Physician payment models are becoming more complex and the pace of change is increasing, creating challenges for physician practices that might hamper their ability to improve the quality and efficiency of care despite their willingness to change. Those are among the findings of a new joint study by the RAND Corporation and the American Medical Association (AMA).

RAND researchers examined how alternative payment models (APMs)—payment models other than fee-for-service—have affected physician practices. For the report, “Effects of Health Care Payment Models on Physician Practice in the United States: Follow-Up Study,” researchers interviewed and surveyed physicians and other staff in 31 practices in six markets, including a variety of practice sizes, specialties, and ownership models.

The work was a follow-up to a 2014 study that also examined APMs’ effects on physician practices. Whenever possible, researchers re-interviewed the same physicians and practice leaders that participated in the previous study, according to a press release about the study.

“The complexity and pace of change in how physicians are paid for their services has required practices to spend substantial resources just to keep up with program details,” Mark W. Friedberg, M.D., the study’s lead author and a senior physician policy researcher at RAND, a nonprofit research organization, said in a statement. “While the practices in our sample generally voiced support for the goals of alternative payment models, these implementation challenges could make it difficult to achieve them.”

The study findings suggest that physician practice engagement with APMs would be enhanced by simpler APMs (to help practices focus on improving patient care); a more stable, predictable, and gradual pace of change; greater support for new capabilities and timely data; and reexamination of how practices might respond to APMs that involve downside financial risk.

Study Results

APMs are changing how physicians are compensated for the care of their patients to create stronger incentives for efficient, high-quality medicine. They often involve either bonuses for meeting quality goals or penalties for falling short.

In this latest study, researchers found that several trends have persisted since the 2014 study. Namely, practices have adopted new capabilities to respond to APMs. These included behavioral health capabilities, data analytic infrastructure, and information technology. Similar to the 2014 study results, the latest study found that practices substantially modified APM financial incentives before passing them through to frontline physicians. Individual physician incentives based on costs of care were rare, even within practices with strong cost-containment incentives from payers, according to the latest study.

“Despite engagement with new APMs, most practices reported that internal financial incentives for individual physicians had not substantially changed since 2014. Modest bonuses for quality performance remained common, and with the exception of small, independent practices (for which physician-owner incentives were inseparable from practice-level incentives), individual physician financial incentives based on costs of care were almost nonexistent,” the study stated.

As in the 2014 study, practice leaders deployed a range of nonfinancial strategies to influence physician decision-making, such as internal performance reports, that appealed to physicians’ competitiveness and self-esteem.

Researchers found that all the challenges described by respondents in 2014 persisted in the current study. In particular, issues related to data continued to constrain practices’ ability to understand and improve their performance. As in 2014, many physician practices—especially those that are small and independent—reported that they lacked the skills and experience with data management and analysis that are needed to perform well in alternative payment methods, according to the report. Building in methods to help these practices master the use of health data would improve the potential success of many alternative payment methods.

Operational errors in payment models also continued to be a source of frustration for physician practices, at times with financial consequences, according to the report.

“In some cases, these negative experiences reduced practices’ future willingness to participate in alternative payment models, even when offered by different payers. Because physician practices typically participated in multiple payment models from a variety of payers, challenges related to interactions between payment models also persisted,” the report stated.

Researchers also identified new findings regarding APMs. Across the markets studied, leaders perceived an acceleration in the pace of change in alternative payment models from both private insurers and government programs since 2014, at least partially driven by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) Quality Payment Program.

Sudden or unexpected discontinuations of APMs were particularly challenging for physician practices and other market participants that had made commitments or investments under the assumption that APMs would continue, according to the latest study.

APMs have become more complex, due to an expanding number of performance measures and uncertainty concerning performance thresholds for penalties and rewards, the respondents reported. Practices reported that understanding complex new payment models often entailed a significant resource investment. Some practices used their knowledge of complex APMs to receive more credit for their preexisting quality without materially changing patient care.

What’s more, physician practices have become more averse to APM downside financial risk. Risk aversion was especially prominent among practices that had previously experienced losses in APMs or that were inexperienced in managing risk. Some practices responded to APMs, the report stated. “In some cases, practices renegotiated contracts with payers to reduce their excessive downside risk or transfer some of that risk to partners such as hospitals or device manufacturers,” the researchers wrote.

“Physicians tell us that it’s more difficult than ever to understand the growing complexity of payment models and they are straining against a conflicting muddle of public and private value-based policies and rules that are continually in flux,” AMA president Dr. Barbara L. McAneny, said in a statement. “The resulting administrative burdens take physicians away from patient care. Today’s report is a call to action to align multiple payers and payment models with consistent measures aimed at improving patient care. It is clear the long-term sustainability of payment reform hinges on value-based payment models that must be operationally and financially sound, sustainable over time, aligned across payers, and must work for physician practices and patients. The AMA is committed to spearheading and engaging these efforts.”

In addition to finding ways to reduce the complexity of alternative payment methods, study findings suggest that a slower and more-predictable pace of change might benefit medical practices, payers and other stakeholders.

As in their previous study, researchers found that physicians were broadly supportive of alternative payment methods that enabled their practices to make noticeable improvements in patient care. They voiced satisfaction with clinical improvements, even when they did not result in financial bonuses.

However, when the alternative payment methods created new reporting and documentation burdens or when they created no perceptible improvements in patient care, physicians reported disengagement and skepticism, according to the report.

Allowing practicing physicians and other practice leaders to help design alternative payment methods might help improve physician engagement and improve the likelihood that such strategies will produce improvements in patient care, according to the report.

The study findings are intended to help guide system-wide efforts by the AMA, which sponsored and co-authored the study, and other health care stakeholders to improve alternative payment models and help physician practices successfully adapt to the changes.