New York Times Examines Medicare Pay-For-Performance Pilot Programs

The New York Times on Friday examined how Medicare is "starting to embrace" the practice of giving physicians "financial incentives to meet goals for quality," a trend that "could set a new standard for the way medicine is practiced in this country" (Kolata/Abelson [1], New York Times, 4/15). CMS in February announced the launch of a demonstration project that gives bonuses to physician practices that improve care for beneficiaries and lower costs.

The program, which began April 1, includes 10 physician groups that represent 5,000 doctors and more than 200,000 fee-for-service Medicare beneficiaries. Providers are testing a number of different tools and preventive services to improve patient care, including disease management for congestive heart failure or diabetes and electronic medical records to help reduce hospital admissions for chronically ill beneficiaries. Participating providers still are paid according to the current fee-for-service Medicare reimbursement schedule, but they also are eligible for bonuses of up to 5% of annual Medicare payments.

CMS will award performance payments if actual Medicare spending for the population assigned to the physician group is at least 2% below the annual target for the group. If the pilot shows that pay-for-performance effectively lowered costs and improved care, CMS could expand it to other group practices without legislative action (California Healthline, 2/1).

CMS has launched a similar pay-for-performance system for 280 hospitals. The agency later this spring will post on a Web site scores on 34 measures of performance for participating hospitals, and CMS expects to pay $21 million in bonuses to hospitals over the course of the three-year project.

A third pilot program scheduled to begin this year will focus on chronic care management companies that help patients manage diabetes and other illnesses. By the end of the year, an estimated 600,000 Medicare beneficiaries will be involved in the pilot programs, the Times reports.

According to the Times, critics say that measuring performance might "be nearly impossible because doctors routinely disagree about which treatments work best." Edward Benzel, chair of the Spine Institute at the Cleveland Clinic, said, "The reality of it is we have very little hardcore information on which we base our treatment methods."

Robert Harbaugh, chair of neurosurgery at the Penn State College of Medicine, said, "It's hard to come up with a nice objective system." He added that some doctors fear that a pay-for-performance Medicare system would penalize physicians who treat beneficiaries with more serious health problems or would result in some doctors avoiding seriously ill patients altogether. In addition, critics of the effort worry that publicly rating doctors on quality would discourage them from sharing best practices.

Michael Hillman, a physician at the Marshfield Clinic in Wisconsin -- which is participating in a pay-for-performance pilot project -- said that "the alternatives are far worse than anything we have now" if the pay-for-performance approach fails. Many health care specialists also say that a pay-for-performance system is an improvement over the existing system, which rewards physicians for quantity of care "without regard to quality or results," the Times reports.

If Medicare expands the pay-for-performance initiative, it "could help drive the rest of private health coverage in a similar direction," according to the Times. "It's hard to convey how big this is going to be, but it's going to be big," CMS Administrator Mark McClellan said (Kolata/Abelson [1], New York Times, 4/15).

The Times on Friday also profiled Wallace Hentschel, a "walking example of a patient who seems to have been better served with less medical attention instead of more." According to the Times, Hentschel chose not to have surgery for cardiovascular problems and an enlarged prostate after he was admitted to a hospital in December 2004 with pneumonia. Since then, his condition has been stable.

Hentschel's approach of "doing less is the antithesis of how Medicare -- and the system of private insurance that follows the government's lead -- works," according to the Times. With studies showing that patients who receive more medical care do not necessarily have better outcomes, Medicare's pilot projects could help "create more coherent standards for care and allow patients like Mr. Hentschel to make better choices," the Times reports (Kolata/Abelson [2], New York Times, 4/15).

In related news, KCET's "Life & Times" on Tuesday included an interview with AARP CEO Bill Novelli about reforming the U.S. health care system, including Medicaid, Medicare, providing health insurance coverage to uninsured U.S. residents, focusing on chronic disease management and reducing increased health costs (Zavala, "Life & Times," KCET, 4/12). The complete transcript of the program is available online. The complete segment is available online in RealPlayer.