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Medicare reducing reimbursement for low-quality docs

January 16, 2012 in Medicare, P4P, Physician Compensation | 4 comments

In 2015, Medicare will begin implementing a value-based purchasing (VPB) program for physicians.  Initially the program will target only certain physicians and groups of physicians, but by 2017 all physicians is participate in this program.

The VBP program will evaluate physicians along two broad dimensions: quality and cost.  In the final rule:

Section 1848(p) of the Act requires the Secretary to ‘‘establish a payment modifier that provides for differential payment to a physician or a group of physicians’’ under the physician fee schedule ‘‘based upon the quality of care furnished compared to cost *** during a performance period.’’ The provision requires that ‘‘such payment modifier be separate from the geographic adjustment factors’’ established for the physician fee schedule. In addition, section 1848(p)(4)(C) of the Act requires that the value modifier be implemented in a budget-neutral manner.

 

Quality

The current quality measures to be used include:

  1. The measures in the core set of the Physician Quality Reporting System (PQRS);
  2. All measures in the Group Practice Reporting Option (GPRO) of the Physician Quality Reporting System; and
  3. the core measures, alternate core, and 38 additional measures in the Electronic Health Records (EHR) Incentive Program measures.

Cost

The current measures of cost CMS is using are total per capita cost measures and per capita cost measures for beneficiaries with four chronic conditions (COPD; heart failure; coronary artery disease; and diabetes).

By January 2012, however, CMS will choose an episode grouper which can evaluate physicians based on episodes of care. Specifically:

Section 1848(n)(9)(A) of the Act requires us to develop by January 1, 2012, an episode grouper that combines separate, but clinically related items and services into an episode of care for an
individual, as appropriate.

Other Issues

One of the main problems of the physician VBP is attribution of patients to doctors. In managed care organizations, patients are assigned a primary care doctor or gatekeeper who are responsible for the patient’s overall care. In Medicare, the patient can see any willing provider; because the primary care doctor cannot restrict the patient’s choice of care, it is more difficult to hold them responsible for the care. Specifically, Medicare beneficiaries never have to choose a primary care doctor, so identifying the doctor to be ultimately responsible for each patient’s overall care is difficult.

Physicians require additional information to understand why the received the VBP scores they did. For this purpose, CMS will create Physician Feedback Reports, confidential reports providing more detailed information of the underlying factors which produce these scores.

For the VBP modifier in 2015, CMS will use 2013 as the initial performance period 2013. This means that payment adjustments in 2015 will be on care provided 2 years ago. Although evaluating physician performance, allowing for appeals and adjusting payments takes time; two years is a long lead time.

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Another Blow to Health Reform?

November 26, 2011 in Medicare | No comments

The head of the Centers for Medicare and Medicaid Services (CMS), Don Berwick, announced he would step down from his post on Wednesday.  Berwick was a temporary 18 month appointment who Obama hoped would stay on longer.  The San Francisco Chronicle reports

“The point man for carrying out President Obama’s health care law will be stepping down after Republicans succeeded in blocking his confirmation by the Senate, the White House announced Wednesday.”

Don Berwick aimed to improve healthcare quality in Medicare.  Many individuals, however, have tried to improve the quality of care provided to Medicare enrollees.  Why would might Berwick’s efforts have been any more successful than his predecessors?  John McDonough of Health Stew notes that Berwick has a legacy of promoting quality improvement across a variety of healthcare organizations.

“In 1989, Berwick wrote a seminal article for the New England Journal of Medicine called “Continuous Improvement as an Ideal in Health Care,” and set off an intellectual revolution in American, and eventually, global medicine. Prior to Berwick, “quality” had been linked with the word “assurance” with the cavalier and false assumption that quality already existed, and all that was needed was adequate policing to root out “bad apples.” Every hospital was required to have a “quality assurance” department that looked out for quality; everybody else just did their jobs.

