Dennis Y. Fong, M.D.

A basic axiom of economics is that value must be linked to utility. For third-party payers, utility means outcomes, which translates into costs. By not being outcome linked, payment models all devalue complex reasoning and drive PCPs toward referring instead. Higher total cost of care (TCOC) results.

The cognitive work of architectural design for a small clinic is not of equal utility to design for a regional hospital. Likewise, in medicine the cognitive work of managing a healthy four-year-old with cough and low-grade fever is not of equal utility to managing an 82-year-old with diabetes, CHF, COPD, renal insufficiency, and atrial fibrillation on anticoagulants with the same complaints — the latter demands more time and skill and governs greater downstream cost. Without timely treatment for such patients, what could have been a four-office-visit episode can spiral into a sub-ICU admission. Yet today, the very cognitive work that prevents these spirals is paid less than simple care per minute in fee-for-service. Capitation mainly rewards panel size, no cognitive work is even required. Salary is actually just capitation – employers are capitated.

One solution is global clinical outcome-linked payment. Global outcomes free the PCP to apply complex, whole person reasoning to all nooks and crannies of complex care.

I already discussed one such lever in my last post: APCM outcome bonuses – link a global outcome such as patient-panel hospitalization rate to a generous bonus on top of Medicare’s monthly Advanced Primary Care Management (APCM) fee code. Capitation plans can modify this into a PMPM bonus.

A second lever I see is complex-patient panel bonuses or retainer fees. The payer identifies potential top spenders using chronic condition HCCs such as diabetes, CHF, etc., and sets the chronic HCC RAF threshold at, say, 1.8. Prior-year total spend can supplement this selection, since almost all top 5% spenders come from the previous year’s top 20%. Dialysis patients whose care is delivered in specialty-led settings and young duals with high unbendable long-term care (LTC) facility costs should be excluded.

For pre-result financial support, needed as the total patients a PCP can handle will decrease as more time is spent in complex reasoning, partial retainer fees can be paid up front for say, terms of two to three years, with full payment and renewal contingent on clinical outcome. This can also be built into capitation models.

Again, as in my last post, guardrails are necessary and payment should not be linked to cost.

PCPs will be richly incentivized to improve outcomes, and that involves the PCP providing whole person clinical reasoning and enabling Whole Person Longitudinal Complex Care (WP LCC), health care's missing piece.

My next post will be about utility from a different angle.