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The Dawn of New Era in Testing Doc Pay Methods?

By John Reichard, CQ HealthBeat Editor

May 5, 2011 -- While a House subcommittee hearing yielded no clues in the unending mystery over how Congress will fund an overhaul of the Medicare physician payment system, it did reveal a consensus among physician groups that a five-year period of experimentation is needed to test new ways to pay doctors.

Republicans and Democrats at the Energy and Commerce Health Subcommittee hearing appeared interested in accommodating the groups.

American Medical Association President Cecil B. Wilson urged lawmakers to follow a three-pronged approach: replace the current sustainable growth rate (SGR) payment system that has doctors expecting a 29.5 percent payment cut Jan. 1; move into a five-year period of stable Medicare payments; and use that time to test and begin adopting "new payment models that reward physicians and hospitals for keeping patients healthy and managing chronic conditions."

Physician groups generally appear to be on board with that approach.

Harold D. Miller of the Center for Healthcare Quality and Payment Reform outlined basic ways in which payments could be changed to lower costs without rationing and to improve the quality of care. The center includes a number of leading policy analysts, health care foundations, and health care systems.

"One is to keep people well," Miller said, "so that they don't have costs at all; second is that if they do have something like a chronic disease, to help them manage that in a way that avoids them having to be hospitalized, and if they do have to be hospitalized to make sure that they don't get infections, complications and re-admissions. And all of those things save money, but they also are improvements for patients and I think that patients would find desirable."

But "the current payment system goes in exactly the opposite direction," he continued. "Doctors and hospitals lose money whenever they prevent infections. We don't pay for things that help patients stay out of the hospital, and in health care nobody gets paid at all if they stay well."

You can't fix those problems by changing fee levels or adding regulations, you do it by "putting in fundamentally different payment models," Miller said.

Two fundamental changes are needed, he added. The first "is to pay for care on an episode basis rather than on a service-by-service basis, such as having a single price for all of the care associated with an episode" of care such as a heart attack; and also including a "warranty" so that no charges are made by providers when infections or complications occur.

"This is the same way that every other industry in America charges for its products and services—a single price with a warranty," Miller said.

The other approach, he said, is "comprehensive care payment, which is to have a single payment for a physician practice for all of the care that a patient needs to manage the particular conditions that they have, and in that way provides the flexibility for physicians to decide exactly what the right way is for care to be delivered to that patient.

"Where these programs have been tried they have worked," he said. Small physician practices can be "the innovators in this if we provide the right kind of support."

Lawmakers such as Rep. Michael C. Burgess, R-Texas urged that doctors play a leadership role in retooling physician payment, and witnesses agreed.

Former Centers for Medicare and Medicaid Services Administrator Mark McClellan said, "No one knows better than physicians how to answer the key questions: Where are the best opportunities to improve care and avoid unnecessary costs for their Medicare patients, and how can we implement practical payment reforms that support these improvements in care?"

Doctors see opportunities every day to improve the value of care," he said, "but are frustrated by a Medicare payment system that often works against them."

For example, McClellan said, oncologists focus on chemotherapy because that is what generates Medicare reimbursement. But they "get little support for doing many of the things that their patients need, things like spending time working out a treatment plan that meets each patient's individual needs; managing patient symptoms; and coordinating care with other providers."

Harvard Medical School Professor Michael Chernew described the "alternative quality contract" (AQC) implemented by Blue Cross Blue Shield of Massachusetts as a promising approach. Used in the insurer's HMO model, it consists of a five-year contract with a physician group that agrees to provide all of the enrollee's care. To prevent the provider from stinting on care, the AQC varies payment substantially based on quality of care assessed by 64 different measures.

M. Todd Williamson of the Coalition of State Medical and National Specialty Societies urged legislation (HR 1700) that would give doctors the option of contracting privately with Medicare patients to provide care. That approach appears to be of particular interest to the GOP Doctors Caucus in the House.

The measure would allow patients "to apply their Medicare benefits to the physician of their choice and to contract for any amount not covered by Medicare," he testified. "Physicians would be free to opt in or out of Medicare on a per-patient basis, while patients could pay for their care as they see fit and be reimbursed for an amount equal to that paid to 'participating' Medicare physicians"—those who agree to accept the Medicare reimbursement rate as payment in full.

Private contracting has been controversial in the past, arousing concern that lower income Medicare patients would lose access to care.

Of course having a period of experimentation hinges on finding huge sums of "pay-fors" to put off cuts required under the current SGR payment formula. For now, Republicans and Democrats appear intent on postponing the fight over how to do that while seeking agreement on the details of policy to replace the SGR.

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