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Medicare’s bet on primary care

Boosting fees for primary care services could lower Medicare’s costs, but some physicians say the increases they have received so far have fallen short.

By Charles Fiegl amednews staff — Posted May 28, 2012

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On a long itemized list of receipts for office visits and procedures, there was a sizable unknown Medicare payment for a group of physicians to share at Oak Street Medical in Eugene, Ore., during the spring of 2011. The lump sum was unexpected, but it could not have come at a better time.

The question of whether to continue participating in Medicare had been on the minds of physicians everywhere. In 2010, Congress repeatedly had delayed Medicare cuts of more than 20% for only short periods. The system responsible for calculating fees remained broken in 2011 and still needed patching by the end of the year, at which point the cut was scheduled to rise to more than 27%.

Medicare makes up nearly half of the patient base at Oak Street, a patient-centered medical home, said Kirk Jacobson, MD, an internist who is a founding partner at the practice. He and other physicians at the center that year held discussions about the difficulties of covering the costs of running a medical home with such a large Medicare base. Geographic adjustments to fees resulted in lower overall payments in Eugene compared with other parts of the U.S., he said. Care coordination efforts and some prevention measures offered at the primary care level by the medical home are not recognized by Medicare’s fee-for-service payment system.

One doctor at the practice thought they would have to return the mystery money. But after a few phone calls, they learned it was not a mistake or an overpayment.

Starting in 2011, the Medicare program began making additional quarterly payments, for a total of $560 million in 2011, to physicians deemed to be in primary care. Overall, fees for new and established office visits and several other services went up 10% for doctors in internal medicine, family medicine, geriatrics and pediatrics. General surgeons practicing in health professional shortage areas also began receiving 10% bonuses under a similar incentive system. The payments, which were authorized by the health system reform law to bolster stressed primary care and general surgery fields, will continue through 2016 unless the statute is overturned or repealed.

“It has been extremely helpful,” said Dr. Jacobson, who declined to specify the size of the bonus.

But other physicians said the bonuses have not had much of an impact. The temporary incentives might be a step in the right direction, they said, but they will not solve major, systemic problems such as work force shortages in certain communities, nor will they end widening payment disparities between generalists and specialists.

“It’s small enough that it doesn’t make a huge difference,” said Robert McLean, MD, an internist and rheumatologist at Connecticut Medical Group in New Haven.

Physicians cannot make long-term growth plans knowing that such a temporary increase could vanish one day, said American College of Physicians President David Bronson, MD. His organization advocates making the 10% increase permanent, along with adding more incentives to improve primary care in Medicare.

Trying to prevent costlier care

Investment in permanent increases to primary care fees could pay dividends in the long run, according to a recent study by the Commonwealth Fund. The New York-based health care research foundation used a simulation model to measure the impact of increasing primary care rates by 10% for the next decade while holding all other factors constant. Overall primary care costs per beneficiary would increase by about 17%, but the Medicare program would reap savings on such care as inpatient and postacute visits, procedures and home health care. Net Medicare costs would decline by nearly 2% over 10 years.

Researchers did not detail how exactly this would happen or what physicians might do differently to make the savings possible, said James D. Reschovsky, PhD, one of study’s authors. He’s a senior health researcher at the Center for Studying Health System Change in Washington. But the potential payoff for providing quality care at the front end of the system is clear.

“In order to improve care, we need to pay for the things we know are components of good clinical care,” Reschovsky said. Examples he gave include paying for care coordination between physicians.

One possible outcome of a more permanent primary care pay boost is that the number of family physicians and internists would increase. Primary care practices also might use the extra funds to re-engineer workflow to be more efficient, or to hire more nurse practitioners and physician assistants. But added efficiency would go only so far: The research concludes that overall primary care activity would increase along with the pay, with per-beneficiary costs for office visits rising by 8.8%.

Congress created the bonus in part to encourage medical students to choose primary care by narrowing the income gap with specialists. However, a temporary 10% increase will not be enough to prevent future work force shortages, said American Academy of Family Physicians President Glen Stream, MD. To accomplish desired policy changes, efforts to address the income gap and doctor shortages cannot end with temporary bonus programs, he said.

Other studies have shown that more primary care can produce better health outcomes. A May 25, 2011, study on Medicare beneficiary outcomes in The Journal of the American Medical Association found that patients residing in areas with relatively high numbers of primary care physicians had modestly lower mortality rates and fewer hospitalizations. Improved outcomes also were directly associated with the volume of primary care services provided.

“Our findings suggest that a higher local work force of primary care physicians has a generally positive benefit for Medicare populations, but that this association may not simply be the result of having more physicians trained in primary care in an area,” the JAMA study said. “Instead, associations were much stronger with a measure of primary care activity that was linked to a central concept of primary care — ambulatory care delivered in an office or clinic setting by physicians trained in primary care.”

Training more primary care physicians alone would not prevent the costly services associated with hospitalizations. The total amount of primary care services also would need to grow. “Increasing the training capacity of family medicine and internal medicine may have disappointing patient benefits if the resulting physicians are primary care in name only,” the report said.

Practice impact difficult to gauge

The Centers for Medicare & Medicaid Services outlined rules for the primary care and general surgeon bonus programs in November 2010. For primary care, a doctor who is enrolled and lists his or her specialty as internal medicine, family medicine, geriatrics or pediatrics is eligible. Nonphysician practitioners in primary care also are eligible.

However, doctors and other health professionals must have had at least 60% of their 2009 Medicare charges in new or established patient office visits and similar primary care services to receive bonuses in 2011. Operational issues prevented CMS from using Medicare claims data that were more current, to the frustration of some doctors.

