under the budget. “CMS will enter into Agreements with Pioneer ACOs only if  they provide enforceable assurances that they can reimburse Medicare for all potential losses.”  Stop loss works to reduce unpredictable budget shortfalls, and Provider Risk, LLC will be helping with this endeavor.

Medicare spent about $528 Billion in 2010, and is projected to spend $1,038 BILLION by 2020. There is little question that benefits will be changing, along with the way CMS pays for care. CMS is clearly moving away from Fee For Service compensation as quickly as medical providers get organized and assume the budgeted program.

About the Author

Stephen George is CEO of Provider Risk, LLC.
Specialists in Medical Stop Loss and reinsurance.
reinsurance@providerrisk.com
www.providerrisk.com