The Fund supports networks of state health policy decision makers to help identify, inspire, and inform policy leaders.
The Milbank Memorial Fund supports two state leadership programs for legislative and executive branch state government officials committed to improving population health.
The Fund identifies and shares policy ideas and analysis to advance state health leadership, strong primary care, and sustainable health care costs.
Keep up with news and updates from the Milbank Memorial Fund. And read the latest blogs from our thought leaders, including Fund President Christopher F. Koller.
The Fund publishes The Milbank Quarterly, as well as reports, issues briefs, and case studies on topics important to health policy leaders.
The Milbank Memorial Fund is is a foundation that works to improve population health and health equity.
September 2019 (Volume 97)
Quarterly Article
K. John McConnell
December 2024
Dec 19, 2024
Back to The Milbank Quarterly
The Centers for Medicare and Medicaid Services (CMS) recently unveiled its “Primary Cares Initiative,” a program that US Department of Health and Human Services Secretary Alex Azar described as “the biggest step ever” toward replacing fee-for-service payment and transforming primary care delivery. The initiative is a continuation of efforts that reflect a longstanding appreciation for the value of primary care.
Recent efforts to transform primary care—including the Patient Centered Medical Home and the Comprehensive Primary Care Initiative—have not necessarily led to measurable reductions in health care spending or improvements in quality.1,2 For some, these results have been met with surprise and disappointment. For others, the results simply confirmed the challenges of fulfilling the core functions of primary care—first contact, continuity, coordination, and comprehensiveness3—within the confines of fee-for-service, a payment system that emphasizes volume over value and intensive procedural services over clinical evaluation and management.
The Primary Cares Initiative continues the trend of investing in primary care but goes further than other initiatives in decoupling payment from fee-for-service. The initiative includes two paths: Primary Care First and Direct Contracting. Both models will be available to eligible providers serving Medicare fee-for-service beneficiaries starting in 2020. The models are voluntary, but CMS anticipates that they will eventually serve up to 25% of the traditional Medicare population.
The first path, Primary Care First, is aimed at small- to mid-sized practices and builds on the existing Comprehensive Primary Care Plus (CPC+) initiative. Beginning in 2020, Primary Care First will be available to eligible clinics in the 18 CPC+ regions and eight additional states. In place of conventional fee-for-service, practices will receive three types of payments: a prospective, risk-adjusted payment for each attributed beneficiary; a flat, per-visit rate for any office visit; and a quarterly incentive payment based on quality performance.
The prospective and per-visit payments replace fee-for-service payments for primary care services and are intended to approximate historical average payments for the primary care practice, with reduced variability. On top of these revenues, the incentive payment offers a considerably large upside (up to 50% of baseline revenue) with a relatively small downside (a maximum 10% reduction in revenue). To qualify for incentive payments, practices must meet thresholds for five measures: patient experience, blood pressure control, diabetes hemoglobin A1c control, colorectal cancer screening, and advance care planning. For practices meeting these thresholds, incentive payments are then based on a single metric: risk-adjusted hospitalizations. The focus on this single metric is noteworthy for its simplicity as well as for the importance of hospitalizations in overall health care spending.
The Primary Care First path also includes a second payment option that addresses seriously ill patients who do not have a primary care provider. This option offers a higher prospective payment as an incentive for providers to connect with a vulnerable population with unmet needs. The second path in the Primary Cares Initiative, Direct Contracting, is designed for larger organizations (“contracting entities”) that can take on greater risk. Direct Contracting can be seen as extending the Accountable Care Organization (ACO) framework with three models. In Model 1, Professional Population-Based Payment (PBP), primary care services are paid with fixed, capitated payments equal to 7% of the total cost of care, with the contracting entity responsible for 50% of savings and losses on the total cost of care. Model 2, Global PBP, exposes the contracting entity to even greater risk. Primary care services (and optionally, all services) are covered via capitation, with the contracting entity responsible for 100% of the savings and losses based on the total cost of care. CMS is seeking public input on Model 3, Geographic PBP, which would resemble the Global PBP but would hold the contracting entity responsible for all Medicare beneficiaries in a defined geographic region.
The Primary Cares Initiative design combines much-needed investment in primary care with incentives to control spending that are stronger than in many previous initiatives. The initiative’s features include greater stability in payment, which may reduce administrative costs associated with traditional billing and revenue cycles, as well as smaller incentive measure sets and reduced requirements for documenting visits in order to obtain optimal payment. These features are designed to unshackle providers from the traditional 15-minute office visit, enabling them to reinvest in the fundamental activities of listening, advising, and coordinating, as well as engaging patients more flexibly through email, phone calls, or telehealth.
As with any significant departure from an established payment system, the Primary Cares Initiative raises a variety of questions. Some of these questions apply to the details of each program’s design. With respect to Primary Care First, incentives based on a single outcome—risk-adjusted hospitalizations—may create unintended behaviors. Given the significant upside associated with this measure, practices may focus on this measure to the exclusion of other important primary care functions. Furthermore, practices may find ways to game this outcome, potentially shifting efforts to enhance documentation and data abstraction processes, without actually changing patient care.4 With respect to Direct Contracting, exposure to 50% or 100% of risk means that the details of setting benchmarks, which will determine the extent to which the contracting entity actually saves or loses money, will be particularly important both in terms of addressing overall health care spending and attracting entities to the program.
Perhaps the most important question for the long-term success of these initiatives—and the fate of fee-for-service payment—is the extent to which other payers, including Medicare Advantage, Medicaid, and commercial plans, align payment and measurement in support of Primary Care First and Direct Contracting mechanisms. In the absence of alignment, providers would continue to face myriad confusing payment and performance metrics. The changes embedded in both the Primary Care First and Direct Contracting models could have nominal impacts on a clinic’s overall administrative burden. Capitation and a simplified office visit payment would not necessarily alleviate providers from the need to submit billing information, particularly if this information were required for rate setting or for patients with other insurance types.
Among the various payer groups, alignment with Medicare Advantage may be most straightforward. In fact, the Direct Contracting model is poised to close the distance between the traditional Medicare program and Medicare Advantage, allowing beneficiaries freedom to choose providers while shifting providers toward greater risk and financial accountability. Direct Contracting also may serve as an additional way to align finances among the dually eligible population, with contracting entities potentially taking responsibility for expenditures on both the Medicare and Medicaid system. Alignment across the Medicaid and commercially insured markets may be more difficult, but encouragement from CMS and an appetite for value-based payment among states and employer groups may create movement.5
The Primary Cares Initiative marks an important milestone in Medicare’s movement away from fee-for-service. The initiative is notable not only for its emphasis on the leading role of primary care and a strong push to change payment, but also in the broad acceptance and desire for systemwide transformation as necessary to better serve patients and providers. Whether this voluntary program catalyzes wider reform will depend on uptake by provider organizations, adoption of similar payment mechanisms and measures by other payers, and the extent to which program design translates to desired changes in patient care.
References
Published in 2019 Volume 97, Issue 3 (pages 636-640) DOI: 10.1111/1468-0009.12399
K. John McConnell, PhD, is director of the Center for Health Systems Effectiveness (CHSE) at Oregon Health & Science University (OHSU), and professor in the Department of Emergency Medicine at OHSU and the OHSU/Portland State University School of Public Health. His work at CHSE has focused on state policy, payment reform, and efforts to improve the quality of care. He and his team are currently involved in assessing efforts to align primary care payment in Oregon and in studying changes in Medicaid policy. These efforts include evaluations of a range of interventions designed to coordinate car, reduce disparities, and improve prenatal and maternal health, substance use treatment, and the use of evidence-based protocols.
