By Reed Cooley, CQ Staff

June 17, 2008 -- The Centers for Medicare and Medicaid Services (CMS) has awarded $24.5 million to the top performers in the first three years of a pay-for-performance demonstration project, Premier Inc., a consortium of care providers, said on Tuesday.

The project, a joint venture by CMS and Premier, gave financial rewards to top-performing hospitals based on 30 "nationally standardized and widely accepted care measures," said a press release. The incentives led to a 15.8 percent average increase in overall quality at 250 hospitals, serving 1.1 million people.

"The findings from the first three years of the . . . project clearly show that transparency with rewards for quality achieves a higher level of performance in American hospitals," said Premier president and CEO Richard Norling.

During the project, researchers have seen the variation in quality scores among hospitals diminish, according to the release. "The range of variance among participating hospitals also is closing, as those hospitals in the lower deciles continue to improve their quality scores and close the gap between themselves and the demonstration's top performers," it said.

Officials say that the successes of the project suggest that pay-for-performances measures should be extended to the entire Medicare reimbursement system. "Given these results, it is time to take the next step and implement hospital Value-Based Purchasing for the Medicare program, so that citizens across the nation can benefit from improved safety and quality get the right care, every time," Acting CMS Administrator Kerry Weems said in an agency press release.

By Reed Cooley, CQ Staff

June 18, 2008 -- The Centers for Medicare and Medicaid Services (CMS) has announced a new five-star rating program for nursing homes that it hopes will aid America's elderly and their families in choosing the right place for end-of-life care.

"Getting information about the quality of a particular nursing home should not have to be like going through bureaucratic water torture," Sen. Ron Wyden said in a Wednesday press teleconference announcing the program. Wyden, an Oregon Democrat, serves on the Senate Special Committee on Aging.

The program, to be implemented in December, will work to improve the Nursing Home Compare section of the Medicare Web site by adding a five-star rating system, based on 19 quality measures, to information on the size, location, ownership, and coverage options of each nursing home.

"We know the public is hungry for information," Acting CMS Administrator Kerry Weems said at the teleconference. "Transparent information is an effective incentive for quality," he added.

Industry representatives agreed but cautioned that it is too soon to tell whether CMS' proposed system will be effective.

"We hope that a rating system would improve the quality of nursing home care, but we are concerned that in the time frame that CMS has outlined they're not going to be able build a stable, solid house to do that," said Lauren Shaham, a spokeswoman for the American Association of Homes and Services for the Aging (AAHSA).

In a statement anticipating the CMS announcement, AAHSA President and CEO Larry Minnix advocated the building of a rating system on "four essential pillars": resident and family satisfaction; staff satisfaction; clinical quality outcomes; and public oversight.

Both Minnix and Shaham stressed the importance of public oversight in the rating process. The public oversight pillar "will be the most controversial because [it] is the most developed, yet has the largest cracks in its foundation," Minnix said.

Tony S. Edelman, a senior policy attorney at the Center for Medicare Advocacy, worried that effective oversight would be difficult. "Two of the three criteria that CMS plans to use—quality measures and staffing data—are self-reported by nursing facilities and are inaccurate," he said.

The CMS announcement garnered a more hopeful reception from the powerful senior lobby AARP. "The star rating system proposed today could make it easier for families to identify facilities that consistently provide quality service and safety for their residents," AARP Executive Vice President John Rother said in a statement.

During the same teleconference, CMS separately unveiled an initiative to require all nursing homes serving Medicare and Medicaid beneficiaries to install sprinkler systems in their facilities by 2013.

The project will be phased-in in stages and is part of CMS' effort "protect the lives of our beneficiaries," according to Weems.

By Mary Agnes Carey, CQ HealthBeat Associate Editor

June 17, 2008 -- Changes to the nation's health care system will influence the pace of economic growth, wages, living standards, and government budgets due to the sector's large and growing share of public and private sector spending, Federal Reserve Board Chairman Ben Bernanke said Monday.

Speaking at a "Health Care Summit" at the Library of Congress sponsored by the Senate Finance Committee, Bernanke said that improving the performance of the health care system was one of the nation's most important challenges, with the key areas of concern being access, quality and cost.

"Taking on these challenges will be daunting. Because our health care system is so complex, the challenges so diverse, and our knowledge so incomplete, we should not expect a single set of reforms to address all concerns," Bernanke said. "Rather, an eclectic approach will probably be needed. In particular, we may need to first address the problems that seem more easily managed than waiting for a solution that will address all problems at once."

Senate Finance Committee Chairman Max Baucus, D-Mont., said he hoped speakers at Monday's summit would lay the groundwork for major health care legislation next year. Sen. Charles E. Grassley, R-Iowa, the panel's ranking Republican, called health care the year's top economic issue and implored lawmakers to find comprehensive solutions that deal with areas such as access and cost.

