Half of large practices net bonuses from Medicare P4P demo

Washington -- The Obama White House has indicated it will continue the move toward more pay-for-performance in Medicare, despite mixed results for physicians in the P4P demonstrations it inherited from the previous administration.

On Aug. 17, the Centers for Medicare & Medicaid Services disclosed findings from three ongoing programs -- including first-year results from a small-practice demonstration -- and announced the start of three new value-based purchasing demonstrations.

Third-year results were revealed for the Physician Group Practice Demonstration, which is in its fifth year of operation and is slated to end March 31, 2010. Although CMS has extended the demonstration twice beyond its initial three-year limit, the agency said it does not anticipate extending the program again.

All 10 of the large physician groups participating in the program achieved benchmark performances on at least 28 of 32 quality-of-care measures, which cover diabetes, congestive heart failure, coronary artery disease, hypertension and cancer screening. Groups can receive up to 80% of the savings they generate for Medicare by reducing medical complications and hospitalizations.

But only five groups in the third year received performance bonuses, totaling $25.3 million. One group that achieved benchmark performances on all 32 measures -- Park Nicollet Health Services in St. Louis Park, Minn. -- did not receive a bonus.

Four of the 10 groups that participated have not yet received a bonus despite the investments they made in quality improvement. Forsyth Medical Center in Winston-Salem, N.C., is one of them.

"We were disappointed with that, of course, because that would have helped us offset the cost of some of the programs that we created," said Nan Holland, RN, MPH. She is senior director of clinical services with Novant Medical Group, which manages Forsyth Medical Center.

Holland said the program's weakness lies with its so-called efficiency component. CMS initially had stated that the 10 physician groups could share in any savings generated. But after having already recruited the groups for the program, the agency altered the requirements. Under the revised rules, a practice would receive a payout only if savings on care for Medicare enrollees exceeded 2% in a given year, against a specified baseline.

"We're compared to other systems of organized care in the Minneapolis area, of which there are very good systems," said David Wessner, CEO of Park Nicollet Health Services, explaining why his group did not exceed the 2% threshold.

CMS changed the requirements before it launched the physician group practice program because it wanted to make sure that any Medicare savings came from the groups' direct participation in the demonstration and not from unrelated fluctuations, said John Pilotte, director of the division of payment policy demonstrations at CMS. That also was requested by the Office of Management and Budget under the Bush administration.

The upside of P4P

The late change by CMS initially caused some of the groups to question their involvement.

"We all had second thoughts," said James Rogers, MD. "It gave us all concern about how stable the project is." Dr. Rogers is medical director for the demonstration project and department chair for primary care at St. John's Health System in Springfield, Mo., which earned a bonus of about $3.1 million in the third year of the project.

But the groups felt assured about moving forward after meeting with CMS and airing their concerns, Dr. Rogers said. Some of the groups were able to build up some capital even after accounting for expenditures for quality improvement.

"We've had to invest in modest training and data reporting, but not to the extent that it would completely wipe out the bonus," said Barbara Walters, DO, senior medical director with the Dartmouth-Hitchcock Medical Center in Lebanon, N.H. The medical center earned a bonus of $3.6 million for year three. Dr. Walters said one of the best aspects of the program has been connecting with the other nine groups to share best practices.

"It's been an excellent experience," she said. "Most of us have been able to achieve the benchmarks and have at least met or exceeded targets. Every year, more of the groups have been able to demonstrate the ability to get quality care and bonus payouts."

Even practices that have not done well enough to pull down bonuses have found value in the project. "I think the organization got a lot of out of the programs we created that we think will extend well beyond the demonstration project," Forsyth Medical Center's Holland said.

New P4P programs

So far, performance bonuses have flowed only to large groups and hospitals, but that changed this year. CMS announced first-year results for the Medicare Care Management Performance Demonstration, now in its third year of operation.

Almost all of the 610 participating small and solo physician practices are being paid a total of $7.5 million for meeting quality standards through the use of health information technology. The average payment per practice was $14,000, and some practices earned as much as $62,500.

The goal of the small-practice program is to promote the use of health IT to improve the quality of care for beneficiaries with chronic conditions, CMS said. Doctors who meet clinical performance standards are eligible to receive financial rewards. In addition, the demonstration provides a bonus to practices that use a certified electronic health record. Twenty-three percent of practices were able to submit at least some of the measures from a certified EHR, CMS reported.

Hospitals in the Hospital Quality Incentive Demonstration raised their overall quality scores in five clinical areas by an average of 17.2% over four years.

CMS also announced on Aug. 17 the start of three additional Medicare value-based purchasing demonstrations. The agency will oversee two programs to evaluate the concept of gainsharing between hospitals and physicians. Another demonstration will determine if financial incentives can improve the quality of nursing home care.

"What we learn from the various Medicare demonstrations help to achieve the administration's goals of paying for high quality and efficient health care in America," said Jonathan Blum, director of CMS' Center for Medicare Management and acting director of the Center for Health Plan Choices. "Building on these findings, we will aggressively test new demonstration concepts to continue to meet these goals."