Support grows to inject more cash into Medicare pay-for-performance

Key health care players' testimony before federal Medicare advisers echoes the AMA's position on programs aimed at improving patient care.

By David Glendinning — Posted Oct. 3, 2005

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Washington -- Those who are still unsure whether Medicare pay-for-performance should be based on rewards or penalties need to look no further than the advice that some outside the American Medical Association are giving, according to AMA Trustee John H. Armstrong, MD.

In recent testimony before the Medicare Payment Advisory Commission, witnesses representing a major insurer, a group of community health plans and a quality improvement nonprofit agreed that Congress must come up with more money to pay physicians who do well on federal quality measures -- not take dollars away from those who don't make the grade. This tacit endorsement of a major AMA policy from a widely representative panel indicates that broad-based support exists for a reward-based structure, Dr. Armstrong said.

"We believe that these other groups in health care delivery got it right," he said. "It's becoming apparent that the stick approach will have many consequences that hurt patient access to care. The carrot approach is one that is much more consistent with pay-for-performance programs that really want to improve quality."

WellPoint's chief medical officer, Samuel Nussbaum, MD; Alliance of Community Health Plans CEO Jack Ebeler; and National Committee for Quality Assurance President Margaret O'Kane, were the quality experts whose opinions mirrored the AMA's stance on the issue. The three appeared before MedPAC, which makes direct recommendations to Congress about reimbursements, to speak about the role of quality measurement in Medicare managed care plans.

Private Medicare insurers already have more experience with pay-for-performance than the traditional program, letting them learn valuable lessons, Dr. Nussbaum said. One major message WellPoint, the nation's largest private-pay health plan, has taken away: Paying performance bonuses by reducing payments elsewhere leads to serious quality-of-care concerns.

"These incentive programs should be designed to raise the performance of all," he said. "We must avoid financial incentives that could potentially force health plans to reduce comprehensive benefits based on a financial neutrality approach."

O'Kane said Congress must add enough value to bonus payments, otherwise physicians won't have a real impetus to improve the quality of the health care they deliver.

"The pay-for-performance incentives clearly have to outweigh the bad incentives of the system," she said. "If the pay-for-performance incentives pale in comparison to the bad incentives, then I don't think pay-for-performance will work."

Even if physicians under a pay-for-performance plan could conceivably continue to receive the Medicare baseline without making any improvements in their quality of care, doctors would be motivated to tap into the bonus money, Ebeler said.

"What we view as upside and downside the day after it's implemented is perceived differently out there," he said. "Whether you have an increment of 2% or a withhold of 2%, those who aren't going to get it will perceive themselves as losing. The behavioral effect [of reward systems and penalty systems] can be the same."

Skepticism amid rising costs

Congress often pays close attention to MedPAC recommendations, and the leading Senate pay-for-performance legislation reflects the panel's plan of withholding 1% to 2% of all physician payments for redistribution to top performers. If support in the health care community is growing for adding a dedicated funding stream to any Medicare performance program, lawmakers may soon get the word.

"This is something that is very positive for the American Medical Association's members and our patients," Dr. Armstrong said. "We hope that MedPAC is listening, and we continue to believe that Congress is listening and wants to get it right."

Some statements from the witnesses were greeted with a degree of resistance from commissioners. David Smith, a senior fellow at the public policy research center Demos in New York and a commission member, challenged ACHP's Ebeler on whether rewards can work without penalties.

"If there is no price for failure to improve or failure to hit a standard of excellence, does the incentive that you hope to get on the upside work without a downside?" Smith asked.

Glenn Hackbarth, the commission's chair, responded with skepticism to Dr. Nussbaum's assertion that pay-for-performance penalties would prompt some doctors to hold off on buying health information technology essential to improving quality.

"I've often heard that point made, that the physician will respond to losing money by investing less," Hackbarth said. "I'm not sure I understand the logic of it because that means that they're going to doom themselves to successive cycles of worsening performance relative to the leaders."

No matter what MedPAC decides to do with the opinions from the panel and from groups such as the AMA, the commission gave no sign that it would consider abandoning the concept of pay-for-performance for another strategy that addresses quality concerns and rising Medicare costs.

The time for making that choice has passed, said commissioner Francis Crosson, MD, executive director of the physician component of Kaiser Permanente. "Pay-for-performance is one of the horses that we've decided to ride," he said.

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AMA's standards for fairness

The American Medical Association's guidelines for pay-for-performance state that programs must:

  • Be based on rewards, not on penalties.
  • Be sufficient in scope to cover any additional work and practice expense physicians incur by participating.
  • Offer financial support incentives to physician practices that implement IT systems or software that interact with aspects of the pay-for-performance program.
  • Finance bonus payments based on specified performance measures with supplemental funds.
  • Reward all physicians who actively participate in the program and who achieve prespecified, absolute program goals or demonstrate prespecified, relative improvement toward program goals.
  • Not reward physicians based on ranking.
  • Provide all eligible physicians and practices, before the program starts, a complete explanation of all program facets.
  • Not financially penalize physicians for factors outside of their control.
  • Be designed to protect patient access and not financially disadvantage physicians who serve minority or uninsured patients.

Source: American Medical Association

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