CMM's pay-for-perfromance gains congressional support

July 1, 2005

If a pay for performance requirement is implemented, it should be phased-in and pilot-tested on a voluntary basis first.

There appears to be growing support within the federal agencies on Capitol Hill for such a plan, especially given the inequities of the current system under which many physicians will continue to see significant reductions in reimbursement levels over the next several years.

The new system is called "pay-for-performance," and in theory, it would pay Medicare physicians based on how well they perform, both in terms of patient outcomes and the cost of achieving those outcomes. It's being developed within the Center for Medicare Management (CMM) at the Centers for Medicare and Medicaid (CMS), and already has been the subject of hearings on Capitol Hill.

In February, William Gee, M.D., a Lexington, Ky., urologist who was speaking for the Alliance, told the House Ways and Means Health Subcommittee that the proposal could cause serious difficulties - particularly for smaller practices.

In April, CMS launched a demonstration project to test pay-for-performance in Medicare's fee-for-service payment system for physicians. According to Herb Kuhn, CMM director, the Physician Group Practice demonstration will assess large physician groups' ability to achieve better patient outcomes and efficiencies.

Ten multi-specialty physician groups of more than 200 physicians each in communities across the nation are participating. Groups will continue to be paid on a fee-for-service basis, but will be able to earn performance-based payments for implementing care management strategies that anticipate patients' needs, prevent chronic disease complications, avoid hospitalizations and improve the quality of care, Mr. Kuhn told the House Ways and Means Health Subcommittee in March. The performance payment will be derived from savings achieved by the physician group and paid out, in part, based on the quality results, which CMS will assess.

"Providing performance-based payments to physicians has great potential to improve beneficiary care and strengthen the Medicare program," Mr. Kuhn says, adding that CMS will also test a pay-for-performance system to promote the adoption and use of health information technology to improve the quality and efficiency of care for chronically ill Medicare beneficiaries treated in small and medium-sized physician practices.

He said the Medicare Care Management Performance Demonstration will provide performance payments for physicians who meet or exceed performance standards in clinical delivery systems and patient outcomes, and will reflect the "special circumstances" of smaller practices.

According to Mr. Kuhn, that demonstration will be implemented in Arkansas, California, Massachusetts and Utah. Participating practices will receive technical assistance from the Quality Improvement Organizations in their areas, as well as bonus payments for achieving the project's objectives.

Pilot project Recognizing the potential for information technology (IT) to improve the quality, safety and efficiency of health care services, Mr. Kuhn says CMS has launched the Doctors' Office Quality-Information Technology (DOQ-IT) pilot project. Through it, CMS is exploring the adoption and effective use of IT by physicians' offices to improve quality and safety for Medicare beneficiaries.

"The pilot project promotes greater availability of affordable and effective health information technology by providing assistance to physician offices in adopting and using such technology," Mr. Kuhn told lawmakers.

Why would there be concerns about all of this? After all, as Glenn M. Hackbarth, chairman of the Medicare Payment Advisory Commission (MedPAC), says, Medicare still pays its health care providers without differentiating on quality or how well they perform.

"Providers who improve quality are not rewarded for their efforts," he says. "In fact, Medicare often pays more when poor care results in unnecessary complications. The incentives of this system are neutral or negative toward improving the quality of care."