By John Reichard, CQ HealthBeat Editor
December 19, 2007 -- Despite all the talk in Washington backing "pay for performance" in Medicare, there's no consensus yet on the details of such a system and much discussion and analysis are needed to finish the job of implementing it, acting Centers for Medicare and Medicaid Services Administrator Kerry Weems said Wednesday.
Advocates of "P4P" say Medicare payments should vary according to the quality of treatment given by a doctor, hospital, or other provider. They say that providers don't have enough incentive to do their jobs well because they are paid regardless of the quality of their care they deliver—in fact, they get more money if they do a poor job and the patient has to keep coming back to the doctor or hospital for treatment.
When asked how to solve the problem of physician spending growth in Medicare, "many people will say, well, 'pay for performance' and they sort of stare off into the middle distance," Weems said in a breakfast meeting with health reporters. "When somebody does that, you should challenge them and say, 'Well, what do you mean? Tell me exactly what you mean.'"
Finally reaching agreement on a system is difficult because of differing views of what "quality" really is and questions about how a system should be funded, Weems suggested. "Pay for performance is hard, there's not a consensus around it," he said. "I'm confident that we can get there, but the way that we can get there is through diligent research, demonstrations, and working with the professional societies to make sure when we say 'quality,' we all mean the same thing."
Weems noted that CMS recently submitted a report to Congress on "value-based purchasing" which called for a portion of a hospital's base operating payment for each discharge—its "diagnosis related group" or DRG payment—to hinge on the quality of treatment. Weems told reporters Wednesday that under such a system, DRG payments in general could be reduced by 3 to 5 percent to create a pool of money for quality-based payment. Providers could earn all of that percentage back and more if they performed well on quality measures or showed substantial improvements in quality. Poor performers would earn less.
Asked why such a system isn't yet in place given seemingly widespread support for P4P, Weems alluded drily to the clout of the hospital industry. "Well, the prospect of not getting a full DRG payment can be a pretty substantial obstacle," he noted. The American Hospital Association has expressed concern about the CMS report, with a top AHA official saying that a reduction of up to 5 percent "is a significant cut, and there's a lot of uncertainty in how that money is returned to the system or if that money is returned to the system."
The next step is to have a congressional hearing on the report, Weems said. "I think that it's something concrete that the Congress can now go in and have a hearing about and think about and really question us," he said. "Bring in some experts and say, 'Gee, have you really got it right?' That I think would be the path forward."
Asked his priorities in the remainder of the Bush administration, Weems said "I intend to work very hard to see if we can get a value-based purchasing system for hospitals. One of the things we are considering...is that even if that system is not put into place, we may demonstrate to the world what it would look like if it were in place. So actually go through the mechanics of the payment system—not pay hospitals in that way but actually demonstrate what that payment system would look like."
