Applied Evidence

Health care reform: Possibilities & opportunities for primary care

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Amid the swirl of change in today’s US health care system, there are opportunities for new care delivery models to slow rising costs and improve outcomes in family medicine. This review summarizes the possibilities.



Pressure to reform our health care system is at an all-time high, driven by relentlessly rising costs and fragmentation of care. These persistent problems have led to lower quality care and limited access to care for a large proportion of the US population—issues that accountable care organizations (ACOs), as well as other value-based models, are designed to address.

While the terms used to describe the means by which health care systems attempt to do more to meet the needs of those they serve may vary, the importance of reorganizing care delivery to better integrate services is gaining traction nationwide. As we move to new models, primary care takes center stage.

ACOs (or ACO-type arrangements) anchored by primary care networks can help meet the goals of health care reform by responding to changes in reimbursement, reducing fragmented care, and focusing on improving the quality of care for defined patient populations. In addition, these delivery models can take advantage of new health information technology (IT) and the move toward patient-centered medical homes (PCMHs).

In the pages that follow, we examine opportunities for new care delivery models to slow rising costs and improve population health in family medicine. The introduction of these models has important implications for patients, physicians, and provider organizations, and our aim is to ensure that family physicians are prepared to take these vital steps toward achieving health reform goals.

Shifting from volume-based to value-based reimbursement

According to the Congressional Budget Office, ACOs are expected to save $5 billion during their first 8 years of existence.1 After one year of ACO activity, the Centers for Medicare and Medicaid Services (CMS) reported savings of $30 million.2 The expected savings will be driven by the increased provider accountability associated with ACOs.

Various means of increasing provider accountability through changes in reimbursement strategies have been proposed; several are new, while others are improvements on—or variations of—methods that have been tried before. The most common approaches—shared savings, shared savings plus penalty, capitation, episodic payment, prospective payment, pay-for-performance, and hospital-physician bundling—are detailed in TABLE 1.3-7 Broad implementation of any of these reimbursement mechanisms within a new model of care would represent a shift away from the traditional volume-based provider payment model to a value-based system—a key step in slowing the rise in health care costs.

Reimbursement strategies designed to promote physician accountability3-7



Implications for FPs

Shared savings

FFS plus a portion of dollars saved relative to predicted costs if quality and patient satisfaction are enhanced3

Focus on population health incentivizes well care and preventive services

Shared savings plus penalty

Same as shared savings, plus a penalty if expenses exceed spending targets; bonus potential is increased to account for increased risk3

Potential for care coordination payments in addition to shared savings


Flat payments plus bonuses and penalties; provider organization assumes full risk for a defined patient population3

A better understanding of population management and IT now makes capitation a viable strategy in certain settings

Episodic payments

Reimbursement is for defined episodes of care, which may extend from time of admission to days or weeks after discharge; may also include home health, extended care, or ancillary services4

No incentive for prevention or PCMH coordination

Prospective payment

Reimbursement for inpatient services based on a prepaid amount that covers a defined period of time; uses DRG system that bases payment on disease classification by CMS5

It is important for FPs to partner with specialists willing to share reimbursement commensurate with the value of care provided


Reimbursement is tied to achievement of metrics (eg, number of patients immunized for a specific disease, desired clinical outcomes, high patient satisfaction scores) mutually agreed upon by ACO and payer6

Be sure any agreed-upon “targets” are achievable and patient-focused

Hospital-physician bundling

Reimbursement is based on the cost of a procedure or diagnosis that includes both hospital and physician components. One payment is made for the collective services associated with a hospitalization7

Similar to prospective payment from FP perspective; it is important to work with those who value the care of FPs

ACO, accountable care organization; CMS, Centers for Medicare and Medicaid Services; DRG, diagnosis-related group; FFS, fee-for-service; FPs, family physicians; IT, information technology; PCMH, patient-centered medical home.

Although it is too soon to be certain of the effect such changes will have on the earnings of family physicians, it is reasonable to think that new payment strategies—and a larger role for primary care providers—will improve their financial standing.


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