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Don't Recommend Lower Payments for Lousy Providers, MedPac Advised

SEPTEMBER 9, 2005 -- Any new system in Medicare that adjusts reimbursement levels based on quality of care shouldn't reduce payments to below-average performing providers, quality measurement specialists said Friday.

And above-average performers should get more than 1 or 2 percent in extra payments, one of the specialists said during a forum sponsored by the Medicare Payment Advisory Commission. That's the amount Washington policy makers typically propose as a reward for superior or improving care.

Both pieces of advice are at odds with recommendations MedPAC made to Congress earlier this year. MedPAC urged a "pay-for-performance" system in which the overall pot of money paid to hospitals, for example, would not grow under payment for performance. Instead, 1 or 2 percent more would be paid to better or improving performers—funded from savings from lower payments to below-average performers.

The specialists agreed on the need for a revised payment system. But Samuel Nussbaum, chief medical officer for the giant insurer Wellpoint, said payment reductions to poor performing doctors would lessen the odds of their investing in information technology systems that could help improve their care.

On the flip side, doctors need more of a reward than 1 or 2 percent, he said. "To envision that 1 or 2 percent will move the needle for physicians won't happen," he said.

Nussbaum urged bonuses of 10 percent for primary care physicians and 5 percent for specialists. The higher percentages are needed because of relative differences in the incomes of providers, Nussbaum said; 2 percent might be enough to spur investment in the case of hospitals because their revenues are far larger.

The pot of money paid to managed care plans under payment for performance should grow, said Jack Ebeler, CEO of the Alliance for Community Health Plans. Ebeler, whose members are among the nation's top performing health plans on quality measures, said shifting funds from the same pot of money could work too.

Ebeler said he thinks the better approach is to add "new money" to the system to fund higher payment. "Those who aren't going to get it perceive themselves as losing," he said, and so are motivated to perform.

Margaret O'Kane, president of the National Committee for Quality Assurance (NCQA), told MedPAC that adding money into the system is the better way to go, rather than reducing some payments. "I personally think it's hard to take money away," she said.

O'Kane is urging adoption of NCQA's measures as the basis of a payment-for-performance system for the health plans in the managed care side of Medicare, called Medicare Advantage. NCQA, an independent organization, developed the most widely used quality measures today.

O'Kane said in a statement released Friday that payment for performance systems in the private sector deliver quality improvements and savings of 10 to 15 percent. "Broad adoption of pay for performance at all levels of the Medicare system ...could be expected to yield similar benefits," the statement said.

Nussbaum likewise asserted that performance measures spur quality improvements and savings. He said Wellpoint has found that savings from reductions in hospital-based infections, for example, can be used to fund bonus payments for higher quality.

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