Improving Primary Care Providers’ Prospects

Doctor discussing with business person

Meeting PCPs Where They Are

“How do I know that you’re not like all the others,” the doctor asks, as she reviews an illustrative analysis of the financial opportunity that Pearl is offering to her practice. “We’ve been promised a lot over the years by ACOs and partners, and not a lot of those promises have been kept.”

“Let’s hear them out,” her partner, a primary care physician (PCP) with more than twenty years in practice, interjects. “The numbers look compelling.”

Practice staff walk in and out of the break room inside the Arizona office, which cares for nearly three thousand original Medicare patients, among thousands of others. A nurse practitioner stops to speak with one of the physicians who sits with us, bemoaning cumbersome quality measures reporting required for participation in the Medicare Shared Savings Program (MSSP).1 The doctor sighs, and quietly responds that they need to continue reporting the required quality measures.

As the Pearl team and I meet with primary care practices and groups across the country, a similar refrain often emerges. PCPs and their staff face a dizzying array of options, explicitly aimed at easing financial and operational burdens as they continue to deliver life-changing care to their patients. But the reality often falls well short of the promise.

When faced with risk-based arrangements, many PCPs tell us that they’ve already taken on risk to get where they are today. After all, they’ve spent years going to medical school, built up practices through hard work and entrepreneurial risk, and — in some cases — tried out previous programs and models from the Centers for Medicare and Medicaid Innovation (CMMI) to align financial incentives with their delivery of better quality care at a lower cost. Why should they have to take on more risk, they ask?

Beyond that, many providers have been burned — by contractually buried “gotchas,” opaque explanations of why there aren’t shared shavings despite positive individual performance, operational burdens imposed by heavy participation requirements, and fly-by-night partners who simply go out of business before delivering value.

As Pearl works to empower and enable PCPs, we’d lack empathy if we didn’t recognize that this is most PCPs’ starting point for transitioning to value. That’s why our team works hard to meet PCPs where they are — and to make it easy for them to start this journey with Pearl to pursue better outcomes for their patients, their staff, and themselves.

Understanding PCPs through Prospect Theory

Roughly twenty years ago, Daniel Kahneman and Amos Tversky were awarded the Nobel Prize in economics for their work on Prospect Theory.2 They posited that, when making decisions, people use a reference point to frame the perceived value of potential gains or losses. This allows us to conceptualize how much pleasure we associate with gains — and how much pain we associate with losses.

For most people, the following patterns are typical:

  • People are usually risk-averse when it comes to considering prospective gains. This means certain, smaller gains are often preferred to larger, uncertain gains.
  • People are usually risk-prone when it comes to prospective losses. This means larger, uncertain losses are often preferred to smaller, certain losses.

Prospect Theory: Typical Valuation of Gains and Losses

Prospect Theory

Adapted from Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk.” Econometrica, March 1979. Figure 3: A hypothetical value function.

Considering the reference point I mentioned above, it likely comes as no surprise that doctors tend to be very risk-averse when it comes to both prospective gains and losses. In reality, in order for many PCPs to consider an alternative to their status quo, they often require certain, larger gains, coupled with the certainty of no loss. Although the pattern contours are similar to the norm, the sensitivity is much more extreme as a result of their reference point: any potential revenue loss as a result of shared losses is more painful, in many cases, than a certain increase of revenue through some financial enhancement.

Primary Care Practices: Typical Valuation of Gains and Losses

Prospect Theory for PCPs

The good news? Pearl cares about primary care, and we’re willing to meet and support PCPs, wherever they are on the risk spectrum.

Supporting PCPs’ Medicare Revenue Maximization

In addition to helping our partner PCPs focus attention on the patients who need it most with no-cost software and services, we also help them maximize revenue from their care of traditional Medicare patients. Central to this is structuring and communicating financial options for partnering with Pearl and participation in Medicare’s ACO Reach model.

The Financial Keys to ACO REACH 

There are three key financial mechanisms that PCPs and their staff need to know about partnering with Pearl under Medicare’s ACO REACH model:

  1. Shifting to capitation from fee-for-service (FFS) payments;
  2. Entering into risk-based arrangements; and
  3. Fixed bonuses that guarantee improved revenues over FFS.

Primary Care Capitation (PCC)

Under the ACO REACH model, Primary Care Capitation (PCC) gives PCPs financial freedom, enabling autonomy to deliver care to traditional Medicare patients as they see fit.

PCC does this by transforming PCPs’ compensation model — in a revenue-neutral way — from volume-based payments for the number of primary care services they provide to stable, monthly payments for revenue CMS estimates the provider would otherwise make from her Medicare patient panel.

CMS calculates monthly PCC payments by indexing payments received under FFS in previous years and dividing the number by 12, the number of months in a year. PCC is designed to provide stable, revenue-neutral payments for Evaluation and Management (PQEM) billing codes (for more detail, read An Introduction to Capitation in Medicare’s Direct Contracting Model).

Operationally, practices continue to submit claims for all services as they otherwise would, but payment for claims under the PQEM (aka E&M) codes below will be reduced in accordance with a FFS Fee Reduction Agreement, in exchange for these capitation payments.3

Most commonly used E&M services and billing codes


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