Appropriateness Modifier Could Enhance Payment and Benefit Design

Gears with medical symbols inside them

Health care in the United States is moving towards value-based payments for populations but precision medicine for individuals.

study published by assistant professor of health care policy Zirui Song, MD, PhD and colleagues at the University of Pennsylvania in the American Journal of Managed Care says that innovations in payment and delivery are needed to enhance appropriate treatment for individuals while also improving the value of care more broadly.

The research team proposed allowing the appropriateness of a given service in a given clinical situation to help determine physician payment and patient cost sharing. A payment modifier based on indication and appropriateness may provide such a solution. Such a modifier would enable payment for a service delivered in higher value (more appropriate) situations to be greater than when the service is delivered in lower value (less appropriate) situations.

This appropriateness modifier has several advantages. By directly focusing on the clinical indication, it reduces the incentive to generate volume in less appropriate situations. It would be built upon clinical evidence produced by clinicians themselves (e.g. clinical trials), rather than a rule created and imposed by payers. Applied to specialty services, specialists would maintain control over utilization rather being subject to referrals from generalists or coverage restrictions from payers. The modifier could not only be implemented within the physician fee schedule, but also in the analogous fee schedule underlying global budgets and other alternative payment models.

However, the team warns that an appropriateness modifier could tempt physicians to “up code” patients into highly appropriate situations. It could also involve additional documentation that may be burdensome. Presently, the lack of clinical granularity from claims data limits the number of services such a modifier applies to. In the future, however, inclusion of clinical data from electronic medical records would better enable appropriateness of services to be defined.

The study suggests that incorporating appropriateness into payment and benefit design could be a meaningful next step in moving America towards value for populations and precision for individuals.