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Despite gradual adoption of value-based payment models, fee-for-service remains dominant. Utilization patterns from value-based models can be used to identify misvalued services, which could inform payment adjustments in the physician fee schedule.
Few tasks in health care policy are as daunting—or as important—as getting the prices right for medical services. In fee-for-service (FFS) payment, mispriced services can compound the underlying incentives to increase the volume and intensity of care, independent of value. Since the passage of the Affordable Care Act in 2010, federal policy has increasingly turned to value-based payment to counter these incentives by holding clinicians and health care organizations accountable for spending and outcomes.
Yet, as value-based payments have expanded, the physician fee schedule (PFS) has maintained a dominant role. Nationally, most health care spending remains based on FFS payment, and most Medicare value-based payment models continue to operate on an underlying FFS chassis. Under the PFS, payments are resource-based, with higher payments for services that require more resources to provide. However, while accurately measuring these resources is important, fee schedules are more than metrics of the time, intensity, and cost of providing a service—they also create financial incentives that influence the provision of health care.
Recognizing the foundational importance of fee schedules, there has been renewed interest in reforming the PFS. For example, the bipartisan Pay PCPs Act, reintroduced in September, proposes changes to how physician services are valued and paid. Researchers have emphasized that shortcomings of the PFS impact not only traditional FFS, but also alternative payment models, Medicare Advantage, and other private health insurance. One of our authors has testified before Congress that the existing PFS incentivizes expensive procedural services at the expense of primary care. MedPAC has linked these incentives to income disparities between primary care and specialty practitioners, and in turn the growing shortage of primary care physicians.