More than anyone, Berwick changed the word from “assurance” to “improvement” with new assumptions: quality must be an essential part of everyone’s job; no matter how good or how bad you think you and your organization are, every day, you have multiple opportunities to improve; and the key to quality improvement (QI) is the elimination of errors and waste, along with the empowerment of workers. Berwick did more than just establish an idea, he created an organization, the Institute for Healthcare Improvement (IHI), to advance and actualize it. Under his leadership, IHI has become the worldwide home for QI through training, teaching, learning, collaborating, advocating, and more.”

Berwick also ran into trouble for using the ‘r’ word.  Specifically, in an interview with a biotechnology journal in 2009, he said, “The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open.”

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Does Medicare use CPT codes for payment?

July 13, 2010 in Medicaid/Medicare, Part B | 2 comments

For Part B services, Medicare pays physicians based on the services they provide.  The American Medical Association (AMA) developed Current Procedural Terminology (CPT) codes to create a taxonomy of procedures that physicians perform.  Does the Centers for Medicare and Medicaid Services (CMS) use these codes for payment?

The answer is yes and no.  Officially, CMS uses Healthcare Common Procedure Coding System (HCPCS) codes.  These codes are used to classify about 6,700 distinct services. Although CMS does not officially use CPT codes, the HCPCS are closely related to CPT codes.  In fact, there are two sets of HCPCS codes. “The first set, HCPCS Level I, are based on and identical to CPT codes…Level II HCPCS codes are used by medical suppliers other than physicians, such as ambulance services or durable medical equipment.”

The Medicare Administrative Contractor (MAC) actually process the payment for these claims.  There are 4 MACs for durable medical equipment claims and 15 MACs for processing Part A and B claims.

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Center for Medicare and Medicaid Innovation

June 30, 2010 in Health Reform, Medicaid/Medicare | 1 comment

Medicare and Innovation in the same sentence?  Yes indeed.

As part of Health Reform [i.e, Patient Protection and Affordable Care Act (PPACA)], the government mandated the creation of the Center for Medicare and Medicaid Innovation (CMI).

What does CMI do?  ”The stated purpose of the CMI is to test innovative payment and service delivery models to bring about a reduction in Medicare and Medicaid program expenditures while preserving or enhancing quality of care.”  Items that CMI might consider are implementing payment mechanisms using accountable care organizations, or pay-for-performance systems using episode grouping technology.  CMI will be especially interested in reforming coverage rules for “dual-eligibles,” beneficiaries who are both eligible for Medicare and Medicaid.  There are 9 million dual eligibles who are, by definition, both elderly and poor.

CMI shall be the research and development arm for CMS.  In addition, CMI will undertake the following roles as well:

  • Lead the design, implementation and evaluation of Medicare and Medicaid demonstrations and pilot programs to test the feasibility, cost effectiveness and quality outcomes of new health care delivery models.
  • Disseminate findings from literature reviews, basic research and program evaluations to inform law makers, academics, and industry about health care delivery issues, new innovative concepts, and demonstrations and pilot programs.
  • Sift through the information and evaluative findings to develop new objectives for basic research and new research demonstrations and provide guidance for the formulation of new program policy proposals and their implementation within the Medicare and Medicaid Programs.

According to Wikipedia, before CMI, “CMS historically has relied on several research and demonstration authorities: §1115(a) of the Social Security Act (which authorizes the HHS Secretary to undertake demonstrations related to Medicaid program design and administration); and other provisions of the Social Security Act which permit demonstrations related to payment, delivery systems, and benefits and coverage.”

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Proposed Reforms to Medicare’s Hospital Wage Index

March 25, 2010 in Labor Economics, Medicaid/Medicare | 2 comments

A hospital in New York City faces higher labor costs than a hospital in Billings, Montana. To take into account these cost differences, Medicare adjusts hospital payments to reflect these cost differences using a hospital wage index. As currently constructed, however, many hospitals petition to be included in labor markets where they would receive a more generous wage index value.

A number of reforms to the CMS hospital wage index have been proposed. In a recent Acumen report to which I contributed, we evaluate whether some reforms proposed by MedPAC would improve the wage index’s accuracy. Below is an excerpt from the executive summary. The full report is available here.

