Commission Recommends Scrapping Fee-for-service System

BOSTON — A state commission tasked with examining how health care providers are paid in Massachusetts are set to recommend that Gov. Deval Patrick and the Legislature adopt a significant change in the system.

Specifically, the Special Commission on the Health Care Payment System wants to replace the current system, by which insurers pay doctors and hospitals a negotiated fee for each individual procedure or patient visit, with one that pays a lump sum for all of that patient’s care for the year. No other state has enacted such a reform, which would essentially put providers on a budget and perhaps encourage them to cut back on treatments.

Dolores Mitchell, a commission member, was quoted by the Boston Globe as saying the current ‘fee-for-service’ system has all the wrong incentives. “It encourages excessive use and does nothing to discourage waste. People know the system has been dysfunctional for years.”

Among the commission’s proposals:

The health system should be organized into ‘Accountable Care Organizations,’ which include doctors, other community-based providers, and hospitals collectively capable of providing a full range of services;
Global payments should be adjusted for risk and other factors and incorporate common performance measures; and
Since some Massachusetts providers will face challenges in moving away from fee-for-service, a careful transition must occur and offer adequate infrastructure support for providers. The transition will occur over a period not to exceed five years, although providers may make the transition sooner.
“The core concept in the commission’s recommendations is something we should all be taught in childhood: how to live within a budget,” wrote Jim Sabin, a professor at Harvard Medical School who blogs about health care organizational ethics. “We in the U.S. have been notably lax about budgeting, as evidenced by our recent trend into negative levels of savings.”

This wouldn’t be the first recent example of Massachusetts being a health care pioneer of sorts, Sabin wrote, noting that the state has received a great deal of attention for its health care reform plan.

“To date, however, Massachusetts has succeeded in insuring most of its citizens, but has flopped in its efforts to contain costs,” he said. “Unless Massachusetts gets a better grip on health care costs, its reform program will die. Having gone this far, the state doesn’t want to see its efforts crash and burn. It has concluded, correctly, that fee-for-service reimbursement must go.”

The 10-member commission includes officials in the Patrick administration, legislators, and representatives of hospitals, physicians, and insurers.

“We need to move forward as quickly as we can,” said Leslie Kirwan, the governor’s secretary of Administration and Finance, and co-chairwoman of the group, as quoted in the Globe. “But this is going to take a very thoughtful transition.”

In Massachusetts, health care spending is growing by more than 8{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} annually, driven largely by the high price and heavy use of hospitals. The commission began meeting in January and soon agreed that eliminating the fee-for-service system would be key to reducing costs.

The Mass. Medical Society, the statewide physicians organization, released a statement recommending that any change must be consistent with the goals of access, quality, and cost, and that payment reform should “include a model of fee-for-service medicine that allows the patient and physician to be aware of the cost of interventions and the ability to factor costs into health care decision-making.”