In his remarks, Bernanke noted that spending on health care services represents a major segment of the economy, exceeding 15 percent of gross domestic product (GDP). "A piece of wisdom attributed to the economist Herbert Stein holds that if something cannot go on forever, it will stop," Bernanke said. "At some point, health care spending as a share of GDP will stop rising, but it is difficult to guess when that will be and there is little sign of it yet." And as health spending continues to rise faster than income, health insurance and out-of-pocket payments "will become increasingly unaffordable," he said.

Higher government spending on health care also puts pressure on other areas of the budget, creating "increasingly difficult tradeoffs for legislators and taxpayers" that will require reductions in other government programs, higher taxes, or larger budget deficits, Bernanke said. In 1975, federal spending on Medicare and Medicaid was about 6 percent of total non-interest federal spending. Today, he said, that share is about 23 percent. If current trends continue, rising costs of health care and the aging of the population will increase that share to about 35 percent in 2025, according to the Congressional Budget Office (CBO).

But as lawmakers focus on what's wrong with the nation's health system, they must also remember what's right, he said. New technologies have added cost to the system, but they have also improved the quality of care delivered. New drugs and treatments have improved the diagnosis and treatment of disease. "In devising policies to reform our health care system, we must take care to maintain the vitality and spirit of innovation that has been its hallmark," Bernanke said.

By Drew Armstrong, CQ Staff

June 20, 2008 -- The House plans to vote Tuesday on a modified version of a Senate Medicare bill, rather than waiting for ongoing bicameral negotiations to produce a deal.

House Majority Leader Steny H. Hoyer, D-Md., said House Energy and Commerce Chairman John D. Dingell, D-Mich., and House Ways and Means Chairman Charles B. Rangel, D-N.Y., had decided to move with their own bill after discussions with Senate Democrats had not yet produced a deal.

Hoyer said the bill the House will vote on Tuesday will not be fully offset.

Dingell and Rangel's bill will be based on legislation (S 3101) by Senate Finance Chairman Max Baucus, D-Mont. The legislation would avert scheduled cuts to Medicare's physician rates from taking effect for 18 months, replacing them with stable payments, including a 1.1 percent increase in 2009, according to a summary.

Baucus' bill has yet to pass the Senate, so the House will have to introduce its version as a new piece of legislation.

House Democratic said the House bill was an independent product, despite ongoing negotiations between Dingell, Rangel, and Baucus. However, those talks are still expected to produce whatever legislation ultimately become law.

The Senate remains the greatest hurdle for any Medicare legislation. The White House and conservative Republicans have used the chamber as a firewall to halt any bill that would cut private Medicare plans, known as Medicare Advantage.

The physician payment cuts are scheduled to go into effect July 1, and lawmakers are scrambling to clear legislation quickly to stop them.

The House package would be partially offset by cutting some bonus payments to Medicare Advantage in areas with teaching hospitals. Another offset would require a subset of the plans called "private fee for service" to form networks with health care providers, which would reduce future costs by slowing the growth of the plans. The plans are paid at a higher rate than traditional Medicare, and Democrats have long sought to cut them.

Proposed cuts to the bonus payments have not generated much opposition from Republicans.

Responding to the House proposal, a Baucus aide said, "Clearly, there's a lot that Senator Baucus agrees with. . . . Senator Baucus believes the bill deserves support and will watch the House vote with interest. It is important to end up with legislation that can pass both chambers."

The bill would rework several elements of the Baucus bill to cut down on the overall cost, deleting a $1.1 billion "Medicare Improvement Fund" and removing several provisions that would offer bonus payments to doctors, and other Medicare programs.

Concerns About Offsets
House GOP Whip Roy Blunt of Missouri expressed some reservations about the bill, saying concerns about the offsets could lead to "at least a veto-sustaining number on our side" voting against the bill.

The House proposal also addresses several Democratic policy priorities, including postponing for one year a Medicare program that would have forced suppliers of durable medical equipment to enter into a competitive bidding program as a way to cut down on government spending. The bill will not cut Medicare payments to providers of powered wheelchairs and oxygen supplies, according to the summary.

Other items include $4 billion over five years of spending on Medicare beneficiary programs, such as premium assistance and lower copayments for mental health services. Provisions to encourage electronic prescribing and to help pharmacies are included as well.

In the Senate, Baucus has been in private discussions with Finance Committee ranking Republican Charles E. Grassley of Iowa, to see what GOP members—who blocked a previous attempt by Baucus to pass legislation—might accept.

