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MedPAC Report Theme: Differentiating Among Providers to Spur Quality, Efficiency

March 1, 2005—That March 1 ritual in the health policy world, the submission by the Medicare Payment Advisory Commission of its annual recommendations to Congress, has in some respects become empty. Reporters wring it dry of news long before by filing stories on the recommendations for payment updates adopted by the commission at its January meeting leading up to the report. But missing in the nitty gritty details of those recommendations this year is a larger theme, that Medicare may soon begin moving toward a system of differential payment.

Mark Miller, the commission's executive director, outlined that theme in a briefing with reporters Tuesday morning, saying the advisory body wants Medicare to adopt a system of differential payment as a way to spur gains in quality and efficiency. Medicare should pay more for higher quality performance from hospitals, home health agencies, and physicians, the March 1 report says.

One of the goals of higher payments for better quality is to create a greater return on investments in information technology, thus improving the quality of care. While only 1 or 2 percent of payments for hospital, doctor, or home health care will be earmarked for higher quality care, Miller said these small percentages are of very large numbers-$111 billion in the case of hospital care and $50 billion in the case of doctor care. "One to 2 percent of that can get to real money." Miller added that the goal is to set aside larger sums for better quality once "pay for performance" is better established.

The report also says the Centers for Medicare and Medicaid Services, which oversees the Medicare program, should include quality measures that reflect the use of functions of information technology systems, beginning in physicians' offices, and require reporting of lab values and prescription claims data that would be combined with physician claims to provide a more complete picture of patient care, the report says.

MedPAC said providers who perform imaging studies and physicians who interpret them should be required to meet quality standards as a condition of Medicare payments and that CMS should improve coding edits for imaging services. MedPAC commissioners are also urging CMS to measure resource use of physicians serving Medicare beneficiaries and provide information about practice patterns on a confidential basis to physicians.

Other recommendations included updates and policy improvements from six Medicare payment systems for hospitals, physicians, skilled nursing facilities and other Medicare providers (see CQ HealthBeat, January 12 and 13, 2005). Several health care groups reacted to the MedPAC recommendations. Jack Ebeler, president and chief executive officer of the Alliance of Community Health Plans, which represents not-for-profit health plans, commended MedPAC for "recommending that Congress retool the payment system in Medicare to provide incentives for the highest-quality care and improvements in quality."

While all Medicare providers should eventually be included in a pay-for-performance program, Medicare should begin with Medicare Advantage plans, Ebeler said. The Medical Group Management Association, which represents medical group practices, expressed "a mix of support and concern" for the MedPAC recommendations, praising its suggestions on physician reimbursements but taking issue with those concerning health information technology (HIT), specialty hospitals and imaging services.

"MGMA remains concerns that HIT's upfront investment discourages the majority of medical group practices from realizing HIT's promise of better quality," said Dr. William F. Jessee, the group's president and chief executive officer. Jessee also urged an extension of the current 18-month moratorium on specialty hospitals in the Medicare drug law (PL 108-173).

Concerning MedPAC's recommendations on imaging, Jessee said while his group appreciates congressional concern about rising health care costs, "the solution is not to restrict patients' ability to receive effective and efficient imaging services in the group practice setting."

An imaging industry group, the National Electrical Manufacturers Association, said any imaging standards should be developed in an "open and collaborative" process that includes industry. Standards shouldn't be burdensome and should be updated to reflect advances in technology and medical practice, the group added. The switch to standards also should include "transition mechanisms," NEMA said.

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