Blending Public, Private Sector Payment for Health Care Offers Benefits, Poses Challenges for Primary Care

FOR IMMEDIATE RELEASE: Friday, August 25, 2017

Leslie Champlin
Senior Public Relations Strategist
(800) 274-2237, Ext. 5224 

WASHINGTON, DC — The U.S. health care system’s reliance on both public and private compensation may encourage primary care physicians to abandon all third-party compensation. Instead, they may gravitate toward direct primary care in which they charge patients a periodic fee for services and do not bill third parties.

That’s among the lessons learned from a hybrid payment system that combines physician income from public and private sources, write Winston Liaw, MD, MPH, medical director of the Robert Graham Center, and his colleagues in the Journal of Primary Health Care.

In “Navigating payer heterogeneity in the United States: lessons for primary care(,” Liaw and his colleagues discuss three take-aways from the U.S. system for compensating physicians: hybridization allows for innovation; hybridization leads to administrative complexity; and if the costs of participation outweigh the benefits, practices may leave the payment system.

Hybrid payment systems combine public sector compensation—primarily through Medicare for the elderly and Medicaid for low-income patients—with private insurance payment. This dual payment system allows for testing payment reforms designed to increase the quality and efficiency of health care. However, it also increases the system’s complexity, according to Liaw.

“In addition to multiple commercial payers, primary care practices … often receive funding from Medicare, Medicaid and uninsured patients,” Liaw writes. “As each payer has its own reporting system, payer heterogeneity has led to administrative complexity.”

For example, each insurance company establishes its own requirements for reporting patient care activities that confirm the quality of care a physician provides. Those requirements may—and often do—differ from reporting rules for other insurers and for Medicare and Medicaid. As a result, primary care practices spend more than $50,000 per physician to report quality measures, according to the authors.

“Nearly half of practices reported that dealing with similar but not identical measure sets was a significant burden,” Liaw writes.

Such a burden translates in “higher burnout, reduced job satisfaction and less interest in seeing patients.” The combination has persuaded a small but growing percentage of family physicians to drop participation in third-party compensation and move to direct primary care models. These practices do not charge third-party payers for the care they provide. Instead, the practices charge patients a periodic fee, for which a set of health services is provided.

“By working outside the insurance system, these providers report that they have more availability, more time per encounter and lower overhead costs,” Liaw writes.


About the Robert Graham Center

The Robert Graham Center for Policy Studies in Family Medicine and Primary Care works to improve individual and population health by enhancing the delivery of primary care. The Center staff generates and analyzes evidence that brings a family medicine and primary care perspective to health policy deliberations at local, state, and national levels.

Founded in 1999, the Robert Graham Center is an independent research unit affiliated with the American Academy of Family Physicians (AAFP). The information and opinions contained in research from the Center do not necessarily reflect the views or policy of the AAFP.