AMA: Medicare pay-for-performance must be voluntary and not punitive

MedPAC wants the federal government to withhold up to 2% of physicians' reimbursement to create a reward pool for high performers.

By David Glendinning — Posted March 21, 2005

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Washington -- Members of Congress are receiving some conflicting advice on pay-for-performance from the nation's physicians and the advisory panel tasked with making Medicare payment recommendations.

The American Medical Association recently unveiled a set of principles that it will use to assess any program that pays doctors differently based on their performance. To garner the Association's support, the programs must focus on quality improvement, allow physicians to opt out and use payment incentives, rather than penalties.

Lawmakers should consider the AMA's position if they wish to launch a successful pay-for-performance element in Medicare, said AMA Secretary John H. Armstrong, MD, who chairs the task force that developed the guidelines.

"When pay-for-performance programs are designed primarily to address these concerns across the system of care, then those programs can be a positive force," he said.

The AMA release occurred one day after the Medicare Payment Advisory Commission unveiled its annual March report to Congress, in which it states that Medicare should begin paying all physicians differently based on how they perform.

MedPAC envisions a system in which 1% to 2% of Medicare payments to doctors are withheld and placed into a pool from which only the top performers are rewarded.

Although the commission leaves many of the details up to lawmakers, the plan appears to violate at least two of the AMA's core tenets right off the bat. By mandating that every physician participate in a program in which many doctors will essentially see a cut in Medicare reimbursements, the proposal is handicapping itself from the start, Dr. Armstrong said.

"Choice remains an important tenet of American health care, and that should apply to physicians as well," he said. "A program that has the right framework for quality improvement should be attractive enough such that physicians want to join it, and the product that would come out of that effort would be significantly better than a product that is based on coercion."

Attempting to keep the pay-for-performance program from impacting the Medicare budget also would violate one of the AMA's principles, Dr. Armstrong said.

Budget neutrality ignores the fact that real quality improvements will require additional funding, said Victor G. Villagra, MD, an internist and president of the consulting firm Health and Technology Vector Inc., in Farmington, Conn.

"There needs to be an investment, and the payers who have a vested interest in seeing our delivery system upgraded should come forth and help build this infrastructure," he said.

Gauging physician readiness

MedPAC insists that physicians are ready to play ball with Medicare pay-for-performance, but not all doctors agree.

Physicians in every type and size of practice can begin collecting and reporting so-called structural measures, which are indications of how well physicians use established processes to organize and apply clinical information, the report says. Such measures could include whether doctors establish registries for patients with chronic diseases, systems for tracking test results or medication safety checks.

While such process measures do not necessarily require the use of information technology systems, they are certainly enhanced by the presence of information technology, said MedPAC Executive Director Mark Miller. As a result, initial rewards under the Medicare pay-for-performance program largely would track IT adoption and upgrades.

"While there are a lot of process measures for physician services out there, there's still some need for development," Miller said. "We start off with the notion of rewarding information technology to move physicians toward IT and also to help develop the infrastructure to get the physicians using these particular process measures."

Within several years, he said, the incentives might produce enough progress that Congress could begin considering adding quality outcomes measures, which aim to determine how well patients are faring from the improvements that doctors are putting in place. Eventually, MedPAC would like lawmakers to consider tracking such measures as cholesterol levels for coronary disease patients and rates of preventing avoidable hospitalizations.

But the commission is going too far when it assumes all doctors are prepared to begin reporting the initial IT process measures, said Jeffrey Rich, MD, a thoracic surgeon in Norfolk, Va., who is experienced with private pay-for-performance programs.

"MedPAC says all physicians are ready -- not true," Dr. Rich said. The Society of Thoracic Surgeons, for example, is one organization that would be able to pick up the concept quickly, but only because the group has spent more than a decade developing the types of data that would be necessary to demonstrate high performance, he said.

A costly endeavor

MedPAC's Miller acknowledged that although the commission views the initial recommendation as involving a relatively modest commitment of Medicare resources to fund the reward pool, the amount that is withheld could prove significant for physician practices that can't get on board.