If the House moves a bill, it will put pressure on Senate Democrats and Republicans to reach an accord. A Senate aide said June 20 that Baucus and Grassley were close to a deal, but had not put a final stamp on one.

"Reports of a deal between the chairman and ranking member are premature," said an aide to Baucus.

A deal between Grassley, Baucus, and House Democratic negotiators could scuttle plans for the House vote Tuesday if the Senate appears ready to move quickly and send over a compromise bill.

By John Reichard, CQ HealthBeat Editor

June 20, 2008 -- Medicare officials are circumventing the will of Congress by diverting funds from quality improvement organizations (QIO), industry officials said.

The Centers for Medicare and Medicaid Services has been using money meant to administer its contracts with QIOs for other purposes, QIO officials said.

CMS is shutting down projects to help seniors take prescription drugs more safely and effectively and scrapping plans to help hundreds of hospitals and nursing homes prevent sometimes fatal bedsores and reduce the use of belts, vests, and wrist devices to keep patients from wandering, they said.

QIOs have long been the mainstay of efforts to improve the quality of care in the Medicare program, but officials say their budgets are increasingly being misused by federal officials for projects that may be worthwhile but are not authorized for funding using QIO money.

The QIO budget, funded through the Medicare Trust Fund, "isn't a piggy bank for anything that has to do with 'quality,'" said David G. Schulke, executive vice president of the American Health Quality Association, the lobby representing the nation's QIOs.

QIO officials suggest that the budget squeeze may be a tactic to achieve administratively what the agency earlier this year proposed, but failed to do legislatively—streamline the program by having regional QIOs rather one QIO in each state.

Only weeks away from having to sign new three-year contracts with Medicare, QIOs hope Congress will intervene with Centers for Medicare and Medicaid Services officials to keep more money for core QIO activities. They note that a June 6 letter to CMS signed by a bipartisan majority of the Senate Finance Committee faults the agency for changing the QIO program "without congressional authorization or consultation."

The letter also seeks a briefing of congressional aides by CMS officials on the changes before any contract negotiations. The senators signing the letter did not include Finance Committee Chairman Max Baucus, D-Mont., or the panel's top Republican, Sen. Charles E. Grassley of Iowa.

CMS declined to comment on the letter, saying it was precluded from doing so by rules pertaining to pending contract negotiations. The agency didn't immediately respond to a request for comment Friday on the various assertions by QIOs.

The Bush administration has proposed a budget of $1.1 billion to QIOs for the three-year contract cycle that starts Aug. 1, 2008. That's a cut of $130 million for QIOs, or 10.6 percent, according to CMS, which says the budget for three-year cycle now ending was $1.23 billion.

But QIO officials say that the cut is really deeper, because last year CMS "deobligated"—transferred to another use—$40 million of the $60 million it said it would spend on QIO projects to improve pharmaceutical drug use. And in the new contract cycle, CMS is making much sharper cuts in funding for basic quality improvement functions, QIO officials add.

Schulke said in an interview that while deobligation is legal, the funds taken away from one QIO function can't be used for non-QIO purposes.

The money went to fund an initiative ordered by President Bush to increase "transparency"—to publicize the quality and price of health care services to boost the value of health care spending through competition. That isn't a QIO function, Schulke said, asserting that under section 1159 of the Social Security Act, funds for QIOs taken from the Part A and Part B Medicare trust funds can only be used for costs incurred in administering QIO contracts.

Schulke noted further that under the 2003 Medicare overhaul law (PL 108-173), QIOs were assigned to work with Medicare health plans and Medicare prescription drug plans to improve the quality of prescription drug therapy. Subtracting the $40 million undermined that effort, leading to the shutdown of various projects, Schulke said. And the upcoming three-year contract provides little or no funding for the work Congress wanted QIOs to do on prescription drugs, he said.

CMS is really substituting its own agenda for that of Congress, Schulke said.

Among the projects in the works before the funding cut were those in 11 states to promote safer alternatives to the use of drugs likely to produce adverse effects in the elderly; in eight states to improve medication use by diabetics; in seven states to educate Medicare enrollees about "Medication Therapy Management" services offered by Medicare drug plans to promote safer and more effective drug use by the chronically ill; and programs by several other QIOs to use pharmacy data to spur competition over quality performance.

Many of those programs have now been suspended, Schulke said.

QIOs also say that between February and May of this year, CMS made cuts that slashed the number of providers they could work with to improve care. According to AHQA, CMS published figures saying QIOs should assist 2,889 hospitals in reducing bed sores, yet in May funded them to assist only 607, a reduction of 79 percent. The agency said QIOs should help 900 hospitals in reducing surgical complications, but in May it funded them to help 801, a reduction of 11 percent. Similarly, hospitals to receive help fighting MRSA infections were whittled from 693 to 644.

