Congress eyes new Medicare payment models

Lawmakers support transitioning away from fee for service toward pay systems based on quality of care.

By Charles Fiegl — Posted May 23, 2011

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Key lawmakers are expressing support for transitioning away from the current Medicare payment system toward several different pay models.

On May 12, the House Ways and Means health subcommittee held the first in a series of hearings on physician payment in the Medicare system. By starting these hearings early in the year, Rep. Wally Herger (R, Calif.), the panel's chair, said he hopes Congress will achieve meaningful payment reform before Medicare doctor rates are cut by nearly 30% on Jan. 1.

"I believe that the future of Medicare depends on a transition away from the fragmented fee-for-service system to a system where the incentives are aligned with better patient care, not just more patient care," Herger said.

The American Medical Association and other members of organized medicine support repealing the sustainable growth rate mechanism responsible for the impending pay cut. At another committee hearing a week earlier, the Association advocated for a mix of payment models for doctors and physician groups to choose from after a transition period of five years of stable payments under the current fee-for-service system.

The health subcommittee heard testimony on alternative pay models led by private insurers and state programs. Blue Cross Blue Shield of Massachusetts launched its alternative quality contract payment model in 2009. The model combines a fixed, population-based budget and incentive payments based on quality performance.

About 6,600 Massachusetts physicians and others have signed up for the quality contract arrangement, representing about 40% of health professionals in the state. All physician groups finished the first year under budget, meaning they could share in the savings generated, said Dana Gelb Safran, senior vice president for performance measurement and improvement at the Massachusetts Blues.

A significant component of the alternative quality pay model allows physicians to receive timely feedback on how well they are measuring up to performance standards. "They are receiving ongoing information over the course of the year about how they are doing on those measures so that they can manage success," Safran said.

For instance, one group reduced unnecessary use of the emergency department by 22% during the first year. This produced about $300,000 in savings. Two more organizations reduced hospital readmissions and saved $1.8 million in hospital costs, Safran said.

Another state program, Vermont's Blueprint for Health, has just started to experiment with different models, including patient-centered medical homes and community health teams, supported by multi-insurer payment reforms, said Lisa Dulsky Watkins, MD, associate director of the state effort. The early trends show decreases in utilization of expensive services, such as emergency department visits, Dr. Watkins said.

Toward the end of the hearing, Rep. Tom Price, MD (R, Ga.), urged his colleagues to proceed with caution when considering such payment reforms. Any changes out of Congress may have unintended consequences, he said.

"The SGR system was this Congress' solution on how to pay physicians a few short years ago," Dr. Price said, later adding that "solutions imposed from Washington oftentimes result in terrible consequences for patients."

Dr. Price has introduced a bill that would allow Medicare patients to contract privately with physicians for services without giving up their Medicare benefits. Currently, physicians and patients must choose not to accept Medicare money if they privately contract. His bill, the Medicare Patient Empowerment Act, had eight co-sponsors at this article's deadline.

During the subcommittee hearing, Rep. Ron Kind (D, Wis.), asked the witnesses what role comparative effectiveness research should play in the health system. The vast amount of health care spending is on actual care and not on how to address waste in various programs, said Stuart Guterman, an analyst at the Commonwealth Fund.

"We need to know how to spend that money wisely so we can get a better return on it for our patients," Guterman said. "Comparative effectiveness research is intended to provide information to help decision-makers, the physician and the patient, make the right decisions for appropriate care."

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A Blues idea for Medicare's future pay system

In their efforts to find a replacement for Medicare's pay system, lawmakers are looking at alternative models such as one offered by Blue Cross Blue Shield of Massachusetts, which has used quality-based contracts with physicians and hospitals since 2009. Under the Massachusetts model:

  • Contracts combine per-patient global budgets with performance incentives.
  • Networks are required to have enough primary care doctors to account for at least 5,000 patients.
  • Contracts span five years.
  • Global budgets are based on historical spending levels.
  • Networks spending below budget retain all or some of the savings. Networks over budget are responsible for all or some of the deficits.
  • Payments for global budget services are adjusted for age, sex and health status of patients. Pay is adjusted annually for inflation and health status.
  • All services a patient receives are covered under the global payments.
  • 64 quality measures are used to track performance.

Source: Blue Cross Blue Shield of Massachusetts

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