"Medicare is a large payer, and 1% to 2% are small percentages but often large dollars," he said. "With $55 billion going to physicians [every year], 1% to 2% can actually get to some real money."

The MedPAC proposal as currently written amounts to a requirement that physicians purchase expensive information technology with no assurances of reward and without knowing whether Congress will fix flaws in the underlying Medicare payment formula for doctors, Dr. Armstrong said.

"Having unfunded mandates without a stable funding platform is not going to produce the kind of physician buy-in that is necessary," he said.

The AMA already has seen how pay-for-performance programs can interfere with the physician's job, rather than improve patient health, Dr. Armstrong said. The group has joined others in protesting the UnitedHealth Performance plan, which purports to be a pay-for-performance product but actually drops physicians if they incur too many health care costs, he said.

Doctors will not be keen on participating in any Medicare pay-for-performance program if its overall goal is to track health care utilization and reward physicians only for keeping costs down, Dr. Villagra said. If Congress plans to persuade doctors that it will reward real performance, rather than monitor every health care expenditure, it must convince physicians that quality improvement is the initiative's central goal, he said.

"If you're not absolutely committed to that principle, physicians aren't going to play," he said.

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MedPAC call for action

The Medicare Payment Advisory Commission made several other recommendations in its annual March report to Congress, including:

  • Congress should increase Medicare payments for doctors in 2006 by the rate of inflation minus a small productivity adjustment. Experts project that this move would result in a 2.7% update.
  • Congress should set national standards for physicians who interpret imaging tests and technicians who administer the scans. Medicare payments for these services could become harder to claim as a result.
  • The Dept. of Health and Human Services should use Medicare claims data to let doctors know how efficiently they use resources compared with their peers. The information would be confidential and would not affect federal payments.
  • HHS should close a loophole in self-referral regulations that allows physicians to own interest in companies that provide substantial services or equipment to medical facilities with which the doctors are affiliated.

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Physicians weigh in

The AMA has adopted five principles it will use to evaluate whether a physician pay-for-performance program is fair and ethical:

Ensures quality of care. Programs must focus on improving health outcomes, not reducing utilization.

Fosters the patient-physician relationship. Programs must allow doctors to exercise sound clinical judgment, not restrict patient access to needed care.

Offers voluntary participation. Programs must allow doctors to opt out without affecting reimbursement levels or other contractual obligations of payers.

Uses accurate data and fair reporting. Programs must use scientifically sound measures and allow physician input. Results must not be used capriciously in physician credentialing.

Provides fair and equitable incentives. Programs must offer new funds for positive incentives for physicians, not penalties.

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How pay-for-performance might work

Physicians who want to see how a Medicare pay-for-performance program might assess and reward them need look no further than the National Committee for Quality Assurance, says the Medicare Payment Advisory Commission in its March report to Congress.

NCQA is a nonprofit organization best known for evaluating health insurers, but the group also runs a "recognition" program called Physician Practice Connections. Doctors can apply to receive special designation based on their work in implementing information management systems. MedPAC recommends that Medicare track such information management adoption and use it for physician pay-for-performance.

"Data collection to report achievement on these types of measures would add some burden to physician offices," the commission says in its report. "However, some physicians are already participating in a recognition program that uses similar ones."

Although NCQA itself does not reward physicians who make the grade, some employers and private payers have begun to do so. The Integrated Healthcare Assn. in California, a group composed largely of health insurers, and the national Bridges to Excellence coalition, which mainly consists of large employers, provide financial incentives for doctors to seek recognition status.

"We know from our experience working with physicians that promoting evidence-based care results in better outcomes," said NCQA President Margaret E. O'Kane. "It's a simple model, and we know that it works."

More information about the Physician Practice Connections program can be found online (link).

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External links

AMA's pay-for-performance principles and guidelines (link)

Medicare Payment Advisory Commission's "Report to the Congress: Medicare Payment Policy," March 2005, in pdf (link)

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