Proposal would credit doctors for Medicare savings

Washington -- A panel of doctors advising Medicare officials has recommended that the government move some of the money it saves under any future pay-for-performance system from the hospital side of the program to the physician side.

Some doctors believe that Medicare can use physician pay-for-performance to cut medical costs over the long run by reducing complications, hospitalizations and use of the emergency department, said Barbara L. McAneny, MD, an oncologist in Albuquerque, N.M. The potential funding problem arises because any such savings would be realized in Medicare Part A, or the inpatient side of the program, not in the outpatient Part B.

In an effort to address this disconnect, the Practicing Physicians Advisory Council recently approved a resolution authored by Dr. McAneny, a member of the panel, that proposes a shift of federal funds between the two closed systems. Under the recommendation, if physician pay-for-performance programs lead to fewer amputations or dialysis for diabetic patients, for example, the Centers for Medicare & Medicaid Services would funnel a portion of the money saved back into the funding stream that pays for doctors' services.

"As long as we are rewriting the way that Medicare pays for services anyway, this seems like the only opportunity to break down the original barrier between Part A and Part B," Dr. McAneny said. "If you're truly going to pay for performance, you need to do some gain sharing and say that some of this money will be put back into the Part B pot."

The way that Medicare determines physician payments is one of the main reasons the council backed the plan.

Some physicians have expressed concern that the federal government will fail to reform the current reimbursement formula before implementing Medicare pay-for-performance, which would pay doctors based on how well they meet requirements for providing preventive services. Any significant increase in physician utilization of these services puts the entire community at risk for exceeding annual spending targets set by the formula. When this occurs, doctors' Medicare payments are cut in the following year.

"The reality is that most physician performance measures focus on providing more care to patients, not less," said American Medical Association Trustee William G. Plested III, MD, a thoracic and cardiovascular surgeon in Santa Monica, Calif. "Pay-for-performance and [the physician rate formula] are inconsistent concepts, because they will punish the physician community for conscientious participation."

Physician concerns have been exacerbated by news that they will sustain cumulative cuts of more than 25% over the next six years unless Congress steps in, he said. The AMA strongly supports legislation in the House and Senate that would reverse the next few years' reductions.

Dr. McAneny's recommendation sparked debate about whether the federal government could even craft a workable method for accomplishing the funding transfer.

The types of patient datasets reviewed by actuaries at private insurers could prove useful in determining when physician pay-for-performance has saved hospitals money in a given population, but insurers are often loath to part with such proprietary trade secrets, Dr. McAneny said.

Some doctors on the panel suggested that the cost of figuring out how much money was saved on the hospital side could exceed the amount that eventually would flow to doctors.

"I understand in theory what you're posing, but at the end of the day I could see them saying that there's never any excess money to pass over," said council member Christopher Leggett, MD, a cardiologist in Canton, Ga.

Recognizing that the Medicare agency's hands are tied when it comes to breaking down the barrier between the hospital and physician sides of the program, the recommendation states that CMS should support legislation that would allow the change. Pressure from Bush administration health officials will be essential if Congress is to contemplate such a complicated and major change to the program's funding system, Dr. McAneny said.

"If CMS went to Congress and said that we are going to need legislation to fix this and put the full weight of the agency behind it, it would be a lot more likely to occur," she said.

The advisory council expects CMS to respond to the resolution in time for the group's August meeting.