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Senate Panel Mulls Structure for 'P4P'

JULY 27, 2005 -- Senate Finance Chairman Charles E. Grassley on Wednesday pledged to move legislation by this fall that would address the desire to link Medicare provider payments to quality of care.

"Everyone around here knows I'm a stickler for getting the most out of every tax dollar spent," the Iowa Republican said during a hearing by his panel on the issue. "Right now, we're not doing that in Medicare."

He and other lawmakers and witnesses noted that hospitals, doctors, and other providers who order unnecessary tests or make mistakes may get more money from Medicare than those who delivery high-quality medical care.

"Right now, Medicare pays the same amount regardless of quality," Grassley said of the program, which spends more than $300 billion a year.

Tying Medicare payment to the quality of care delivered "represents a sea change in Medicare policy, a significant departure from business-as-usual," said the committee ranking Democrat, Max Baucus of Montana. And making such a change, Grassley and Baucus said, will influence private payers as well because Medicare is the largest purchaser of health care in the nation.

Baucus and Grassley are sponsoring legislation to link Medicare provider payments to quality.

Herb Kuhn, director of the Center for Medicare Management in the Centers for Medicare and Medicaid Services, told the panel there are "too many examples" of providers being rewarded with higher payments for poor quality care. He said the agency is conducting several demonstrations and pilot projects to test pay-for-performance principles and develop standardized quality measures for different health care settings.

Mark E. Miller, executive director of the Medicare Payment Advisory Commission (MedPAC) that advises Congress on Medicare payment policy, said there are enough quality measures in place right now that would allow Medicare to begin pay-for-performance programs for hospitals, physicians, home health agencies, Medicare Advantage plans, and dialysis facilities and physicians who treat dialysis patients.

"CMS already has quality information for most of these settings that could be used as a 'starter set' of measures," Miller said. "However, to ensure that measures capture a broader spectrum of quality for patients and types of providers, additional information would be needed, particularly for physicians," he said. Miller also said CMS may need legislative authority to change the way it pays providers.

Kuhn and Miller both said physicians are central players to making "pay-for-performance" work and that financial incentives may help toward that goal. MedPAC has urged taking about 1 percent to 2 percent of current payments for physicians and other providers, and redistributing it to caregivers who improve the quality of their care or meet quality benchmarks.

"It's small enough not to affect revenue streams but large enough to make a difference over time," Miller said.

Sen. Jon Kyl, R-Ariz., said that removing that amount of money from Medicare physician payments without increasing reimbursements to doctors would cause trouble.

"I think this will be perceived as an enormous problem," he said. Miller responded that MedPAC is also urging a physician payment update be done in tandem with the redistributed payments.

An American Medical Association official urged lawmakers to ensure that any value-based legislation replaces the current sustainable growth rate (SGR) physician payment formula with a "stable, reliable payment system that preserves patient access and reflects increases in physician practice costs."

"The flawed SGR formula cannot co-exist with a value-based purchasing program for physicians," Nancy H. Nielsen, speaker of the AMA House of Delegates, told the panel. "The flawed SGR and value-based purchasing are incompatible."

Separately, Ways and Means Health Subcommittee Chairwoman Nancy L. Johnson announced she plans to unveil legislation Thursday to overhaul the way Medicare pays physicians. If left unchanged, she said, Medicare physician reimbursements will be cut an average of 5 percent in each of the next seven years, a step she said could hurt senior's access to physician care.

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