CMS chief seeks cost control through better quality

Meanwhile, a study cites high physician pay in the U.S. relative to other countries as a significant driver of spending in the system.

By Doug Trapp — Posted Sept. 19, 2011

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Seemingly all of Washington is searching for mandated spending cuts to reduce federal deficits, but Centers for Medicare & Medicaid Services Administrator Donald M. Berwick, MD, said he prefers another way to control health care spending: Provide better quality care.

"Cost has center stage," Dr. Berwick said. But "the problems of cost and quality are connected."

CMS can reduce costs directly, for example, by adjusting Medicare payment through the multiple rules the agency issues each year. The proposed 2012 physician fee schedule calls for a number of rate reductions for certain doctors, particularly in advanced imaging services. Another example of a direct method of savings is requiring durable medical equipment manufacturers to bid competitively for Medicare's business -- a program in effect in select cities.

Both are legitimate tools to control spending, and "any prudent purchaser would use these," said Dr. Berwick, who gave the keynote address at a Sept. 8 event in Washington to unveil a Health Affairs special issue on lowering health care costs.

This cost control aim is the third of Dr. Berwick's three major goals as CMS administrator. The other two are improving health care quality and boosting the population's health.

Dr. Berwick said he prefers to find savings by making health care smarter and more efficient, but he acknowledged that this can be difficult to quantify. Indirect savings "are a little harder to understand and to explain and to track than direct savings."

For example, bundling payments could allow physicians and hospitals to focus better on episodes of care. Medicare will institute this payment model for volunteers starting in 2012. Similarly, accountable care organizations will allow hospitals, physicians and other health professionals to change their delivery of care and possibly share savings that result from such innovations.

Dr. Berwick said even small changes to health care practices adopted today could have a great impact on long-term health spending. Perhaps 10% or more of U.S. health spending is wasteful, he said.

However, such indirect savings probably would not arrive in time to help members of the Joint Select Committee on Deficit Reduction prevent hundreds of billions in automatic cuts to Medicare, defense spending and many other areas of the budget.

Such cuts are mandated in the Budget Control Act of 2011 if the bipartisan panel cannot find spending reduction substitutes that Congress can adopt this year.

Nor will indirect savings arrive soon enough to prevent a 29.5% Medicare physician payment cut scheduled to take effect on Jan. 1, 2012, due to Medicare's sustainable growth rate formula.

The American Medical Association, the American Academy of Family Physicians and the American College of Physicians, among others, have called on Congress to block the 29.5% Medicare cut as well as any automatic cuts to the program that could reduce physician fees further.

AMA President Peter W. Carmel, MD, said Dr. Berwick is correct in seeking better value for health care spending. "History has shown that cost reduction efforts that focus only on cutting payments are shortsighted, compromise access to care for patients and, in the long run, are ineffective," he said.

Dr. Berwick acknowledged the need for some type of medical liability reform to relieve the pressure on physicians to provide unnecessary care. "We know we need improvements in the medical liability system. But "its exact effect on costs? I don't know." Medical liability reform is not part of CMS' jurisdiction, he said.

International pay comparisons

One study featured in the September Health Affairs special issue found relatively high physician payment in the United States compared with five other first-world countries: Australia, Canada, France, Germany and the United Kingdom.

The article's authors concluded that these fees are a significant factor in higher U.S. health spending relative to other countries. The investigation adjusted for U.S. physicians' medical school debts and practice costs, said co-author Miriam Laugesen, PhD, assistant professor of health management at the Mailman School of Public Health at Columbia University in New York.

But spending on physician services is only about one-sixth of total U.S. health spending and has grown more slowly than other areas, Dr. Carmel said. "We question the conclusion that physician payment rates are driving our nation's health care costs."

The study raised some legitimate points, such as the income differences between primary care doctors and orthopedic surgeons, said Kevin Bozic, MD, chair of the American Academy of Orthopaedic Surgeons' Health Care Systems Committee.

However, attempts to make international comparisons of health spending might not always be accurate. For example, orthopedic surgery in the U.S. typically includes 90 days of follow-up care, which could make it appear that the bill is significantly higher.

American hospitals also pay more for equipment that is used in surgeries than do the hospitals in other countries, said Dr. Bozic, an associate professor and vice chair of orthopedic surgery at the University of California San Francisco Medical Center. "They're not real apples-to-apples comparisons," he said.

The study authors acknowledged that another reason behind the higher fees may be an apparent correlation between compensation for U.S. physicians and the country's income structure.

Primary care doctors typically earn about one-third as much as the top 1% of households in that country, and that segment of Americans earns significantly more than the same demographic in other countries.

"High physician fees in the United States may reflect the cost of attracting skilled candidates to medicine in a society with a relatively more skewed income distribution," the study says.

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Payment as a cost driver

View in PDF

Click to see data in PDF.

A new analysis of health spending drivers finds that U.S. physicians received relatively higher fees for primary care office visits and hip replacements in 2008 than doctors in other nations. Americans were less likely than other citizens to obtain primary care office visits but were more in the middle of the pack for the likelihood of receiving the costly hip replacements. All fees are in U.S. dollars.

For primary care office visits
Country Public payer fees Visits
per capita
France $32 7.0
Australia $34 6.1
Germany $46 7.4
Canada $59 5.8
United States $60 3.8
United Kingdom $66 5.1
For hip replacements
Country Public payer fees Procedures
per 100,000 patients
Canada $652 119.7
France $674 215.6
Australia $1,046 152.1
United Kingdom $1,181 170.1
Germany $1,251 270.3
United States $1,634 161.9

Source: "Higher Fees Paid To U.S. Physicians Drive Higher Spending For Physician Services Compared To Other Countries," Health Affairs, September (link)

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