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Care Coordination | Value-Based Care

Value-based Care Solutions: Hybrid Payment Models for Primary Care

October 17th, 2023 | 8 min. read



Content Team

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An aging, chronically ill population has put pressure on healthcare to lower costs and deliver proactive primary medicine. For this reason, healthcare payment models are moving towards value-based contracts, where the provider’s compensation is tied to care quality and patient outcomes. 

This transition has gained steam throughout the last decade due to federal and state policy initiatives, payor influence, and technological innovation. However, many healthcare organizations are still working to figure out exactly how to implement this new system. 

Conversations about value-based care tend to emphasize a need to fully switch away from fee-for-service (FFS) payments. The idea is to leave one model behind to adopt the other, putting providers in a position of haste to adjust their businesses, accordingly.  

Yet, a hybrid payment model, where FFS and value-based contracting co-exist, may offer a more versatile way for healthcare organizations to utilize alternative incentive programs without completely sacrificing their financial stability. 

The idea has gained traction, particularly with the release of a 2021 report by the National Academies of Sciences, Engineering, and Medicine (NASEM). They specifically recommended a hybrid payment for primary care as the default payment methodology. This would be a significant shift away from the current pay-for-volume or even pay-for-performance model.

In addition to changes in payment structures, the hybrid care payment model utilizes advanced primary care, which focuses on delivering services with five attributes:

  1. Person- and family-centered
  2. High value
  3. Team-based and collaborative
  4. Accessible
  5. Coordinated and integrated

Why are leaders calling for a hybrid payment model?

In addition to NASEM’s call for primary care payment change, numerous medical and policy leaders are pushing for change in how primary care services and physicians are paid.

The American Academy of Family Physicians and other organizations have proposed specific payment models. And nearly 30 provider groups have submitted a letter to the Biden Administration and the Centers for Medicare & Medicaid Services (CMS) on the need for such a hybrid payment model.

Plus, a 2021 physician opinion piece in JAMA highlights the pressing need for primary care payment transformation. In support of NASEM’s recommendations, these clinician-authors stressed the need for widespread adoption of hybrid payment models as an “immediate action to support primary care’s future.”

They point to four compelling reasons, including:

  • Physician burnout and lack of time to meet the more holistic needs of patients with chronic health conditions
  • Shortages in new primary care residents who go on to become doctors
  • Chronically low spending on primary care in the US
  • Numerous primary care alternative payment testing projects

As of late 2022, the US spent about 3% of its healthcare budget (in inflation-adjusted dollars) on primary care, down from ~5% a few years before. The JAMA authors pointed to what most advanced countries spend – between 10-15% on primary care – stating that paying 6% on primary care is not unreasonable.

Their report also referenced previous primary care alternative payment projects, led by the CMS Innovation Center. Their view is that the 2024 Making Care Primary initiative – a 10.5-year hybrid payment model for primary care – will delay change.

But what could a new hybrid payment model look like for advanced primary care? 

How would a hybrid approach balance prospective and FFS payments? And how would this reflect performance accountability and health equity? Could a hybrid model ensure robust, team-based care delivery for services like chronic care management?

What could a primary care hybrid payment model look like?

A report by Manatt Health, with support from Blue Shield of California, sets the stage for what a well-designed hybrid payment model could entail. 

The report states, “By providing predictable revenue for practices tied to the populations they serve while allowing them the opportunity to increase overall revenue when they achieve positive health outcomes for those populations.”

With exceptions like immunizations and well-child visits, a hybrid model would essentially decouple revenue from volume. This is critical for provider organizations that want to organize their teams more objectively around patient needs.

Plus, practices would have more control and flexibility to invest in new services, like care management, as well as hire or incentivize staff and improve infrastructure.

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Payment design under a hybrid model

While there are several frameworks for how a hybrid payment model could work for primary care, certain features are consistent among them. The NASEM report recommends a combination of FFS and population-based payments for primary care.

NASEM recommended increasing compensation for primary care clinicians by 30%.

It also strongly suggests that CMS decrease its reliance on the American Medical Association’s Relative Value Update Committee when designing the Medicare Physician Fee Schedule.

Globally, many high-income countries have successfully adopted blends of FFS payment and PBP to pay primary care clinicians. Numerous countries provide between 35-70% of primary care payments via population-based payments, with the remaining share paid mostly through FFS.

Population-based payments would entail monthly, per-beneficiary payments that account for most of a provider’s payment. In theory, they could:

  • Enable flexibility for practices to optimize compensated services currently offered
  • Support diverse activities that aren’t paid for currently, including team-based care, portal messages, emails, and phone calls.
  • Cover wellness care, chronic disease management, and care coordination.

A larger portion of a primary care office visit would be covered by the population-based payment. The remainder of a per-visit payment could consist of a single CPT code for all visits. However, the topic of which services should be covered by FFS versus population-based payment is still up for debate.

When stratified for risk, a provider would receive higher monthly payments for patients with chronic conditions or social risk factors. This would reflect the additional assistance these patients will likely need.

What are the benefits of a hybrid payment model?

Financial analysis of one hybrid payment model found that it more accurately aligned revenue with the actual costs of providing team-based care. 

The hybrid model outperformed FFS and risk-adjusted capitation payments alone. Primary care providers and healthcare payors could also implement this model using existing billing and claims payment systems.

In addition to better cost alignment, a hybrid payment model could increase primary care physician pay by 30%, enabling physicians to be paid for services that are included at no additional cost, including behavioral health integration.

Lastly, a new approach to payments could help reduce the shortage of primary care physicians, as only 15% of medical school students choose this field.

What could be next for hybrid payment models?

CMS will launch the Making Care Primary initiative in 2024. Eligible practices in the initial eight states can participate and experience a hybrid payment approach and test its possibilities.

Physicians and provider leaders should also voice their thoughts to their specialty organization, the American Medical Association, and their state government.

Lastly, providers can advocate for hybrid payments with health plans, when negotiating new contracts or considering value-based care arrangements.

Through a hybrid payment model for primary care, patients can receive team- and technology-enabled whole-person care that considers their social risk. This patient-centered approach to payment could revive primary care practices and protect the foundation that makes up the US healthcare system for years to come.

How ThoroughCare can help

Healthcare organizations use ThoroughCare to deliver integrated care management services to foster patient engagement and enhance revenue. Our platform provides the digital infrastructure to leverage fee-for-service programs for value-based success. 

With seamless EHR integration and data interoperability across health information exchanges and remote devices, our platform supports solutions for:

  • Chronic disease management
  • Remote patient monitoring
  • Behavioral health services
  • Wellness assessments
  • Transitional care

Providers use ThoroughCare to seamlessly manage populations, capture and act on patient data with interactive care planning and assessments, and visualize business performance to inform decision-makers.

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