“The Medicare statute requires that per-discharge payments to hospitals in the inpatient prospective payment system (IPPS) reflect geographic differences in the cost of labor. As a result, Medicare’s IPPS payments are adjusted by a hospital wage index that seeks to reflect the average price of labor facing each hospital. To construct the index, Medicare clusters hospitals into metropolitan statistical areas (MSAs) and residual areas (“balance-of-state” or “rest of state”). These geographical areas approximate hospital labor markets, and average wages are calculated for each using wage data from an annual survey of IPPS hospitals’ labor costs. However, accurately representing a hospital labor market is not a simple task, and inaccurately specifying a hospital labor market can create two problems.

Read the rest of this entry »

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Implementing a value-based purchasing program for Medicare

January 27, 2010 in Medicaid/Medicare, P4P | No comments

“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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Health Spending Climbs to 16.2% of GDP

January 25, 2010 in HC Statistics | 5 comments

From the CMS Office of the Actuary:

U.S. health care spending growth decelerated in 2008, increasing 4.4 percent compared to 6.0 percent in 2007, as spending growth slowed for nearly all health care goods and services, particularly for hospitals. Health spending growth for state and local and private sources of funds also slowed while federal health spending growth accelerated in 2008. Total health expenditures reached $2.3 trillion in 2008, which translates to $7,681 per person and 16.2 percent of the nation’s Gross Domestic Product (GDP). Despite slower growth in overall health expenditures, the share of GDP devoted to health care increased from 15.9 percent in 2007.

A detailed table of health expenditures by service type (e.g., hospital, physician services) can be found here.

Also interesting is the changes in spending by payor.  While overall Medicaid expenditure growth decelerated between 2007 and 2008, the composition of expenditures changed significantly.  Federal Medicaid spending increased by 8.4%, but state Medicaid spending actually decrease by 0.1%.  A table providing more information on the changes health expenditures by payer is available here.

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Medicare: Primary Docs to get more money, Specialists less

February 26, 2009 in Medicaid/Medicare, Physician Compensation, Public Policy | 1 comment

Joe Paduda of Managed Care Matters has a two great posts on Medicare’s new payment structure.  

The first post reports how exactly Medicare is changing its reimbursement for medical services.  ”It looks like reimbursement for cognitive services – the 99xxx codes for readers expert in CPT-4s…office visits and similar services for others – will be increased while payments for surgeries, imaging, and other ‘procedures’ will be reduced.”

The question remains, will these changes stick?  For years, policy experts have advised CMS to increase primary care compensation and decrease specialist compensation.  However, specialists are a smaller, more cohesive group.  This facilitates the formation of compelling lobbies for specialists.  Mr. Paduda accurately predicts that these Medicare reimbursement changes will create a “loud, violent, and ugly” political backlash from specialists.

In the second post, Mr. Paduda reveals some insight as to how Medicare reimbursement changes will affect Medical care contracting in the short- and long-term.

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Reference Pricing

January 29, 2009 in Health Insurance, Medicaid/Medicare, Pharmaceuticals | No comments

What percentage of your prescription drug costs should your insurance company cover?  You may say “100%, of course!”  However, if health insurance cover all pharmaceutical costs this will drive up premiums.  

One solution to this problem is reference pricing.  If generics are available for $10 and name brand drugs are available for $100, the insurance company only covers $10 for drugs in this category.  Why would anyone want a $100 drug when a $10 one is available?  The Health Care Blog gives 4 reasons why physicians don’t prescribe more generics:

  1. Many drugs are better known by their often simpler brand names and so physicians routinely write the brand name on the prescription, even if they do not mean that the brand has to be filled.
  2. Physicians do not have any idea what drugs actually cost their patients, because we are “too busy” and because prescription drug pricing transparency might wake us up.
  3. Some physicians believe, against the evidence in double-blind trials, that generics are inferior or less pure than the brand name version.
  4. Some patients are convinced, also against the evidence in double-blind trials, that they do better with the brand than with the generic version and request that their physician specify the brand.