Other specialty societies had petitioned CMS to be included under the primary care category. Neurologists, infectious disease physicians and endocrinologists had requested that they should be eligible because they also provide primary care services and have the requisite training and education. However, Medicare law prevented these specialties from being included, CMS said. General surgery bonuses are paid to physicians enrolled in Medicare as general surgeons. CMS publishes a list of ZIP codes designating professional shortage areas.

The extra pay to primary care doctors and surgeons was not budget-neutral, so Medicare rates for other physicians were not reduced.

The primary care bonus has meant that physicians are doing slightly better, but the increase has not represented a big change to most doctors, said Conrad Flick, MD, a family physician in Raleigh, N.C. Dr. Flick serves on the American Academy of Family Physicians’ board of directors and practices at Family Medical Associates of Raleigh. “As they say, it’s a nice start,” he said.

Medicare as an insurance payer is only 20% of his practice’s volume, so a 10% increase on primary care services raises overall practice revenue by just a fraction. Any increase, especially a temporary one, for primary care by just one insurer won’t be enough to change most practices, especially when recent Medicare and Medicaid rates for office visits have been below the costs of providing the care, Dr. Flick said.

Primary care payments under Medicaid also are set to receive a boost soon. In May, CMS proposed a regulation that would pay Medicare rates for Medicaid services provided by eligible primary care physicians in 2013 and 2014. The proposed criteria for earning more Medicaid pay are similar to the rules for the Medicare primary care bonus program.

Dr. McLean, the Connecticut physician, pointed to other recent Medicare improvements that have helped his practice more than the temporary pay boost. For instance, he now provides several annual wellness visits to Medicare patients each month. The service, which began in 2011, is a new opportunity for primary care physicians to discuss a patient’s health and manage chronic conditions. A beneficiary can get an annual visit without having to pay a co-pay or deductible, The extra visit brings in new practice revenue.

“The 10% has not changed the way I have done things,” Dr. McLean said. “But the annual wellness visit has made it easier to get Medicare patients, especially those on tight budgets, to come in and see me.”

Because Medicare represents a large chunk of his practice, Dr. Jacobson, the Oregon internist, has seen more of a tangible benefit from Medicare paying more. His practice has earmarked primary care bonuses to cover overhead costs.

However, the practice has not changed dramatically after a full year of the payments. The physicians would like to hire a diabetes educator as part of the medical-home concept and to aid a growing patient population coping with the chronic condition. But the 10% plus standard Medicare rates for diabetes prevention services are not enough to cover the salary of another health professional.

Still, Medicare coverage for primary care and preventive services is getting better, he said. Unlike a few years ago, the program is starting to cover additional services such as smoking cessation and dietary counseling — care that is expected to prove cost effective.

“It is moving in the right direction,” he said.

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Boosting primary care pay could lower net spending by 1.9%

Commonwealth Fund researchers concluded that increasing Medicare payments for primary care office visits would produce net savings over 10 years. Although the pay increase would prompt primary care physicians to provide more evaluation and management services, and order more drugs and tests, those patients would have less need for later care from hospitals, nursing homes and home health agencies. The researchers estimated per-beneficiary costs in 2020 (in 2010 dollars) to project the effect that the 10% pay boost would have on that baseline.

Service category Cost per beneficiary w/o pay increase Change with pay increase
Primary care evaluation/management visits $524
Cost increase from 10% bonus 8.2%
Cost increase from more visits 8.8%
Other E/M visits $1,682 -3.6%
Other Medicare services $1,478 4.1%
Imaging services $1,296 2.1%
Diagnostic tests $346 5.0%
Minor procedures $691 —0.6%
Major procedures $1,239 —0.4%
Part B drugs $1,028 4.2%
Hospital outpatient care $1,832 —4.6%
Inpatient care $10,016 —4.0%
Skilled nursing facility care $3,027 —3.6%
Home health and hospice care $1,688 —3.5%
Total $24,847 —1.9%

Source: “Paying More for Primary Care: Can it Help Bend the Medicare Cost Curve?” The Commonwealth Fund, March (link)

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What primary care services are eligible for Medicare bonuses?

Primary care physicians are eligible for Medicare bonuses that are equal to 10% of office visits and certain other evaluation and management services they provide. To qualify, an internist, family physician, geriatrician or pediatrician must have primary care comprise at least 60% of his or her services. The physician service codes eligible for the enhanced pay are:

  • 99201-99205, new patient office visit (five levels).
  • 99211-99215, established patient office visit (five levels).
  • 99304-99306, initial nursing facility care (three levels).
  • 99307-99310, subsequent nursing facility care (four levels).
  • 99315-99316, nursing facility discharge day management (two levels).
  • 99318, other nursing facility services.
  • 99324-99328, new patient domiciliary, rest home or custodial care visit (five levels).
  • 99334-99337, established patient domiciliary, rest home or custodial care visit (four levels).
  • 99339-99340, supervision of patient in home, domiciliary or rest home (two levels).
  • 99341-99345, new patient home visit (five levels).
  • 99347-99350, established patient home visit (four levels).

Source: “Medicare Program: Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011,” Federal Register, Nov. 29, 2010 (link)

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External links

“Paying More for Primary Care: Can it Help Bend the Medicare Cost Curve?” The Commonwealth Fund, March (link)

“Medicare Program: Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011,” Federal Register, Nov. 29, 2010 (link)

“Primary Care Physician Workforce and Medicare Beneficiaries’ Health Outcomes,” The Journal of American Medical Association, May 25, 2011 (link)

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