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Poll: 'Pay For Performance' Best Way to Cut Health Care Costs

MAY 13, 2005 -- Tying providers' pay to the quality of the medical care is the most effective way to cut health care costs, according to a Commonwealth Fund poll released Friday.

More than half of those surveyed, or 57 percent, rated "pay for performance" as an "extremely or very effective way" to reduce health care costs.

Federal officials and policy wonks are touting pay for performance as a way to improve medical care for Medicare beneficiaries and spend federal health care dollars efficiently.

"Pay for performance has been gaining attention as an effective strategy of improving quality of care," Commonwealth Fund President Karen Davis wrote in a column posted on the Fund's website. "Health care opinion leaders view pay for performance not just as a way to reward quality, but as a strategy to raise efficiency in health care delivery."

In another sign Medicare is moving toward a pay for performance system, on May 3, Centers for Medicare and Medicaid Services administrator Mark B. McClellan trumpeted the preliminary results of a pilot program showing that the lure of higher payments goaded hospitals into improving their quality of care. Separately, federal official and medical society representatives have announced a "starter set" of measures of care given by physicians outside the hospital.

The Medicare Payment Advisory Commission (MedPAC), which advises Congress on payment issues, has urged lawmakers to establish a "quality incentive payment policy" for hospitals, home health agencies and doctors. MedPAC's recommendations include setting aside 1 percent of current payments and giving it to caregivers who improve the quality of their care or meet quality benchmarks.

As part of the Medicare drug bill (PL 108-173), hospitals were given higher Medicare payments to report data on quality performance measures. Performance data is also available for skilled nursing facilities, home care agencies, and managed care plans. Lawmakers could use that data to move to pay for performance systems for each of those health care sectors.

The Commonwealth Fund Health Care Opinion survey, an online survey of U.S. experts in health care practice and policy, asked respondents to rate the effectiveness of several strategies to reduce health care costs.

Fifty-six percent said improving disease management and primary care case management would be extremely or very effective, while 52 percent said that using evidence-based guidelines to determine when a test or procedure should be done would help lower costs.

Other cost-saving strategies included expanding the use of information technology (46 percent) and having all health care payers, including Medicare and Medicaid, adopt common payment methods and rates (44 percent). Less than one-third, or 31 percent, of those surveyed said that having patients pay a substantially higher share of their health care costs would help lower health care costs.

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