Medicare group practice demo aims for better patient outcomes

Washington -- Physician group practices that have said they can do a better job designing how Medicare pays for health care than the federal government could get the chance to try to prove themselves right.

The Centers for Medicare & Medicaid Services is soliciting proposals from practices and integrated delivery systems for the upcoming Medicare health care quality demonstration. The five-year experiment, which Congress authorized in its 2003 reform law, seeks to test new types of payment systems that could lead to better outcomes for a targeted group of patients.

By providing financial incentives for doctors and other health professionals to do the right thing when it comes to providing the best evidence-based care, practices can help bring about much-needed overhauls of entire health systems, said CMS Administrator Mark McClellan, MD, PhD.

"This is a major initiative to use innovative payments to improve health and reduce costs for everyone in an area, not just for Medicare beneficiaries but for all Americans," he said. "We are allowing providers and communities to take advantage of Medicare payment reforms to redesign care delivery from the ground up, where they have the opportunity to structure that care and payment in a way that focuses on outcomes."

As to what form these quality payment proposals take, the agency is leaving that up to the groups who apply to participate in the demonstration. But in its written solicitation to Medicare participants, CMS suggested several alternative payment models that applicants could consider.

A shared-savings plan would split savings derived from providing more efficient care between Medicare and the physician practice, or other entity, that participates. Or under a per-member, per-month setup, doctors would get an additional flat fee to provide services that Medicare currently doesn't cover, with the expectation that the extra care saves money for the traditional side of the program.

CMS said such changes likely would be accompanied by other reforms for the entire group, such as adoption of a health care information technology system and development of new patient care guidelines.

CMS said the end goal is to reposition the health care delivery system in a way that addresses shortfalls in safety, effectiveness, patient-centeredness, timeliness, efficiency and equity. The Institute of Medicine identified these areas as ripe for improvement in its 2001 report on health care quality -- but did not point the finger at physicians themselves.

"It is not a lack of caring, competent and dedicated professionals that is to blame for this state of affairs, but rather fragmentation that makes continuous care very difficult and a lack of systems designed to protect against the likelihood of human error," the agency said in the solicitation in the Federal Register. "The Medicare health care quality demonstration will enable CMS to support major system changes to achieve effective, safe, and patient-centered care."

Redirected money, not more

Although Medicare is planning to allow redesigns of the current fee-for-service system, it doesn't mean that physicians can expect to receive more money from the government.

Congress mandated that the demonstration be budget-neutral, meaning that Medicare cannot spend more than it normally would on patient care as it tries to improve health care quality. CMS will not provide startup funding for physician practices or integrated health systems that apply for the demo.

The expectation that practices will bankroll the reforms in the hopes that money saved will flow back into patient care could rule out some groups that have not already contemplated such a major shift, a CMS official said.

The agency is holding two rounds of applications. Submissions received by the initial Jan. 30, 2006, deadline likely will be from entities that already have started making changes to their systems, the CMS official said. Groups that believe they can develop a proposal by the second deadline on Sept. 29, 2006, must submit a letter of intent to CMS by Jan. 30, 2006.

Regardless of what alternative payment structures meet federal approval, applicants will be responsible for saving money to offset any increased Medicare payments. If participants who accepted the risk aren't making the grade, the government will adjust reimbursement as necessary during the demonstration. A review of budget neutrality at the end of the five years also could result in Medicare recouping funds from physicians that it lost during the project.

If a group practice submits a proposal, it doesn't mean that CMS automatically will approve the plan, the official said. Project managers hope to approve at least eight but no more than 12 participating groups for the demonstration.

Physician groups must be sufficiently large and have a big enough target patient group to institute truly broad system reforms, the agency said. CMS also will base its final approval on whether the proposed model could be easily reproduced in other health systems.

Practices interested in learning more about the Medicare health care quality demonstration can find more information and application materials online (link).