Yet the Wall Street Journal reports that CMS may ban reference pricing.  Authors Dr. Rick Peters and Dr. Karl Luber claim that reference pricing does much good and should not be banned.

I tend to agree with them.  If low cost, safe generics are available, then insurance should only cover the cost of generics.  This will lower costs and convince more people to take generics.  

There is a down-side to reference pricing, however.  By giving less money to the pharmaceutical companies who manufacture the name brand drugs, this may stifle innovation of these drugs in the long run.  However, incentives to innovate could be generated through extending patent lengths or giving prizes to pharmaceutical companies who develop new drugs.  

Reference pricing is a fair way to steer patients and physicians towards more cost-effective use of pharmaceuticals.

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Should low quality hopsitals be given more or less money?

August 25, 2008 in Hospitals, Medicaid/Medicare, Quality | Permalink

Recently, the San Diego Union Tribune reported that the Sharp Grossmont Hospital in eastern San Diego county was cited for a number of preventable deaths. Reporter Cherl Clark found numerous problems, which included:

“staff members restraining a highly medicated, 25-year-old man with schizophrenia in such a way that he was allowed to suffocate. In addition, hospital workers caused the death of an 83-year-old woman who had undergone a hysterectomy by injecting a dangerous anti-narcotic into her bloodstream. Other problems included nurses who did not know or use proper CPR, an unsanitary operating-room mattress held together by tape and glue, unsafe storage and handling of food and kitchen equipment, and use of critical medications such as heparin that had expired up to a year earlier.”

CMS is threatening Sharp Grossmont that it could lose all federal money (i.e., Medicare and Medicaid). Since 50% of Sharp Grossmont’s business comes from Medicare and Medicaid patient, this would be a disaster for the hospital. What should we do with underpreforming hospitals?

In regular markets, when a product has lower quality, people stop buying that product and switch to another one. For instance, if GM stops making high quality cars, people switch to Toyota. The market compels companies to offer a desirable bundle of quality and price or else they will lose business. Because markets are so effective at maintaining high quality, withholding Medicare and Medicaid payments from Sharp Grossmont makes sense, right?

Maybe not in this case. First of all, some hospitals may not be in a competitive market. While urban hospitals must compete with other, nearby hospitals, Sharp Grossmont is supposed to provide medical care for the entire Grossmont Healthcare District, which covers 750 square miles in San Diego’s more suburban and rural East County. This area has more than 652,000 residents and Sharp Grossmont has the busiest emergency department in San Diego County. By reducing funding, individuals who have emergencies will receive even worse care than before.

This is similar to the no child life behind program. Low preforming schools lose money. But these are exactly the schools that need more money to survive. If students had the freedom to switch schools, then penalizing a failing school would make perfect sense since the students could opt for higher quality schools. The failure of low quality schools would not be a problem if students had other schools available for them to choose to attend. If individuals do not have any choice of which school they attend, however, withholding funding from schools or hospitals can make low quality schools worse.

Will Sharp Grossmont be decertified? The CMS threat to withhold funding is likely just a bluff.

“Among the 450 hospitals in [CMS certification officer Steven] Chickering’s jurisdiction of Hawaii, California, Nevada and Arizona, 10 to 12 a year have as many major lapses, he said. Ninety-nine percent of those facilities resolve their crises and keep their federal payments, Chickering said.”

The federal government knows that removing funding from the only emergency room in a 750 square mile area is not politically feasible. Although individuals may not have much choice of a hospital in an emergency situation, in non-emergency situations patients can decide to drive longer distances to visit physicians at more competent hospitals. If CMS payments are proportional to patient volume, then Sharp Grossmont may take a financial hit due to this lower patient volume without having the hospital decertified.

Decertification is likely not the answer, but having such serious quality lapses reflects poorly on the state of health care in San Diego, and in the U.S. in general.

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