Medicare experiments with quality incentive programs

Demo would test paying physicians bonuses to improve quality of care.

By Markian Hawryluk, amednews staff. Nov. 4, 2002.

Washington -- What would it cost to encourage you to improve the quality of care in your practice? How about $20 a patient?

In 1999, Anthem Blue Cross and Blue Shield implemented a quality improvement program in New Hampshire that offered primary care physician group practices $20 per enrollee if they could finish in the top 25% of network practices on a set of quality measures.

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In the first year, the plan's average rates for mammography, immunization and pediatric exams showed increases. In 1999, about 80% of women in the network received Pap smears. By 2000, the top quartile of physician practices were testing 98.5% of adult female patients.

While this pay-for-performance approach is less than universal in the private sector, it is virtually nonexistent in Medicare. But in September, the Centers for Medicare & Medicaid Services said it wanted to change that by paying physicians bonus payments for improving quality of care.

"Doctors who treat Medicare beneficiaries already provide them with high-quality care," CMS Administrator Tom Scully said. "Private companies have seen that care improve even more after they create incentives, and we want to test that concept in Medicare."

Under a three-year demonstration project, physician groups will be paid on a fee-for-service basis but can share in the savings resulting from better quality of care. Groups also can earn a bonus for meeting certain quality benchmarks, such as the percentage of patients given flu shots.

If practices can generate more than 2% savings over average Medicare Part A and B treatment costs, they can keep a portion of those funds.

CMS expects to select six groups of more than 200 doctors for the demonstration, although it left open the possibility of choosing additional practices that make a compelling case.

The agency is hoping in particular to find groups that can better coordinate the provision of inpatient and outpatient services, and can focus on improving care for beneficiaries with chronic illnesses, who account for a disproportionate share of Medicare spending. CMS is taking applications through Dec. 26 and will begin the demonstration project in 2003.

The agency will face challenges in implementing the demonstration. In private-sector incentive programs, patients are usually limited to a certain group of physicians who contract with the health plan or are employed by the facilities offering the incentives. But patients in fee-for-service Medicare are free to see any physician who accepts Medicare.

CMS attempted to get around this problem by offering the bonus payment to the physician practice only if it provides more evaluation and management services to the patient than any other practice. The physician group to which the patient is assigned will then have to try to convince patients to continue to seek care within the group or have their access to the bonus payment determined by physicians outside the practice.

A field still in its infancy

According to Anthem's chief medical officer, Sam Nussbaum, MD, quality incentives are still a relatively new phenomenon. Most programs still deal with the easiest measures around -- preventive care or performance measures that the medical profession has agreed upon and represent reasonable first steps, he said.

"We're at the earliest stages at identifying, recognizing and rewarding quality," he said. "Over time, we would want to say a lot more than just, 'Did a mammogram get done?' "

Practices can earn a bonus for meeting quality benchmarks.

While many physicians bristle at the notion of being paid extra to do what their Hippocratic oath compels them to do anyway, proponents of quality incentives say it's not a question of desire.

"Every physician is absolutely committed to providing the very best quality he or she can provide," Dr. Nussbaum said. "But our supportive processes are not where they need to be. So by creating this reward and recognition system, we're allowing the physicians to invest in infrastructure in their offices."

According to Kevin Piper, director of the National Health Care Purchasing Institute, financial pressures force physician practices to make payment their top priority.

"Our health care system really has straightjacketed physicians," Piper said. "Failing to set any performance expectations other than quantity and productivity and through-put of patients is really forcing them to focus on the more parochial issue of how to get patients through the door as fast as possible. How can I respond to the claims processing game, to make sure all the coding is right, to collect the right data?"

Nobody is paying the physician to spend time learning evidence-based practices or to invest in an electronic medical record system, but physicians can recoup the investment in systems to help them submit more accurate claims, he noted.

The Medicare demonstration project was authorized by Congress in 2000 in hopes that it might provide a model not only to improve quality of care but also to save program costs. Yet research by quality guru Don Berwick, MD, a pediatrician who heads the Institute for Quality Improvement, shows that those savings often aren't realized by the party making the effort. This could be bad news for physicians participating in the Medicare project.

CMS will begin the demonstration project in 2003.

Dr. Berwick looked at eight quality improvement initiatives undertaken by health plans, hospitals or employers. While many were undertaken because of their clinical rather than financial benefits, virtually none of the interventions saved money for the organization that launched them.

"Most of the improvements saved money somewhere," Dr. Berwick said. "Almost none of the programs returned money to the innovating provider."

That's because clinical and financial incentives for improving quality are not aligned, according to Brent James, MD, executive director of the Institute for Health Care Delivery Research at Intermountain Health Care in Salt Lake City.

Dr. James described an Intermountain project that sought to improve care for individuals with community-acquired pneumonia through the use of evidence-based medicine. In its first year of implementation at 10 rural hospitals, 20 fewer patients died from pneumonia.

But hospital administrators were complaining that their budgets hadn't improved at all. "It turns out that while our costs had fallen by $1.2 million, our revenues had fallen by $1.5 million in the class of patients," Dr. James said.

Intermountain found that by improving the quality of care, it kept patients out of the diagnosis-related group for long-term ventilator support that paid hospitals about $16,400 per case. Instead, the hospitals received payments of about $4,600 per case for the community-acquired pneumonia DRG. Intermountain's true cost of operations were about $5,200 per case. They were essentially subsidizing the Medicare program.

"It's easy to make the case that quality does control cost," Dr. James said. "The real problem is improvements in cost structure that damage your bottom line."

ADDITIONAL INFORMATION:

Insurers have success stories

The private sector uses a number of different approaches to quality incentives, such as:

In Ohio, Anthem Blue Cross and Blue Shield created a system with an ob-gyn group that included measures such as patient satisfaction. The group also reviewed hysterectomies to see if American College of Obstetricians and Gynecologists guidelines were followed.

In addition to providing a bonus payment of up to 5%, Anthem removed administrative hurdles seen as barriers to improving care. After the first year, patient satisfaction increased from 82% to 98%. The group met clinical guidelines for hysterectomies 90% of the time, compared with 54% for other physicians in Ohio.

The Central Florida Health Care Coalition, a group of more than 120 employers, is implementing a performance-based fee schedule. Physicians in the platinum level would get the highest fee schedule, followed by gold-level physicians; silver level is the lowest.

The program also would limit administrative hassles for the platinum doctors, such as waiving the formulary and precertification. Platinum physicians would have to agree to mini-residencies every two years and by the second year, agree to use a handheld computer to submit prescriptions, order lab tests and track referrals.

Blue Cross and Blue Shield of Illinois set up performance-based compensation for group practices in its HMO. By meeting annual targets on several measures, practices could increase their income from the plan. In 1998, only 2% of the groups had a Pap smear rate of at least 70%, the threshold for attaining bonus payments. By 2000, the percentage had increased to 34%.

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