IOM gives thumbs-down to Medicare regional value-based pay

A proposal floated by lawmakers to decrease Medicare physician payment rates in higher-spending, lower-quality areas probably would punish efficient doctors, according to an interim report.

By — Posted April 1, 2013

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Instituting a geographically based value index in Medicare that would change payment rates for physicians and other health professionals based on how much program spending is incurred by different regions could lead to serious adverse effects on the system, according to preliminary research by the Institute of Medicine.

In 2009, Congress requested that the IOM investigate evidence of wide disparities in Medicare spending among different regions of the U.S. that appear to have little correlation to patients’ health outcomes — evidence that many experts say indicates wasteful program spending in some parts of the country. Lawmakers asked the IOM specifically to consider whether adopting a regional value index, which would alter pay rates based on a given region’s composite cost and quality measures, could help encourage higher-value care.

In an interim report released by an IOM committee on March 25, the research organization said making such regional pay adjustments would not give individual physicians and other health professionals the correct incentives to boost the quality of their care and provide services more efficiently. Because decisions about patient treatments are made at the level of patient care, not at a regional level, setting geographic payments in such a way would create an inequitable situation for doctors and others, the committee stated.

Initial observations of Medicare cost data for regions mapped out by both by the federal government and the Dartmouth Atlas Project — which for years has documented regional Medicare spending variations that do not appear to be related to differences in patient outcomes — backs this assertion, the committee stated in the report. Spending variations are not consistent for a given region, and differences are seen to exist among different hospitals within a single referral region or among different physicians within a group practice, for example.

These data “suggest that a geographic value index would reward low-value providers in high-value regions and punish high-value providers in low-value regions,” the report stated.

Many physician organizations, including the American Medical Association, have opposed value-based purchasing policies for Medicare that would reduce some individual doctors’ pay based on performance measures that are beyond their control, such as composite measures that take into account the performances of other doctors.

Medicare pay already varies by region

The IOM will produce a final report for Congress in the summer that will make the committee’s conclusions official and include additional findings based on private health insurance spending.

Although Medicare doesn’t alter physician pay based on regional differences in spending, it does make adjustments based on differences in the costs associated with providing medical care. In areas where average office rents, staff salaries, equipment costs and other expenses are higher, Medicare pays practices higher rates for the same services. In a separate report in 2011, the IOM recommended that Congress draft a new Medicare map for geographic pay adjustments to doctors that it said would reflect these practice costs more accurately.

The most recent report noted that the Affordable Care Act included several provisions designed to adjust Medicare pay in a way that rewards those who provide high-quality care at a lower cost, including value-based purchasing, accountable care organizations and payment bundling.

“Because these reforms are relatively new, there is little evidence to date about their effects on the value of care,” the committee stated. “Nevertheless, the results of the subcontractors’ work for this study suggest that tying a decision-making unit’s payment to its actions, as these reforms do, is preferable to induce desired changes in care.”

The IOM also suggested in the report that because home health and skilled nursing care are “a major source of unexplained variation in Medicare spending,” reforming the post-acute care system to cut down on overuse and fraud could improve efficiency significantly.

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External links

“Geographic Variation in Health Care Spending and Promotion of High-Value Care — Interim Report,” Institute of Medicine, March 22 (link)

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