Unbiased Analysis of Today's Healthcare Issues

Implementing a value-based purchasing program for Medicare

Written By: Jason Shafrin - Jan• 27•10

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) requires the Department of Health and Human Services (DHHS) to develop a plan that will transition Medicare payments into a VBP [value based purchasing] program for physician and other professional services that is based on efficiency and the quality of services provided. The Act also requires the DHHS to disseminate informational reports to physicians using episode groupers and/or per capita measures.

One way to implement VBP is to evaluate physicians based on episodes of care.  Episodes of care aggregate claims information to construct episodes.  These episodes are supposed to represent a homogeneous unit of care for a given type of treatment or disease.  A paper by Thomas et al. (2009) however, has found some problems with how episodes are constructed.  For example:

  • Many physicians typically treat a patient during an inpatient stay.  Can inpatient episodes reliably be attributed to a single physician?
  • Most Medicare inpatient stays treat multiple diseases simultaneously.  How does grouping account for these comorbitities?
  • Episode grouping is based on claim diagnosis codes.  “Since Medicare’s payment for a physician service is based on the CPT code (reflects procedure or type of visit) rather than on the diagnosis, physician offices have no incentive to spend much effort in coding a diagnosis. In contrast, the payments hospitals receive are determined by a combination of diagnosis and procedure codes.”
  • Complications from surgical care can be the fault of the doctor or from factors outside their control.   Determining whether or not the physician is at fault is extremely difficult and any physician rating system will likely blend the two causes.

Slides and a “backgrounder” from a CMS listening session on “Defining an Episode Logic” are also available.

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