Summit focuses on alternatives to Medicare pay system

Innovations in paying for health services are in the testing phase, with CMS launching a bundled payment initiative on Jan. 31.

By Charles Fiegl amednews staff — Posted Feb. 11, 2013

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The Medicare program cannot move forward without a plan to change its payment structure to a higher-performing system, physicians and analysts said during a recent policy summit underwritten by the American Medical Association.

There has been little movement to transition the program's payment system away from fee for service and a seemingly endless cycle of pay cuts threatened by the sustainable growth rate formula. Health policy analysts and industry leaders discussed issues preventing reforms to how Medicare doctors are paid and offered insight on what action is needed to bring innovation to the system during the Jan. 29 event, hosted by National Journal.

New efforts to change Medicare will not proceed until the hurdle of the Medicare SGR formula is cleared, said AMA Executive Vice President and CEO James L. Madara, MD. The AMA has drafted a framework for a transition plan that starts with eliminating the SGR. The formula is a problem that has lingered for far too long and presents an annual threat to physician practices, program confidence and patient access, he said.

“These realities pose obstacles to widespread adoption of the kind of innovative care and delivery models needed to reinvigorate our Medicare program in the service to 47 million Americans,” Dr. Madara said. “Our work to build a strong and sustainable Medicare system is just one effort by the American Medical Association in making and shaping a better future for patients, physicians and our nation.”

Developing ideas to stabilize Medicare is part of the AMA's work to make the health care system better. The Association's goals include improving patient health outcomes and reducing costs, accelerating innovations in medical education and training, and enhancing practice sustainability by helping physicians adopt new payment and delivery models.

“These are big and ambitious goals, but we believe they're the foundation upon which we will contribute and fulfill the mission of the AMA,” he said.

Physician input sought

New Medicare payment models should encourage physicians to collaborate or participate in organizations to care for patients, said Paul Ginsburg, PhD, president of the Center for Studying Health System Change. Physicians must go beyond agreeing to join initiatives by also accepting risk and being held accountable, he said.

For far too long, Medicare payment delivery has been driven by volume, and not enough attention has been paid to improving quality and efficiency, said Gail Wilensky, PhD, a former Medicare chief and a senior fellow at Project HOPE, an international health foundation. The fee-for-service system limits physicians to doing what they can bill for, not pursuing the best combination of services they can provide, she said.

In Medicare, one payment model to improve the system in hospitals has been to bundle payments for a range of services. Physicians feel constrained by the fee schedule, but the specifics of how to help doctors make the transition to a new payment and billing system has policymakers stuck, Wilensky said.

“We need to find a smarter way to provide better care,” she said.

Getting physicians to the next step will be difficult, said Len Nichols, PhD, director of the Center for Health Policy Research and Ethics at George Mason University in Fairfax, Va. He suggested that stakeholders listen to physicians and develop ways to improve Medicare. He said there should be a focus on responding to local innovations that achieve goals of better care, better health and reduced costs. At the same time, reforms should be coordinated with other payers for health care services.

47 million Americans receive health care coverage through Medicare.

“We have to figure out how do you have multipayer arrangements so they can spend less time on documentation and more time on patient care,” he said.

Physicians speaking at the event also called for the need to map out reforms and offer financial incentives to encourage change. “As long as people perceive the status quo as a practical alternative, it's going to be hard to see wholesale change,” said Edward Murphy, MD, a professor of medicine at Virginia Tech Carilion School of Medicine in Roanoke, Va.

A new bundled payment demo

Medicare has started to move forward with payment experiments such as accountable care organizations and other shared savings models. On Jan. 31, the Centers for Medicare & Medicaid Services announced it had selected 500 organizations with which to test bundled hospital and physician payments.

“The objective of this initiative is to improve the quality of health care delivery for Medicare beneficiaries, while reducing program expenditures, by aligning the financial incentives of all providers,” said acting CMS Administrator Marilyn Tavenner.

The initiative is limited to four episodes of care involving inpatient stays. For example, one bundled model will offer a single prospective payment, determined by the hospital, for all services provided during a patient's acute care episode. Related readmissions for 30 days after the discharge will be included in the payment amount.

The AMA was pleased that the initiative provided flexibility and a range of models for participating physicians. The AMA was an early supporter of pilots for bundling Medicare payments and believes those and other pay models are part of an opportunity to improve the quality of care and reduce costs, said AMA President Jeremy A. Lazarus, MD.

“It is important that physicians in a variety of practice types have opportunities to participate in bundled payment program pilots,” Dr. Lazarus said. “The AMA urges CMS to provide opportunities for additional practices, which may not have been ready to apply when the program was first announced, to participate. We encourage CMS to offer additional models, as the four existing models all involve an inpatient hospital stay.”

The Association will continue to work with lawmakers and the Obama administration on implementing new ways to deliver health care services that improve value for patients, he added.

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Funding tests of new Medicare pay methods

As of September 2012, the Center for Medicare & Medicaid Innovation had spent hundreds of millions of dollars to support payment model development and testing. A report to Congress details how the center has used the funds to start Medicare and Medicaid projects and public health initiatives to improve health outcomes and achieve savings. A majority of dollars already spent by the center has gone to health professionals.

Payments (in millions of dollars)
Program To health professionals Total support
Health care innovation awards $280.1 $289.8
Partnership for Patients Not applicable $243.0
Pioneer ACO Not applicable $40.2
Strong Start (Medicaid) Not yet made $37.5
Financial alignment initiative Not yet made $36.3
Reducing preventable hospitalization in nursing facilities $26.3 $30.7
FQHC advanced primary care practice $15.3 $26.7
Integrating care for Medicare-Medicaid enrollees Not yet made $17.0
Advanced payment ACO $14.6 $16.0
Bundled payments for care improvement Not yet made $12.2
Comprehensive primary care initiative Data not yet available $10.0
Innovation advisers Not applicable $5.9
State innovation models Not yet made $5.1
Million Hearts Initiative Not applicable $0

Source: “Report to Congress,” Center for Medicare & Medicaid Innovation, December 2012 (link)

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