CMS Launches Medicare Pay-for-Performance Demonstration Project
As part of an effort to shift Medicare's physician reimbursement system to a pay-for-performance model, CMS on Monday announced the start of a demonstration project that will give bonuses to physician practices that improve care for beneficiaries and lower costs, the Winston Salem Journal reports (Jackson, Winston Salem Journal, 2/1). CMS Administrator Mark McClellan, who announced the initiative at a World Health Care Congress meeting in Washington, D.C., said that the agency has selected 10 physician groups that represent 5,000 doctors and more than 200,000 fee-for-service Medicare beneficiaries (Higgins, Washington Times, 2/1).
Participating providers include Dartmouth Hitchcock Clinic in New Hampshire, Deaconess Billings Clinic in Montana, Everett Clinic in Washington state, Geisinger Health System in Pennsylvania, Middlesex Health System in Connecticut, Marshfield Clinic in Wisconsin and Forsyth Medical Group -- part of Novant Health -- in North Carolina (Wall Street Journal graphic, 2/1).
Providers will test a number of different tools and preventive services to improve patient care, the Journal reports. For example, Dartmouth Hitchcock will work on disease management for beneficiaries with congestive heart failure or diabetes, and Deaconess Billings will use electronic medical records to help reduce hospital admissions for chronically ill beneficiaries.
Providers will continue to be paid according to the current fee-for-service Medicare reimbursement schedule, according to the Journal (Lueck, Wall Street Journal, 2/1). Participating physicians also will be eligible for bonuses of up to 5% of annual Medicare payments (Washington Times, 2/1). CMS said that "[p]erformance payments may be earned if actual Medicare spending for the population assigned to the physician group is below the annual target," adding that the payments will be allocated between efficiency and quality, with an increasing emphasis placed on quality during the demonstration.
Performance targets will be set annually for each participating physician group based on the growth rate of Medicare spending in the local market, according to CMS (CQ HealthBeat, 1/31). The groups will be eligible for performance bonsues if they keep their costs to at least 2% below the target, according to the Times (Washington Times, 2/1). Costs will be measured in terms of all Medicare spending for participating beneficiaries, instead of just spending on physician care (CQ HealthBeat, 1/31). The clinics with which the physicians are affiliated would keep most of resulting savings, and the federal government also would receive a portion, according to the Journal (Wall Street Journal, 2/1).
According to CQ HealthBeat, if the pilot shows that pay-for-performance effectively lowers costs and improves care, CMS has the authority to expand it to other group practices without legislative action (CQ HealthBeat, 1/31). The three-year pilot will begin April 1 (Condon, Hartford Courant, 2/1).
"It's time we pay for the quality of health care provided to our beneficiaries, not just the amount," McClellan said (Hartford Courant, 2/1). He added, "That's the way payments ought to work -- we ought to be doing more to reward good performance" (Wall Street Journal, 2/1). McClellan said, "We're at a critical time now where we can really move forward" on the program, adding, "We're going to see how well it works and what that means for applying these kinds of incentives more broadly" (Winston Salem Journal, 2/1).
"We've got a strong foundation this year to get pay-for-performance in place," McClellan said, adding, "There are steps under way right now to develop quality measures in virtually all settings of care" (Wall Street Journal, 2/1). He also said that the "physician groups have the potential to save significant amounts of money," and he hopes that the pilot will prompt hospitals and physician practices to invest more in health information technology (Washington Times, 2/1).
McClellan said President Bush's federal budget proposal -- to be released Feb. 7 -- will include recommendations for adopting a pay-for-performance system for Medicare that will be similar to a proposal made by the Medicare Payment Advisory Commission. MedPAC on Jan. 12 voted to recommend that Congress enact pay-for-performance incentives for hospitals, doctors and home health agencies. McClellan said that provisions for creating such a system could be included in legislation this year.
McClellan noted that CMS is planning a separate demonstration project to provide bonuses to doctors in small or solo practices who invest in information technology (CQ HealthBeat, 1/31). According to McClellan, future programs testing pay-for-performance will focus on nursing homes, home health care and dialysis centers (Hartford Courant, 2/1).
John Armstrong, secretary of the American Medical Association, said it is "too early" to adopt a pay-for-performance system nationwide, and "these demonstration projects seem to be the right process" (Wall Street Journal, 2/1).
Dr. Katherine Schneider, director of community medicine at Middlesex Hospital, said, "Things can get pretty complicated for patients who are on 10 or 15 medications (who) have a lot of complex needs," noting that case management will help the facility prevent patients from "falling through the cracks" (Hartford Courant, 2/1).
Some physician groups in the program said they expect the extra payments from Medicare "to barely cover the cost for investing in the extra services," the Washington Times reports (Washington Times, 2/1).