The number of nursing homes to get help reducing bed sores dropped from 1,942 to 1,476, a 24 percent decline. Those to receive help lessening the use of physical restraints to keep patients from wandering was reduced from 2,475 to 1,930, a 22 percent decline, according to AHQA.

Meanwhile, CMS is increasingly shifting funds into administrative and overhead spending—and away from quality improvement work with providers and beneficiary protection work to review quality of care complaints and appeals of coverage decisions, according to the association.

Almost half of the QIO spending—44 percent—in the upcoming contract cycle will go for "overhead and support" costs, compared with 30 percent in the current contract, according to AHQA. The percentage for quality improvement work with providers will drop from 38 percent to 30 percent, while that for beneficiary protection will fall from 27 percent to 18 percent.

Schulke said it's unclear how money shifted into the overhead and support category will actually be used.

The pattern of using QIO money for non-QIO purposes goes back several years, Schulke added. He noted for example that a 2006 study by the Institute of Medicine found that $55 million in Medicare trust fund money allocated for QIO contracts in 2002 through 2005 was actually used for non-QIO activities.

It's unclear, however, to what extent if any Congress will intervene with these funding shifts.

Grassley may be a tough ally for QIOs to attract on the funding issue; he has fiercely criticized the management of QIOs and appears to be working successfully behind the scenes with CMS to tighten QIO management in the upcoming contract cycle. Baucus, meanwhile, has been busy negotiating the terms of Medicare physician payment legislation and has fish to fry with Grassley on non-QIO issues, even if he is inclined to oppose the funding shifts.

Aides to Baucus and Grassley offered only limited comments Friday on QIO issues, citing the intensity of negotiations on other Medicare matters.

A Baucus aide said the Finance Committee chairman "believes that QIOs should be able to focus more on improving quality of care, not less." It was unclear, however, whether Baucus plans to intervene in CMS funding allocations. Meanwhile, a Grassley aide said, "We do not have information about CMS using trust fund money from the QIO budget for non-QIO purposes." The aide noted that a report by the Government Accountability Office on QIOs has found "shortcomings with their work in many areas."

By Whitney Blair Wyckoff, CQ Staff

June 18, 2008 -- Only a small number of physicians use a comprehensive digital record keeping system, according to a study in Thursday's online edition of the New England Journal of Medicine.

Four percent of physicians have fully functional electronic health records, or EHRs, and 13 percent have a basic system, according to the study titled "Electronic Health Record Adoption in the Ambulatory Setting: Findings from a National Survey of Physicians." Even among physicians in largest group size—where physicians are three times as likely to use basic EHR systems than their colleagues in practices of one to three—almost half did not have a digital record keeping system.

However, the study found that more physicians could be implementing such systems soon.

Sixteen percent have bought an EHR system but haven't implemented it yet, and 26 percent said their practice would purchase an EHR system within two years, the study found. This could signal an increase in usage within the next three to five years, said lead study author Catherine DesRoches during a teleconference sponsored by the Robert Wood Johnson Foundation and the Institute for Health Policy at Massachusetts General Hospital.

One of the major barriers to physicians adopting EHR is cost, DesRoches said. She said some doctors surveyed recommended the use of incentives, such as payment for purchasing or using an EHR system. The study also found that doctors view legal protection from personal liability for record tampering as important, she said.

Richard Baron, a doctor and CEO of the Greenhouse Internists group practice in Philadelphia, said it was an expensive endeavor to adopt EHR in his practice. It cost each physician in his practice $40,000 to implement, and it costs $60,000 each year in IT support, he said, adding that it took a long time to start up.

"It was not a financially rewarding thing for us to do," Baron said at the teleconference, while adding that it does help with patient care. He emphasized the need to provide incentives for practices to adopt an EHR system. "I really think new financing strategies are desperately needed," he said.

DesRoches said physicians who use the systems like them. "They're not finding them cumbersome to use, and they're not having a lot of problems with these systems going down," she said.

Last week, the Department of Health and Human Services said it plans to establish a five-year, $150 million pilot project offering incentives to 12 cities and states to encourage physicians to adopt an EHR system.

"Our findings both amplify and extend earlier work that has been done in this area," DesRoches said, adding that previous studies simply asked physicians whether they use EHR. This study differentiates between basic and more comprehensive systems, she noted.

In the more elite "fully functional" category, the EHR system must be able to record patient information and demographics, view and manage things such as lab results, manage orders—like e-prescriptions—and help with clinical decisions, such as processing reminders for screenings. Basic systems may not have certain order entry capabilities or clinical decision support.