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Fee-for-Time Payment for Physicians

July 14, 2023

Summary: Current physician payment rules are complex, time-consuming, and unfair to primary care providers. Success of universal coverage with single payer will require a simpler and fairer approach. Fee-for-Time is such a proposal.

Optimizing physician payment for a single-payer healthcare system
International Journal of Social Determinants of Health and Health Services
May 24, 2023
By Stephen B. Kemble and James G. Kahn

For independent physicians, we recommend that a U.S. single-payer system return to fee-for-service payment, replacing RBRVS [Resource-Based Relative Value Scale] with a time- and training-based system designed to be as administratively simple, objective, fair, and incentive-neutral as possible.

This approach would improve on RBRVS in multiple ways. It would base the value of physician services on two straightforward factors: time to complete the procedure (i.e., effort) and years of training (i.e., investment for needed expertise). Physician cognitive and procedural activity would be valued equally, given equal training duration. Practice expenses would be measured and fully covered. Payment would be delinked from extensive documentation, easing EHR demands and ending gaming to maximize income. Physicians would be paid for all time spent on patient care, including documentation, coordination, alternative care delivery modes such as telephonic and telehealth care, and administration. Total physician work and training would determine physician personal income. The physician’s interest in a clinical focus and the system’s interest in efficiency would align to minimize administrative burdens.

A simple example illustrates how this system might work. Assume 2,400 work hours in a year. A doctor who works more hours would earn more, and part-time practitioners would earn less. Practice expenses would be reimbursed at cost, so the work component determines physician personal income. Assume collective negotiations arrive at a base rate for medical school plus internship of $80/hour, plus $25/hour per added year of required training for the next 2 years and $15/hour for subsequent years. That would yield the following personal annual incomes by specialty:

Example Scenario of Fee-for-Time Physician Payment

  SpecialtyYears of Post-grad TrainingHourly RateIncome for One Year
GP just internship1$80$192,000
Internist, Family Physician, Pediatrician3130312,000
Psychiatrist4145348,000
Internal medicine specialist5160384,000
General cardiologist6175420,000
Surgical specialist7190456,000
Interventional cardiologist8205492,000

The complications and gaming now seen with RBRVS-based fee-for-service for providers paired with data demands of capitated fiscal intermediaries, or with capitation of providers, would disappear with the FFT proposal. There would be no disincentive to treat sicker people (no risk pool to game), no risk adjustment of capitation rates and therefore no up-coding, no incentive to deny care inappropriately, no complicated problems with attribution, and no problematic benchmarking methods. In other words, the gaming of payment now seen with all forms of capitation would no longer be motivated or possible.

Conclusion:

We believe fee-for-service payment of independent physicians using the Fee-for-Time proposal would be substantially simpler, more objective, fairer, and less costly to administer than fee-for-service based on RBRVS and Evaluation/Management coding or “value-based” payment (notably capitation) with pay-for-performance and risk adjustment. A universal single-payer system that paid hospitals with global budgeting and physicians based on time and expertise, with standardized salaries for employed physicians and time-based payment for independent physicians, would likely achieve greater administrative savings and lower total cost than any proposal based on existing Medicare fee-setting policies or shifting insurance risk onto doctors and hospitals. U.S. healthcare might then achieve cost-effectiveness comparable to all other advanced countries.

Comment by: Steve Kemble & Jim Kahn

Moral injury and burnout are now pervasive among U.S. physicians. Doctors are disenchanted with private practice due to the complexities and frustrations of medical billing and collections, compounded by the distractions and documentation demands of “value-based payment.” These administrative tasks frustrate a focus on clinical care. Further, inappropriate interference in physician-patient decision-making by insurance plans is now widespread, via care denials and unreasonable formulary restrictions and prior authorization policies. Physicians are rapidly losing professional autonomy and control over their time.

When private practice becomes untenable, physicians are driven to sell their practices to large corporations, often for-profit and investor-owned, or private equity. They stay on as clinicians, soon discovering that accountability is to shareholders and investors who expect return on investment, even at the expense of the best interests of patients and providers.

For all these reasons a single-payer healthcare system is increasingly attractive to physicians.

However, many remain skeptical because they fear that a publicly funded system would mean “Medicare-as-we-know-it for all,” with complex billing rules including value-based payment. RBRVS has been complex and subject to gaming, detracting from clinical focus. They need assurances about the implications of single payer for medical practice – confidence of adequate income and a focus on clinical care.

Fee-for-Time payment (disclosure: we’re the authors) is a proposed answer to these questions. It greatly simplifies billing, fairly compensates physicians across specialty (notably, including primary care), and leaves providers the latitude to spend adequate time on patient care.

We encourage exploration of FFT, salary, and other simple, fair compensations systems under Medicare for All.

About the Commentator, Jim Kahn

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Jim (James G.) Kahn, MD, MPH (editor) is an Emeritus Professor of Health Policy, Epidemiology, and Global Health at the University of California, San Francisco. His work focuses on the cost and effectiveness of prevention and treatment interventions in low and middle income countries, and on single payer economics in the U.S. He has studied, advocated, and educated on single payer since the 1994 campaign for Prop 186 in California, including two years as chair of Physicians for a National Health Program California.

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