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McClellan, Like a Metronome, Sticks to Measures

By John Reichard, CQ HealthBeat Editor

July 27, 2006 -- Unmoved by skeptical questioning from House lawmakers, the head of the Medicare program said Thursday that the moment has arrived for widespread adoption of quality measures of physician care. Centers for Medicare and Medicaid Services Administrator Mark B. McClellan repeatedly rebuffed suggestions by Democrats at a House hearing that measures aren't well-developed enough across the physician sector to permit their use to be tied to physician payments.

Nor would McClellan take the bait when Georgia Republican Charlie Norwood suggested that government bureaucrats have no business telling doctors how to practice medicine by tying payment to use of the measures.

McClellan's testimony before the House Energy and Commerce Health Subcommittee suggested that the administration will push Congress later this year to adopt legislation blocking a scheduled cut in physician payment of almost five percent next year—with the proviso that doctors will only avoid lower reimbursement if they report data allowing Medicare to measure the quality of their care.

"We definitely want to work to address the scheduled payment reduction," he said in remarks to reporters after his testimony. But "we still want to make sure we're addressing it in a way that doesn't increase overall costs and beneficiary premiums."

McClellan suggested that could be accomplished in part through savings generated by adopting measures of quality. "There is growing evidence that these quality reporting programs and steps toward performance-based payments can save money overall," he said.

McClellan said hospitals are a good model for physicians to follow with regard to measure-based payment. In the hospital sector, reporting data on quality performance measures is voluntary, but hospitals that do so receive a higher payment update.

McClellan cited hospitals as a model during the hearing, as well. When Rep. Sherrod Brown, D-Ohio, suggested that measures aren't close to being ready across the board for the physician sector, McClellan noted that hospitals started with a limited number of performance measures. "This is a gradual process," McClellan said.

He said that 34 physician specialties have developed measures that doctors could use to report performance data using the current claims they file when they seek reimbursement from Medicare. Only 5 specialties lack such measures, he added.

McClellan hammered away at the point that Congress can't simply respond to scheduled payment cuts by putting more money into the physician payment system without adopting new steps to ensure that the money is well-spent. "We should be paying for care in a way that encourages improved quality and keeps overall costs down," he said. Simply putting more money into the system also is untenable because it drives the premiums beneficiaries pay for Part B of Medicare higher, he added. McClellan suggested that quality-based payment is particularly needed in light of faster-than-expected growth in Medicare's Part B program, much of which is spending on physician care.

"The main reason for the 10 percent growth in expenditures for physicians' services in 2005 is an increase in the volume and intensity of services," he testified. "The continuing rapid growth in utilization and thus in Part B spending has two important consequences: it will lead to substantial increase in Part B premiums and will increase the difference between actual and target expenditures with the existing update formula." That formula requires payment cuts to recoup spending in excess of the target Medicare sets every year for how much physician spending should grow. The faster that spending grows and the more it exceeds yearly targets, the more payments to individual doctors must be cut under the Medicare formula.

While Democrats questioned what one called the "rush" to adopt measures in payment, a Subcommittee Republican questioned the government's role. Norwood urged McClellan not to fool himself that bureaucrats can tell doctors what quality care is. But McClellan said measures are being developed with the leadership of doctors. "CMS expects that physicians will continue to be the leaders in the development of performance measures for the various specialties," he said.

The event was the second day of a hearing that began Tuesday on the subject of Medicare physician spending. As he did Tuesday, House Energy and Commerce Committee Chairman Joe Barton, R-Texas, again expressed interest in passing legislation this year that would scrap the problematic current payment formula and switch to yearly payment increases based on the change in the Medicare Economic Index (MEI), which tracks the costs of delivering physician care.

McClellan said that would be costly and that doing so would have to be combined with other steps to keep the volume of services down. While McClellan agreed "structural" change is needed in physician payment, he didn't appear to be endorsing a wholesale switch to an MEI-based system. Democrats pressed McClellan on issues other than quality measures, but the CMS administrator was similarly unmoved in those areas as well. Brown noted that 205 Democrats in the House sent a letter to the administration Wednesday opposing the issuance of regulations by CMS they said would cut Medicaid by $30.4 billion over 10 years. The letter said that among other things, the regulations would trim health care services to children.

Asked by Brown if he could assure lawmakers the administration wouldn't move on the rules, McClellan said that as the administration moved forward with the regulations it would take the concerns of lawmakers into account. The regulations will be proposed as soon as possible, McClellan said. Changes by the administration in Medicaid are redirecting dollars to where they are needed most, he said.

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