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MedPAC's June Theme: Think It Through, Do It Right

By John Reichard, CQ HealthBeat Editor

June 13, 2008 -- For those who follow the twists and turns of Medicare payment policy, MedPAC reports are an imperfect guide to the future—nevertheless, they may be the best roadmap available. The latest report out of the Medicare Payment Advisory Commission points to a future in which Medicare payment spurs doctors and hospitals to team up to deliver large packages of services efficiently—instead of operating independently and being individually reimbursed for many separately billable services.

The annual "June report" to Congress by the Medicare Payment Advisory Commission also suggests that changes lie ahead for the Medicare hospice benefit, and that the payments doctors receive from drug and medical device companies will increasingly come into public view. And it points to the rising prominence of "comparative effectiveness" research in determining coverage policy.

Many MedPAC recommendations are never followed, but many are—and with lawmakers increasingly anxious about controlling health costs, the panel's advice for improving the efficiency of health care will likely get a serious look from congressional aides and the lawmakers they advise.

"The commission continues to be very concerned that underlying payment systems in Medicare do things wrong," MedPAC Executive Director Mark Miller said in a press briefing on the report. "They reward volume, they discourage coordination, they are indifferent to quality. And they have been on this path of trying every year to make recommendations to push the system in a better direction."

Teamwork, Please
Spurring teamwork and promoting more careful oversight of the overall care of Medicare patients, particularly those with chronic illnesses, are major themes of the report.

One way commissioners aim to focus those efforts is to target hospitals more likely to readmit patients—a sign that the care they received wasn't good in the first place. The panel is calling for reduced payments to facilities with high readmission rates for selected conditions. This change would be coupled with a change in law allowing hospitals and doctors to share in savings from treating patients more efficiently—a goad to avoiding sloppy care that leads to readmissions.

The panel also would have the secretary of Health and Human Services report readmission rates publicly after two years. In the first two years, information about readmission rates would be provided to doctors and hospitals on a confidential basis, as would data on the level of health care resources they consume in delivering care. Hospitals and doctors could use the information to compare their performance to that of other hospitals and doctors, and make improvements accordingly.

MedPAC also advises Medicare to establish a pilot program to test the use of a single payment for a large package of services involved in treating a patient with a specific condition. The idea is to pay based on an "episode of care"—for example, for all the services that hospitals and doctors provide in treating a heart attack, not to continue paying separately for all the tests and procedures and appointments that go into delivering that care.

Bundling Medicare payment "to cover all services associated with an episode of care has the potential to improve incentives for providers to deliver the right mix of services at the right time," the report says. Medicare recently announced an "Acute Care Episode" demonstration program that appears similar to the test MedPAC has in mind.

The panel also is pitching "medical homes" for the chronically ill. That's not a nursing home; rather it's a doctor's office that would be paid a monthly fee per patient in return for overseeing his or her various preventive, maintenance, and acute care needs. The physician's practice would "maintain 24-hour patient communication" with beneficiaries, among other services. The panel is calling for a pilot program testing whether the concept can improve the efficiency of care.

Another recommendation calls for higher payment of primary care doctors, who coordinate the overall care of individuals.

Spotlighting Conflicts of Interest
Physicians have great influence over the volume of health care services in the nation and over the types of procedures performed and drugs and other medical products patients use. Financial entanglements with hospitals and drug and device companies raise the specter of unnecessary referrals and prescriptions. "Payers, plans, patients, and the general public are often not aware of these potential conflicts of interest," the report observes.

"A federal law that would require drug and device companies to publicly report their financial ties to physicians could encourage physicians to reflect on the propriety of those relationships, perhaps discouraging inappropriate relationships. A public reporting system also would help the media and researchers shed light on physician-industry relationships and explore potential conflicts of interest."

The study explores various options for disclosing these financial relationships, including the type and size of payments that could be disclosed and how they would best be publicized. "Under the approaches we describe, the responsibility for public reporting would rest with pharmaceutical and device manufacturers, hospitals, and ambulatory surgery centers, rather than with physicians," the report notes.

The report also explores issues involved in the creation of an independent entity to produce and publicize information about the comparative effectiveness of health care services and products, a step it urged a year ago. The report weighs pros and cons of different options for funding the entity and for the makeup of its board, but does not make specific recommendations.

Closer Scrutiny of Hospice, Drug Benefits
The report also examines a trend in Medicare toward longer periods of hospice treatment for patients nearing the end of their lives and the growth of for-profit providers in the hospice sector. The growing number of providers in the program "certainly doesn't imply providers are being paid too little," Miller said.

The report may lay the groundwork for recommendations to change the payment system, which pays providers based on the number of days of care they provide, Miller said. He predicted that people will say of the report's examination of hospice, "these guys were pointing out the direction this benefit was going before anybody was paying attention to it." The aim of future recommendations may be to "be more judicious about how we pay so we send the right signals," Miller said.

Miller also addressed a recommendation from a year ago that researchers be given greater access to drug claims data in Part D of the Medicare, the prescription drug benefit. He reserved judgment about a rule recently issued by the Centers for Medicare and Medicaid Services to open up access to the claims, saying it's unclear how the access provisions will work.

According to Miller, MedPAC is considering a number of possible studies of the data, including whether the use of prescription drugs lowers the hospitalization rate. Another topic that may be of strong interest is the number of Medicare beneficiaries that fall into the so-called donut hole in the drug benefit, a level of expenditure at which beneficiaries must pay 100 percent of their drug costs. Questions of interest also include whether patients with certain types of medical conditions are more likely to hit the gap and what impact that has on the rate at which they continue to fill prescriptions and their subsequent use of hospital care, Miller said.

Another area of potential MedPAC interest is the degree to which Medicare is making use of generic drug alternatives when available and the degree to which drug plan formularies cover brand name drugs that are treatment breakthroughs. Another possible focus is usage levels of biologics for which there are no generic alternatives. "We can't do them all" right away, Miller said of the studies.

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