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'Value-Based Purchasing' Fate Uncertain Despite New Demos

By John Reichard, CQ HealthBeat Editor

August 17, 2009 -- You mean they haven't adopted it yet?

"Value-based purchasing" in Medicare has been discussed for so many years that it may come as a surprise that the program isn't close to adopting it yet—although it's getting closer.

The term refers to varying Medicare payment levels based on the quality and efficiency of treatment delivered by doctors, hospitals, and health plans.

On Monday, Medicare officials trumpeted the concept yet again, announcing promising results from three demonstration programs and the start of three more such programs: for nursing homes, and for two other projects testing "gainsharing" programs in which hospitals collaborate with doctors to improve the efficiency of care, with the lure of bigger profits if they keep treatment costs down.

But for all the talk about value-based purchasing in the hospital sector and the national angst about controlling health care spending, value-based purchasing ("VBP") wouldn't necessarily be adopted under health overhaul legislation. House Democratic overhaul legislation (HR 3200) does not implement the concept for hospital payments, and while the Senate Finance Committee has expressed strong interest in doing so, it would not begin until fiscal 2013 under a legislative option the panel floated earlier this year.

But House provisions do call for pilot programs creating "accountable care organizations," or "ACOs." The entities would consist of teams of doctors and hospitals receiving a single payment for an episode of treatment. By giving them a single payment, the providers would have an incentive to team up to figure out how to become more efficient, because they'd share any leftover payment after delivering treatment.

"Pilots" are different from "demonstration programs" because the latter can't be adopted through the Medicare program without Congress passing legislation to do so. Pilot programs can be adopted nationally by Medicare officials if the results meet certain criteria. But there is no guarantee about the results of demos becoming law or about the pilots panning out.

Officials at the Center for Medicare and Medicaid Services (CMS) proposed a VBP program to Congress in late 2007 but Congress has yet to legislate one.

"We've given them all this stuff and are continuing to gather information," a CMS source said. "The rest is up to Congress. Implementing VBP, changing the way Medicare pays its claims, would require legislation."

In a news release Monday, CMS said three ongoing demos—a hospital pilot program entering its fifth year, another program involving big group practices, and a third program involving some 560 small physician practices—"continue to provide strong evidence that offering financial incentives for improving or delivering high quality care increases quality and can reduce the growth in Medicare expenditures."

"What we learn from the various demonstrations helps to achieve the administration's goals of paying for high quality and efficient health care in America," said Jonathan Blum, director of the CMS Center for Medicare Management. "Building on these findings, we will aggressively test new demonstration concepts to continue to meet those goals."

The longest-running of the three ongoing demonstrations is the Hospital Quality Incentive Demonstration sponsored by Medicare along with Premier Inc., a national hospital consortium. Conducted in 38 states, it tests the impact of paying hospitals more if they attain certain levels of performance on quality measures or improve sufficiently on their quality scores. CMS says the program is generating widespread quality improvements.

CMS said Monday that participants "raised overall quality by an average of 17 percentage points over 4 years, based on their performance on more than 30 nationally standardized and widely accepted care measures for patients in five clinical areas—heart attack, coronary bypass graft, heart failure, pneumonia, and hip and knee replacements."

Premier recently announced that safety net hospitals and facilities in rural areas also have showed quality gains because of the payment incentives, suggesting that a payment-for-performance system can work not only for well-heeled hospitals that have more resources to improve quality but other hospitals as well.

The second of the ongoing demos is the "Physician Group Practice" (PGP) Demonstration. All ten of the group practices in the program attained benchmark performance levels on at least 28 of 32 measures in year three of the demonstration, CMS said. Two of the groups, Geisinger Clinic in Danville, Pa., and Park Nicollet Health Services in St. Louis Park, Minn., achieved benchmark performance on all 32 levels.

"As a result of their efforts to reduce the growth rate in Medicare expenditures, five physician groups will receive performance payments totaling $25.3 million as part of their share of $32.3 million of savings generated for the Medicare Trust Funds" in year three, CMS said.

The third demonstration is the "Medicare Care Management Performance" demo involving some 560 small and solo physician practices promoting the use of health information technology to improve the quality of care. The average payment per practice is $14,000 but some practices earned as much as $62,500.

In the first of the three new programs, nearly 200 nursing homes in New York, Wisconsin, and Arizona will receive higher payments if they meet certain quality performance standards or improve enough on those standards. The areas to be measured include nurse staffing, outcomes of treatment, avoidable hospitalizations and reducing citations during quality inspections. The program will run three years. The two gainsharing demos involve 14 hospitals collaborating with some 1,000 doctors.

Beth Feldpush, senior associate director for policy at the American Hospital Association, said her group supports building a value- based purchasing system off the current system that pays hospitals for reporting data on a variety of quality measures. AHA is willing to see adoption of such a system if it is budget neutral, she said, but opposes another option floated by the Senate Finance Committee which would return unused funds from a quality payment pool to the U.S. Treasury.

Although concerns have been expressed about the difficulty of less-well-off hospitals improving quality, AHA is willing to see a value-based purchasing program adopted but said it should be closely monitored for "unintended consequences," Feldpush said.
Among the difficulties in adopting a hospital system are the resources and data analyses that would be required at CMS to pay some 6,000 hospitals, a health care lobbyist noted. Some 600 hospitals take part in the current demonstration program with Premier Inc.

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