Medicare Payment Rates Should Not Be Based on Region, IOM Panel Says
A congressional proposal that bases Medicare reimbursement rates on a "geographic value index" would unfairly reward or penalize health care providers, according to an interim report released Friday by an Institute of Medicine panel, Kaiser Health News reports.
Such a proposal "would likely mischaracterize the actual value of services" and result "in unfair payments" to providers that are monitoring their use of Medicare services but are situated in areas that are marked by heavy spending, the report stated (Rau, Kaiser Health News, 3/22).
HHS Secretary Kathleen Sebelius commissioned the report in 2010 at the request of a coalition of House lawmakers who represent typically low-spending regions and were examining how Medicare pays hospitals and physicians (Zigmond, Modern Healthcare, 3/22).
For the report, the IOM panel -- led by Harvard researchers -- analyzed data from the Dartmouth Atlas' widely used hospital-referral regions map. According to KHN, the map groups the nation's providers into 306 regions, which have as few as two hospitals in one region or as many as 87 in another. The panel noted that Medicare spends more per beneficiary in some states and regions -- like New York, Florida and McAllen, Texas -- compared with other states, like Minnesota and Wisconsin (Kaiser Health News, 3/22).
In some regions, those expenditures were as much as 44% higher than similar regions elsewhere in the U.S. (Modern Healthcare, 3/22). A sizeable portion of those spending totals -- 20% to 30% by some estimates -- could not be itemized, which has led some analysts to conclude that those expenses are a result of unnecessary services and waste (Kaiser Health News, 3/22).
Panel Observes Wide Variance in Spending, Quality To Support Use of Geographic Value Index
The panel's analysis found that there was excessive variance in spending and quality across three common geographic levels -- hospital-referral regions, hospital service areas and metropolitan statistical areas -- "even within individual providers when treating different conditions" to justify the use of a geographic value index, MedPage Today reports.
The panel also outlined six observations that potentially would place into question payment rates under the geographic value index:
- Providers would have to act identically to be "equally deserving of the reward" or penalty;
- If providers do not act identically, the reimbursement would unfairly reward or penalize particular providers within the overall region;
- The quality of health care services varies across conditions and treatments within hospital-referral regions;
- A significant amount of variation between health care costs still remains unexplained, even though geographic variation can be attributed to demographic and health status variables;
- The quality of hospital-referral regions does not consistently correlate to health care spending or utilization; and
- Though post-acute care has a significant impact on the geographic variation in overall Medicare spending, the greatest variable is dependent on inpatient care.
Instead, the panel added that behavioral changes at the "locus of care" -- between a provider and patient -- would generate benefits for health policy and payment reforms. It noted that payment reforms -- such as value-based purchasing, accountable care organizations and bundled payments -- included in the Affordable Care Act could shift the focus to the locus of care, but those reforms are new and largely untested (Struck, MedPage Today, 3/22).
A full report that is expected in mid- to late summer will include recommendations and conclusions (Modern Healthcare, 3/22).
Panelist, Lawmaker Comment on Report
Joseph Newhouse -- a professor of health policy at the Harvard School of Public Health and chair of the IOM panel -- said, "Areas don't make decisions; doctors, hospitals and delivery systems make decisions." He added that rewarding individual hospitals or providers would promote more efficient, quality care, noting, "If one were to target at the delivery system level, that would benefit the high-value regions."
Rep. Betty McCollum (D-Minn.) -- who leads the congressional coalition that requested the IOM report -- said, "Continuing to pay health care providers for bad outcomes -- while punishing states â¦ where doctors provide high-quality, low-cost care -- does nothing to address Medicare's solvency." She added, "Congress needs to demand comprehensive, value-based payment reforms" (Abelson, New York Times, 3/22).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.