Medicare Update

Senate Finance Committee Hosts Roundtable Discussion on Hospital Value Based Purchasing

The Senate Finance Committee recently announced in a Press Release that it will hold a roundtable discussion at 2:00 p.m. on March 6, 2008 to discuss ideas for implementing a Medicare value-based purchasing program for hospital care. 

According to the Press Release, 22 health care organizations will take part in the roundtable discussion.  During the discussion, the Centers for Medicare & Medicaid Services (CMS) will present an overview of its November 21, 2007 Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program (Report).  The Report discusses options for a plan to implement a Medicare hospital value-based purchasing (VBP) program beginning in fiscal year 2009.

As reflected in the agenda, the roundtable discussion is expected to involve a discussion of key issues concerning performance standards, incentives, quality measures, and the implementation of the VBP program.

GAO Reports on Physician Group Practice Demonstration Project

On February 15, 2008, the Government Accountability Office (GAO) released a Medicare physician payment report entitled Care Coordination Programs Used in Demonstration Show Promise, but Wider Use of Payment Approach May Be Limited (Report). 

In the Report, the GAO examines the Medicare Physician Group Practice (PGP) Demonstration.  The PGP Demonstration was authorized by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 and began in April 2005 with 10 participating physician groups (each having 200 or more physicians).  The PGP Demonstration tests a hybrid payment methodology that combines Medicare fee-for-service payments with bonus payments that can be earned by demonstrating cost savings through better patient care management and meeting quality of care performance targets.

In July 2007, the Centers for Medicare & Medicaid Services (CMS) issued a Press Release announcing that, in the first performance year (PY1), 2 participating physician groups earned combined bonuses of approximately $7.3 million and that all 10 physician groups achieved most of the quality targets. In the Report, the GAO evaluates the PY1 of the PGP Demonstration by examining the programs used, whether the design was reasonable, and the potential challenges in broadening the payment approach of the PGP Demonstration to other physician groups. 

According to the Report, the GAO found that the design for the PGP Demonstration was generally reasonable.   However, the GAO also found that the PGP Demonstration design has some challenges. For instance, the GAO reports that the bonuses and performance feedback for PY1 were not given to the participating physician groups until after PY3 began.  The GAO points out that more timely delivery of the bonuses and feedback may have enabled the physician groups to improve their programs. 

Further, although CMS provided each physician group with quarterly patient claims data, the GAO reports that most of the groups did not have the necessary resources to analyze and use the data to measure their progress and potential improvement areas.  The Report also indicates that some of the physician groups raised concerns about the PGP Demonstration, including the use of a uniform 2 percent savings threshold, which may have made earning a bonus more challenging for particular groups.

Finally, the GAO found that the large relative size of the 10 participating physician groups (200 or more physicians) compared to most U.S. physician practices gave the participants certain size related advantages that may make broadening the payment approach of the PGP Demonstration to other physician groups and nongroup practices challenging.  In the Report, the GAO points out the 3 size related advantages:

• Institutional affiliations that allow greater access to financial capital;
• Access to and experience with using electronic health records; and
• Experience prior to the PGP Demonstration with pay-for-performance programs.

In fact, the Report indicates that most of the physician groups believed that the 3 size related advantages were critical to achieving cost savings and improving quality.

Senators Suggest Enhancements to Physician Quality Reporting Initiative

In a recent letter to Kerry Weems, Acting Administrator of the Centers for Medicare & Medicaid Services (CMS), Senate Finance Committee Chairman Max Baucus and Ranking Member Charles Grassley outline their intentions for improving Medicare payments for physician services by better linking payment to the quality of care provided.  In the letter, Senators Baucus and Grassley identify enhancements to the Physician Quality Reporting Initiative (PQRI) that they believe will "substantially expedite the transformation of this payment system to one that better ensures high-quality, patient-centered care."  The enhancements include:

• use of National Quality Forum endorsed measures;
• reporting on quality measure groups that focus on the care of patients with chronic conditions;
• employing clinical databases to capture more complete information about physician quality; and
• encouraging a team-approach to chronic care by permitting quality reporting by group practices.

President Bush Signs Medicare, Medicaid and SCHIP Extension Act of 2007

On December 29, 2007, President Bush signed the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) into law, extending the State Children's Health Insurance Program (SCHIP) and temporarily addressing a number of Medicare program issues.

As widely reported, the Act prevents the 10.1 percent reduction in Medicare physician payments that was scheduled for 2008 and gives physicians a 0.5 percent increase through June 30, 2008.  The 10.1 percent reduction in Medicare physician payments is driven by the statutory sustainable growth rate (SGR) formula, which is intended to control the growth in aggregate Medicare expenditures for physician services. Therefore, Congress will have to revisit the issue before July 1, 2008 or the 10.1 percent reduction will take effect at that time.  The 109th session of Congress passed similar legislation averting a 5 percent reduction in Medicare physician payments for 2007. The 5 percent reduction for 2007 was also driven by the SGR formula.

