Physician Payment And The Sustainable Growth Rate (Sgr) Fix Harvard Case Solution & Analysis


According to Bodenheim and Pham (2010), how does the mix of services provided by primary care physicians affect their reimbursement relative to specialists? 

According to Bodenheim and Pham (2010), the mix of services is offered in such a way that it attracts the customers by whom high profit margins could be obtained and it would not attract to the customers from whom only low profit margin could be gathered. This has resulted in increase of cost as well as volume of services. Therefore, it has provided positive effect on their reimbursements relative to specialists because they have targeted the customers with high profit margin.(Paying More for Primary Care:, n.d.)

a)      Describe the principal-agent problem in fee-for-service payment of physicians and supplier-induced demand.  Describe the findings of Baker (2010). What does this imply about supplier-induced demand?

 The principal agent problem is such that the physicians do not provide patients with high quality services. They are always intended to enhance their profits some way or the other by charging higher prices from their patients.

This problem occurs when the regulators are less concerned with the quality provided by the physicians. Moreover, when the incentives are not offered to the physicians, then they are more motivated to charge inflationary fee from their patients.

The physicians receive commission from the suppliers if they prescribe their drugs to the patients.

This has increased the demand of drugs because the private physicians prescribe more drugs to their patients than the ordinary public physicians for the similar disease or illness, in order to earn confidence of their customers and to get high commissions.

Since the patients consider their physicians that they have superior knowledge so they are highly dependent on them. Whichever medicine they prescribe, they start purchasing such medicine without even using their personal judgments. This increases the supplier induced demand as well as increases the principal agent problem. (The principal-agent problems in health care: evidence from prescribing patterns of private providers, n.d.)

Compare the structure of payment under the Alternative Quality Contract compared to fee-for-service reimbursement. How does this change the incentives for the volume of services provided by physicians?  Are the findings of Song, et al. (2012) consistent with your theoretical prediction?

 The Alternative Quality Contract is a five-year contract. It is used in health maintenance organization plans for enrollees. The primary care physician is designated by these members prior to each enrollment year.

If the Primary care Physician belongs to an organization that has joined the contract, then the enrollee that belongs to such physician is deemed to be of Alternative Quality Contract. In this arrangement, patients are attributed to primary care physicians. In this contract, the total medical spending is 1.9 times lower as well as it provides excellent quality of improvements. It promote additional savings year after year.

This has improved quality care services. This has increased the volume of spending as well as volume of services provided by the physicians because it has attracted the PCP because of additional savings.

By offering lower prices the savings are enhanced. This has also improved quality of care with chronic care management, adult preventive care, as compared to control organization. Moreover, shifting procedures, imaging and test facilities are also offered at lower fees under such contract.(The ‘Alternative Quality Contract,’, n.d.)

What is a potential unintended consequence of “global budgets” such as that in the Alternative Quality Contract?  How does the AQC attempt to mitigate this incentive, and was the attempt successful?

In AQC rates paid for services are determined by the amount of resources and the amount of inputs that would be necessarily used in order to give those services. This allows the management to control their budget.

Moreover, the SGR has improved the payments on physician amenities when the growth rate of spending decreases as compared to the growth in the gross domestic product (GDP). Likewise, when the spending grew more than GDP it cuts payments.

Prices, the amount of Medicare receivers, and variations in guideline were all accounted for and leaving process rate as the only key feature lashing the SGR algorithm.

Physician Payment And The Sustainable Growth Rate (Sgr) Fix Case Solution

We examined variations in spending and quality related with the Alternative Quality Contract and found that the rate of increase in spending slowed as compared to control groups, the reduction was more in the second year than in the first.

Moreover, contribution in the agreement over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) related to outlay in non-participating groups. (May The Era Of Medicare’s Doc Fix (1997-2015) Rest In Peace. Now What?, n.d.)........................

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