Pay-for-performance programs need more evaluation before becoming the standard

The additional reimbursement dollars afforded by pay-for-performance programs may not stretch as far as you think.

Issue: February 1, 2006

BySamuel M. Silver, MD, PhD

Pay-for-performance quality incentive programs are being evaluated in a variety of health care settings.

Last year, the Centers for Medicare & Medicaid Services (CMS) launched a number of demonstration projects to determine the efficacy of these programs (see the attached chart for a list of the major Medicare pay-for-performance initiatives). The ideal is that by reducing cost and providing high-quality care, we can earn larger reimbursement. The reality is that the mechanisms and support structure required to enact these reporting systems may make the cost savings difficult to achieve.

One of the demonstrations is a three-year project mandated by Medicare and the State Children’s Health Insurance Program Benefits Improvement Act of 2000 (BIPA), which is intended for physician groups with more than 200 doctors. The project is testing data collection methods and quantifying how much it can improve care delivery. At its core, the demonstration is intended to help us anticipate patients’ needs, especially patients with chronic diseases, so we can intervene before expensive procedures and hospitalizations are required. It covers both Medicare Part A and Part B, meaning that we can collect data for inpatient and outpatient processes.

Samuel M. Silver, MD, PhD [photo]
Samuel M. Silver, MD, PhD

In practice

My practice at the University of Michigan Faculty Group Practice in Ann Arbor was selected to participate in this demonstration. Since starting the program in April 2005, we have recognized some costly areas. For instance, we are focusing on streamlining the patient transition process.

Patients typically have long waiting periods after discharge, especially before they had a clinic visit, outpatient visit or were placed in a long-term care facility. Patients are at high risk in this transitory period. They may not receive their medicines or may not be assessed quickly enough. This increases the likelihood that they are readmitted to the hospital, resulting in a costly and dangerous process for all parties. Now we are placing resources to spot these transition points in an attempt to rectify the problems and decrease patient cost and improve quality of care.

Medicare Pay-for-Performance (P4P) Initiatives

HOSPITALS
Hospital Quality Initiative (Medicare Modernization Act [MMA] section 501[b]): Part of the National Quality Initiative, this focuses an initial set of 10 quality measures that link reporting of these data and the post-discharge reimbursement. Hospitals that submit the required data receive the full payment update to their Medicare DRG payments.

Premier Hospital Quality Incentive Demonstration: Under this demonstration, the CMS are collecting data on 34 quality measures relating to five clinical conditions. Hospitals scoring in the top 10% for a given set of quality measures will receive a 2% bonus payment on top of the standard DRG payment for the relevant discharges. Those scoring in the next highest 10% will receive a 1% bonus. In the third year of the demonstration, hospitals that do not meet a predetermined threshold score on quality measures will be subject to reductions in payment.

PHYSICIANS OR INTEGRATED HEALTH SYSTEMS
Physician Group Practice Demonstration (BIPA 2000): Mandated by the Medicare, Medicaid and State Children’s Health Insurance Program Benefits Improvement and Protection Act of 2000 (BIPA), this demonstration rewards physicians for improving the quality and efficiency of health care services delivered to Medicare fee-for-service beneficiaries. The demonstration coordinates Part A and Part B services, while rewarding 10 large (more than 200 physicians) group practices for quality improvements.

Medicare Care Management Performance Demonstration (MMA section 649): A three-year P4P demonstration to promote the adoption and use of health information technology to improve the quality of patient care for chronically ill Medicare patients. Physicians who meet or exceed performance standards established by the CMS in clinical delivery systems and patient outcomes will receive bonus payments for eligible Medicare beneficiaries. This is focused on small and medium-sized physician practices in Arkansas, California, Massachusetts and Utah.

Medicare Health Care Quality Demonstration (MMA section 646): Mandated by section 646 of the MMA, there will be a five-year demonstration program under which projects enhance quality by improving patient safety; reducing variations in utilization by appropriate use of evidence-based care and best practice guidelines; encouraging shared decision making; and using culturally and ethnically appropriate care. Eligible entities include physician groups, integrated health systems or regional coalitions of the same.

DISEASE MANAGEMENT/CHRONIC CARE IMPROVEMENT
Chronic Care Improvement Program (MMA section 721): Participating organizations are paid a monthly per-beneficiary fee for managing a population of chronically ill beneficiaries with advanced congestive heart failure and/or complex diabetes. The groups must guarantee the CMS a savings of at least 5% plus the cost of the monthly fees compared with a similar population of beneficiaries.

ESRD Disease Management Demonstration (MMA section 623): This three-year demonstration will test a fully case-mix adjusted payment system for an expanded bundle of end-stage renal disease (ESRD) services. A portion of the payment will be linked to ESRD-related quality measures.

Disease Management Demonstration for Severely Chronically Ill Medicare Beneficiaries (BIPA 2000): This demonstration will test P4P principle in a disease management and prescription drug coverage environment, where beneficiaries are being treated for congestive heart failure, diabetes or coronary artery disease.

Disease Management Demonstration for Chronically Ill Dual Eligible Beneficiaries: Similar to the demonstration above, but services can be provided to Medicare- and Medicaid-eligible beneficiaries in Florida who suffer from advanced-stage congestive heart failure, diabetes or coronary artery disease.

Care Management for High-Cost Beneficiaries: This demonstration will target beneficiaries who are both high cost and high risk. The payment methodology will be similar to that implemented in the Chronic Care Improvement Program.

Data collection

There is no questioning the concept. We will never improve care without being able to scrutinize its quality. However, the University of Michigan has invested close to $1 million ramping up its information technology (IT) infrastructure and personnel to support these pay-for-performance measures. This may be the cost of doing business, but insurers and the CMS need to be aware of the real costs of providing these data. As community practices look at participating in similar pay-for-performance programs, they will have to contend with the added cost to support this reporting. In many cases, the cost savings of improved care will offset the subsequent savings. This yields no saving and therefore no additional reimbursement — even though our physicians are achieving their goal of improving the quality of care. It’s not that we should not be conducting these quality reporting steps, but it raises an important question: Is this really paying for performance? As we evaluate these programs, it is important that we examine the logistical issues as well.

Proof of principle

The high start-up costs are attributable to a lack of IT infrastructure and personnel to collect and submit this data. Many practices simply do not have the infrastructure. Additionally, out-of-the-box electronic medical records (EMRs) don’t support this type of reporting. Quality improvement reporting is going to become essential to operating a practice. It may not be a clinical necessity now, but it will increasingly be tied to the CMS and third-party incentives. Patients will be directed to our practices based on participation in these programs because payers will use terms like “centers or practices of excellence” to distinguish participating facilities.

From an IT and EMR perspective, physicians must ensure that the systems they purchase are capable of capturing and reporting these quality measures. At the same time, the CMS and third-party payers have to be more cognizant that the implementation of these programs can incur a tremendous cost

About the author:
Samuel Silver, MD, PhD, is a professor in the department of internal medicine and director of the Cancer Center Network at the University of Michigan Health System in Ann Arbor. He is also the practice management section editor of Hem/Onc Today.