The Act also extends the Medicare therapy cap exception process through June 30, 2008.  The Balanced Budget Act of 1997 required that the Centers for Medicare & Medicaid Services (CMS) impose the therapy caps on Medicare payments for outpatient physical therapy (OPT), speech-language pathology (OSP) and occupational therapy (OOT) services in all settings, except hospital outpatient departments.  However, the Deficit Reduction Act of 2005 directed CMS to create a clinically-based exception process to the therapy caps for 2006. The Tax Relief and Health Care Act of 2006 extended that exception process through 2007. If Congress had not acted to extend the exception process through June 30, 2008, the Medicare Physician Fee Schedule Final Rule for 2008 would have imposed a combined therapy cap of $1,810 per beneficiary for OPT and OSP, and a separate cap of $1,810 for OOT, beginning January 1, 2008.  Unless Congress repeals the therapy caps or further extends the therapy cap exception process prior to July 1, 2008, the therapy caps will take effect when the Act's extension expires on June 30, 2008.

The Act also contains a number of other provisions impacting Medicare providers and suppliers, such as provisions freezing the inpatient rehabilitation facility compliance threshold at 60 percent and allowing certain comorbidities to count toward that threshold.

CMS Releases Report to Congress on Medicare Hospital Value Based Purchasing

On November 21, 2007, the Centers for Medicare & Medicaid Services (CMS) released a document entitled Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program (Report). 

The Report discusses options for a plan to implement a Medicare Hospital Value-Based Purchasing (VBP) program beginning in fiscal year 2009.  The options presented in the Report would build on the current Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) program, which ties a portion of the annual payment update under the inpatient prospective payment system (IPPS) to a hospital's reporting on specific inpatient quality measures. 

However, the VBP program would phase out the RHQDAPU program over a 3 year period and make a portion of a hospital's Medicare payment contingent on its performance on specific measures. In the Report, CMS suggests that such an incentive payment could be based on a percentage of the base operating diagnosis related group (DRG) payment (i.e., geographic and DRG relative weight adjustments). CMS believes that such an approach would most directly link the incentive payment to clinical services during a patient stay. 

Alternatively, CMS indicates that the incentive payment could be based on other components of the IPPS payment that are less directly linked to VBP policy objectives, including:

• capital costs;
• disproportionate share hospital payments;
• indirect medical education payments; and
• cost outliers. 

In the Report, CMS also suggests that the percentage of the base allocated to the incentive payment could be established annually, and that no additional funds may be required for the incentive payments (i.e., the incentive could be budget neutral).  The Report also addresses other key components of the VBP program, including:

• a potential Performance Assessment Model that incorporates measures from different quality "domains" to calculate a hospital's Total Performance Score;
• options to translate that score into an incentive payment;
• options for criteria to select performance measures for the financial incentive and candidate measures for fiscal year 2009 and beyond;
• a potential phased approach to transitioning from the RHQDAPU program to the VBP program;
• a redesign of current data transmission and validation infrastructure to support VBP program requirements;
• potential enhancements to the Hospital Compare website to support expanded public reporting; and
• an approach to monitoring VBP impacts.

In a related Press Release, Kerry Weems, the Acting CMS Administrator, states that "[v]alue-based purchasing would benefit Medicare beneficiaries and other health care consumers by encouraging higher quality care" and that "[u]nder the plan, additional information would be collected and publicly disseminated to patients and health care providers so that they can make better health care decisions." 

CMS to Hold Open Door Forum on Home Health P4P Demonstration Project

The Centers for Medicare & Medicaid Services (CMS) will hold a Special Open Door Forum on the Medicare home health pay-for-performance demonstration project.  The Open Door Forum will take place from 1:00 p.m. to 2:30 p.m. (EST) on November 13, 2007.

During the Open Door Forum, CMS will provide an overview of the demonstration design, define those eligible to participate and the application process, and explain the next steps for home health agencies (HHA) that are interested in participating.  CMS reports that a question and answer session will follow the presentation. Slides and other information for the Open Door Forum will be available on the CMS website.

To participate in the Open Door Forum, registration is required. The deadline for registration is 2:00 p.m. (EST) on November 9, 2007.  Beginning on November 19, 2007, CMS will also make an audio recording of the Open Door Forum available for download from the CMS website.

The Medicare home health pay-for-performance demonstration project will be conducted in the states of Connecticut, Massachusetts, Tennessee, Alabama, Georgia, Illinois and California.  CMS reported that it would begin recruiting HHAs for the demonstration project during October 2007, and that HHA enrollments would be accepted through November 30, 2007.  However, the implementation phase of the demonstration will not begin until January 1, 2008.