Croakey has lost count of the number of contributors who have written here of the need to reform the fee-for-service model that underpins so much healthcare (for a recent sampling, see this by Professor Peter Brooks, and the comment here from Professor Stephen Leeder).

Fee-for-service, it is widely agreed, is not an efficient mechanism for encouraging quality care and addressing health inequalities. Indeed, you might argue there is no better system for entrenching Dr Julian Tudor Hart’s famous Inverse Care Law.

Not surprisingly, the topic was also up for discussion at the recent Medicare Roundtable meeting in Canberra, reports Walter Kmet, CEO of WentWest and a councillor of the AHHA.

He writes below that Australia should learn from moves in the US away from fee-for-service to more equitable funding mechanisms.


On the fee-for-service debate, it’s time for some action

Walter Kmet writes:

The fee-for-service system may have been good policy in the past, when the demands on Australian’s health care system were largely episodic and far less complex than they are now.

We could learn from the example of the US, which as a result of reforms is moving away from a fee-for-service model out of recognition of the risks it presents to equity, financial sustainability, value and quality.

According to the American Academy of Family Physicians, the reforms in the US would:

  • Provide funding to shift emphasis toward new payment models that focus on quality of care rather than fee-for-service;
  • Provide $125 million to help small physician practices transform to payment models based on the quality of care;
  • Consolidate existing quality improvement programs into a single Value-Based Performance Payment program that would reward high performing practices;
  • Create a Medicare payment for complex chronic care services, which also will compensate physicians for services provided remotely; and
  • Create a process to identify misvalued services and redistribute savings on those services within the physician fee schedule.

One thing is clear, if US can have a debate about fee-for-service, and move towards a more equitable model, so should Australia.

The evidence shows that to get the best return from our investment in health, it is vital to support continuity of care and reinforce the role of primary care.

But the one-size-fits-all funding model that we currently have does not support continuity of care and primary care. Quite the contrary.

The ability of primary care and general practice to play its role at the centre of our health care system will continued to be undermined when volume and price drive practice, which is inevitable when we rely on fee-for-service completely and in particular when fee-for-service is disconnected in payment silos as it is in Australia.

I am not arguing that we should ditch fee-for-service and copy the largely salary-based NHS system.

Rather, Australia has the opportunity to modify Medicare and the role of Medicare Locals to ensure fee-for-service is the starting point – not the end point. That was an argument I put at the Medicare Roundtable.

The RACGP, in its recent submission to the 2014-15 Budget, made a clear case for reducing the dependence on fee-for-service by providing a framework for support payments across practice, practitioner and population metrics. We should also ensure that those in most need are not left behind by barriers such a specialist co-payments attached to our current fee-for-service system.

Again looking at US, it is worthwhile to look at the most recent outcomes being achieved from the Patient Centred Medical Home (PCMH) initiative. The nexus between fee-for-service payment reform and the PCHM are at an interesting juncture, and also surely worthy of further debate.

The Patient Centred Primary Care Collaborative in the US in their January 2014 Annual Update showcases impressive outcomes from the PCMH structure, one that is becoming more influential in service delivery in that country. This should not be ignored in the Australian context.

Interestingly, the Collaborative’s report notes:

“Paying for a health care system that invests in primary care and the Patient Centred Medical Home (PCMH) is imperative.”

 And goes on to say that:

“If passed into law, these reforms will result in a major step toward moving the US health care system away from a fee for service model, to one that rewards quality, efficiency and innovation.”

At a time when the government considers the financial sustainability of Medicare, it is both opportune and necessary to consider payment reform that improves the effectiveness and equity in our health system.

• Walter Kmet, CEO WentWest

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