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MedPAC Wrestles with New Tactics to Spur Efficient Care

By John Reichard, CQ HealthBeat Editor

April 9, 2008 -- The Medicare Payment Advisory Commission (MedPAC) voted Wednesday to recommend to Congress that it revise Medicare payments for treatment in skilled nursing facilities and increase payments for primary care. The panel also was headed toward approval of a recommendation that Congress establish a pilot program in Medicare to provide beneficiaries with a "medical home" to oversee their care.

Commissioners also agreed to recommend the adoption of Medicare payment incentives to motivate doctors and hospitals to work together to find more efficient ways to treat selected medical conditions. The panel will formally present the recommendations in a report to Congress this June.

MedPAC analyst Carol Carter said that the revised payment method for skilled nursing facilities (SNFs) recommended by the panel "would result in payments that are much closer to costs."

Currently, the payments consist of a nursing component, a therapy component, and an "other" component that includes room and board. The revisions would add a "separate non-therapy ancillary component," a term that includes items such as prescription drugs and intravenous therapy. They also would revise the therapy component to base payments "on predicted patient care needs," and adopt a provision for "outlier payments" covering unusual financial losses on patients.

MedPAC also approved a recommendation that calls on the secretary of the Department of Health and Human Services (HHS), which oversees the Centers for Medicare and Medicaid Services (CMS), to require the facilities to report diagnosis information and dates of service on their claims. In addition, the facilities would be required to report "services furnished since admission to the SNF separately" in their assessments of patients, and to disclose nursing costs on Medicare cost reports.

Facilities that have the largest profits under the current payment system would take the largest cuts under the revisions while those that are losing money on the payments would see the biggest increases, according to a MedPAC staff analysis. Non-profit SNFs would average payments that are 7 percent higher than those now while for-profits would average payments that are 3 percent lower.

MedPAC's recommendation for an "adjustment" for primary care services responds to concerns that the Medicare program and the nation generally will increasingly face a shortage of internists and family practitioners who provide basic medical services. MedPAC analysts believe that having an ample supply of such physicians is one of the keys to improving U.S. health care. If each patient has such a physician, their treatment is more carefully supervised, improving preventive care and eliminating duplicative testing, analysts say.

An analysis by MedPAC staffers Cristina Boccuti and Kevin Hayes defined primary care as "comprehensive health care provided by personal clinicians who are responsible for the overall, ongoing health of their individual patients."

The analysts said that most Medicare enrollees "have a usual source of care that they value" but "some access concerns exist. Among those looking for a new primary care physician 29 percent report some difficulty. U.S. medical school graduates selecting family practice and primary care residencies have declined steadily. Internal medical residents are increasingly becoming subspecialists," they added.

The recommendation on primary care does not specify how large the "adjustment" should be. Its actual language states that: "The Congress should establish a budget-neutral payment adjustment for primary care services billed under the physician fee schedule and furnished by primary care-focused practitioners. Primary care–focused practitioners are those whose specialty designation is defined as primary care and/or those whose pattern of claims meets a minimum threshold of furnishing primary care services. The [HHS] Secretary would use rule-making to establish criteria for determining a primary care-focused practitioner."

"Budget neutral" means that added payments for primary care would be funded by paying other types of doctors less so that the net effect on Medicare physician spending is neither an increase or a decrease. The sole dissenting vote against the recommendation was cast by Karen R. Borman, a general surgeon with the University of Mississippi Medical Center. Borman said payment rates for general surgery have suffered because of other payment changes in Medicare. "I think we need to recognize that there is a price that is being paid" that is substantial because of the budget neutrality requirement, she said.

Commissioners appeared headed Wednesday toward adopting another recommendation meant to better oversee and manage the health care of Medicare patients, which calls on Congress to "initiate a medical home pilot in Medicare." The recommendation outlined various "stringent criteria" that "medical homes" must meet.

To get the designation, a physician practice would have to show the capability to "furnish primary care" including "coordinating appropriate preventive, maintenance, and acute health care services." It would have to "use health information technology for active clinical support." It would have to "conduct care management and "maintain 24-hour patient communication and rapid access." It also would have to "keep up-to-date records of patients' advance directives" explaining what treatment they'd want if they became incapacitated.

The recommendation under discussion also called for requiring a "physician pay-for-performance program" in the pilot rewarding higher quality and greater efficiency.

And it said that the pilot "must have clear and explicit thresholds for determining if it can be expanded into the full Medicare program, or discontinued entirely."

Other language in the recommendation under discussion would require a participating Medicare beneficiary to sign a document designating a practice as a medical home and requiring notification of the home by the beneficiary if treatment was obtained outside the providers designated by that home. In addition, Medicare would have to provide the home with data on the levels of use by a beneficiary of Medicare-covered services, and the home would have to have a quality improvement program.

Medical homes would receive an added payment each month per participating Medicare enrollee.

Commissioners also weighed recommendations meant to intensify scrutiny by hospitals and doctors of how they provide care to avoid readmissions to the hospital and other forms of inefficient treatment.

Commissioners agreed to recommend that Congress require HHS "to confidentially report readmission rates and resource use around hospitalization episodes to hospitals and physicians. Beginning in the third year, providers' relative resource use should be publicly disclosed." The public would then be able to compare the efficiency of various hospitals and doctors in deciding where to go for treatment.

Commissioners also were expected to approve recommendations relating to "bundled" payment, in which Medicare would issue single payments for episodes of treatment such as heart attacks that would be shared by both the hospital and the doctors involved in delivering the care. The idea is that the single payment would spur them to be more efficient because they'd team up to be more efficient to have more of the payment left over to share after they'd delivered treatment. Doctors and hospitals now get paid separately.

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