Feb. 14, 2022 – Doctors are still largely paid by how many patients they see and services they provide, despite years of discussions about pegging their pay to judgments about the quality of the care they deliver, according to the authors of a new study.

Volume-based pay was the most common type of base income for more than 80% of primary care doctors and for more than 90% of specialists in a sample studied by Rachel O. Reid, MD, of Rand Corp., and co-authors. They published their findings Jan. 28 in JAMA Health Forum.

Their study examined the pay in 31 doctor groups that work with 22 U.S. health systems. The percentages of total doctor compensation based on quality and cost performance judgments were “modest,” at 9% for primary care providers and 5% for specialists, the researchers found.

These findings may be a “solid reality check” on progress in shifting the U.S. practice of medicine toward what are called value-based arrangements, Reid tells WebMD.

Their findings are similar to previous studies. In 2016, for example, researchers working for the federal Agency for Healthcare Research and Quality reported that 94.7% of U.S. doctor office visits were covered under some form of fee-for-service plan in 2013.

‘Beautiful Rhetoric’

There has been much talk in recent years about the need to tie doctors’ pay to the quality of care patients receive. In theory, there is broad agreement about the benefits a shift away from the fee-for-service model could provide.

The Affordable Care Act of 2010 also included ways to encourage health care systems to consider changes in their approach to care.

In the years after the Affordable Care Act passed, discussion focused on the need for payment based on quality of care, instead of an a la carte system, which would provide a reason for doctors to layer on services, says Frederick Isasi, JD, the executive director of the left-leaning consumer advocacy group Families USA.

Leaders of health systems will often address this theme of value-based payment in their public talks, he says.

But work from researchers like Reid and her co-authors shows how little progress has been made in turning this into reality.

“There's lots of beautiful rhetoric, but this study shows that 12 years later, we’re still stuck in the same place,” Isasi says.

While the results of Reid’s paper would be “100% predictable” for anyone who understands the financing of health care in the United States, they would be “truly shocking” for most people, he says.

‘Fee-for-Service Chassis’

One reason for the slow pace of growth in value-based payment arrangements is that many of them are rooted in the older approach to reimbursement, Reid tells WebMD.

“A lot of the alternative payment models that are out there are built on a fee-for-service chassis where attribution happens on the basis of fee-for-service claims, or it’s a shared savings model on the basis of fee-for-service billing,” Reid says.

This study was part of a larger Rand Health System study, in which in-depth interviews were done with senior officials with health systems in four states (California, Minnesota, Wisconsin, and Washington). These states were selected to represent variation in the U.S. marketplace, but the finding may not generalize to other regions of the country, Reid and co-authors note.

Gary Young, JD, of Northeastern University, also cited this as a limitation of the paper. In an interview, he also noted that the Reid paper addressed some of the hurdles that have slowed the adoption of value-based payment, such as issues with attempts to establish measurements of quality of care.

The paper’s conclusion “isn’t that surprising, but it raises some serious considerations about why pay-for-performance, value-based payment, and alternative payment arrangements have not diffused through the system more deeply,” he says.

The paper Reid and co-authors published last month in JAMA Health Forum provides a snapshot of one part of the debate about how doctors are paid, focusing in on the persistence of the fee-for-service approach.

But Reid also is among the researchers who have studied the effects on patients of a fee-for-service approach to medical care, as is Young, who is director of the Northeastern University Center for Health Policy and Healthcare Research.

Reid, for example, is one of the authors of a 2021 paper in JAMA Network Open that reported on the persistence use of treatments considered to be of low value to patients despite major efforts to make doctors and consumers aware of concerns about them. In that paper, Reid and co-authors said low-value care use and spending had decreased only marginally from 2014 to 2018 among people enrolled in traditional Medicare.

Young says many consumers tend to be more worried about changes in health care that would limit their access to services.

“They may even say ‘Look, I'm happy to have my provider be more incentivized to give me more,’” Young says.

But they may not factor in how this approach raises health insurance costs in general or how it can put them at risk for ineffective and unnecessary treatments, according to Young. He is one of the authors of a 2021 paper in the journal Health Affairs that found the odds of a patient receiving an inappropriate MRI referral increased by more than 20% in cases where doctors had transitioned to hospital employment.

Young and his co-authors said they found most patients who received an MRI referral by a hospital-employed doctor had the procedure at the hospital where the referring doctor was employed, Young and his co-authors found. These results thus point to the increasing trend of hospital employment of doctors as a potential driver of low-value care.

Show Sources

JAMA Health Forum: “Physician Compensation Arrangements and Financial Performance Incentives in US Health Systems.”

Health Affairs: “Fee-For-Service, While Much Maligned, Remains The Dominant Payment Method For Physician Visits,” “Hospital Employment Of Physicians In Massachusetts Is Associated With Inappropriate Diagnostic Imaging.”

Frederick Isasi, JD, executive director, Families USA. 

Gary Young, JD, director, Northeastern University Center for Health Policy and Healthcare Research, Boston.

JAMA Network Open: “Trends in Low-Value Health Service Use and Spending in the US Medicare Fee-for-Service Program, 2014-2018.”

Rachel O. Reid, MD, Rand Corp.

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