Helping pediatricians succeed in new payment models

News Update

Helping pediatricians succeed in new payment models

Date

August 2, 2016

Physicians may be reluctant to try alternative payment models (APMs) because of uncertainty about the impact on their practice financials.

In a study supported by the Merkin Family Foundation and published online first in the journal Pediatrics, a research team including Duke professor of the practice Mark McClellan and senior policy advisor Steven Farmer presents a tool that can help mid-sized pediatrics practices calculate their break-even rate and staffing levels needed to succeed under one such APM – a primary care capitation model.

In a capitated model, providers are paid a set amount for each enrolled person assigned to them over a period of time – whether or not that person seeks care.

“Our goal is to help pediatrics practices determine the financial consequences of shifting to a new payment model and to be able to do so with more confidence,” said McClellan. “We looked at the factors that determine that rate including the number of patients enrolled in the capitated model, practice overhead such as facilities, equipment, and utilities, physician salaries, and staffing ratios.” 

“Once in this kind of payment model, pediatricians will have more flexibility to pay for what really matters for their patients – enabling them to deliver better care and potentially reducing costs and increasing net practice revenue.”

The team found that, using reasonable assumptions, an average mid-sized pediatrics practice would break even (versus fee-for-service) with a per-member per-month (PMPM) payment rate of $24.10. However, many practice characteristics vary broadly in the real world, so the researchers constructed a model that practices can customize to their own circumstances.

“We modeled a broad range of variation in the factors that affect how cost-effectively pediatricians in these practices can deliver care, and even with that variation, we found that more than 80 percent of practices would break even at a PMPM of $35.00,” said Farmer.

This is important because capitated rates vary substantially across payers.  “Many independent practices lack the resources to do this kind of analysis.  The model shows what the capitated payment would need to be for a mid-sized practice to succeed financially.  These models may work for practices even outside of large, integrated health systems, but physicians need to understand the model and change the fee for service mindset.”

“There are many variations of capitated models with differing incentives for managing quality, cost, efficiency and patient satisfaction, and we are developing further evidence and tools to determine the best approach,” adds McClellan.

Other study authors include Joel Shalowitz from Northwestern University, Meaghan George and Frank McStay from Duke-Margolis, Kativa Patel from The Brookings Institution, James Perrin from Harvard Medical School and Ali Moghtaderi from George Washington University.