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Revising Physician Reimbursement

The Society of General Internal Medicine provides 12 recommendations for reforming payment of physicians.


Image © Society of General Internal Medicine

It is commonly thought that the best way to abort the meteoric rise in health care costs is to move toward reimbursing quality and away from reimbursing quantity. In theory, this would promote coordination – instead of duplication – of services.  Advocates of this movement wish to replace fee-for-service (FFS) physician reimbursement with fixed payments for all-inclusive care. But how do we get from our current system to this theoretical ideal?

The National Commission on Physician Payment Reform recently produced a report providing a blueprint for this transition. The Commission’s report specified that the FFS payment system should be partially phased out over the course of approximately 5 years; the end goal would be a physician payment system combining FFS with reimbursement based on capitation or salary.  The report emphasized that reimbursement for quality is just as strong as the motivators for cost savings.  Reimbursement should also be risk-adjusted to the complexity of the patient to avoid cherry-picking of less complex patients.  The Commission’s report recommended that quality-based reimbursement should begin where it is likely to save money – the management of patients with several chronic comorbid conditions or with global payment for acute episodes of care (e.g. surgical procedures bundled with pre-operative and follow up care).

Because the FFS system will remain a major part of physician reimbursement in the near future, the report stresses the importance of continuous recalibration of the fee schedule.  Reimbursement for procedures should be frozen for 3 years. A revised FFS system should equalize reimbursement for care done inside and outside of the hospital. FFS should have at least some component of payment based on quality.  Lastly, the committee that reassesses the Medicare fee schedule should modify its member-physicians to better represent the medical profession as a whole.

The report supports elimination of the Sustainable Growth Rate, suggesting costs will be recovered via savings from the above changes or by reducing physician payments.


The concepts supported by the National Commission on Physician Payment Reform, such as bundled payments and ACOs, are also piloted by the Affordable Care Act. They are not ground-breaking concepts.  It is worth noting that the Society of General Internal Medicine (SGIM) convened the commission deriving these 12 recommendations for physician payment reform. This report falls along the “party lines” between specialists and generalists in that it focuses on decreasing reimbursement for care other than for the non-hospital based care of complicated patients with chronic diseases.

Although implementing blended reimbursement for generalists would be no small feat, this report does not propose a mechanism by which to include non-employee specialists in this type of flat-fee or quality-based reimbursement system.  Finally, the report suggests vague cuts in physicians’ reimbursement as a potential means by which to fund the elimination of the SGR.  This type of controversial recommendation very well may be necessary to eliminate SGR. A proposal for such a change might be better received since it derives from  physician-generated suggestions.

Schroeder, SA and Frist, W. NEJM. 2013; 368 (21): 2029-2032.


Lisa Maurer, MD

Lisa Maurer, MD
About Lisa Maurer, MD

Dr. Maurer is an attending physician with Emergency Medicine Specialists in Milwaukee, WI where she serves as Legislative Liaison. Contact: Facebook | More Posts