Medicare Compliance & Reimbursement

Hospitals thrive but primary care applications falter.

The concept of paying for performance in health care promises to reduce inefficiencies and costs simultaneously, but the benefits derived in hospital settings may not extend to primary care practices, according to several new reports on the subject.

The move to a pay-for-performance (P4P) health care system has affected nearly every facet of the industry. More than 50 percent of the country's HMOs, representing more than 80 percent of HMO enrollees, have instituted P4P programs, report Ashish Jha and Arnold Epstein of the Harvard School of Public Health. In addition, the Centers for Medicare & Medicaid Services (CMS) is running a three-year evaluation of P4P on hospital care, and Congress recently mandated that CMS incorporate P4P into Medicare, Jha and Epstein said in a statement.

Although the plethora of programs already in place suggests that P4P has already established itself as a proven means of cost-reduction, a new article from the New England Journal of Medicine implies that while paying for performance may work in hospitals, it does not significantly alter the cost or quality of care in primary care settings.

In hospitals, paying for performance has provided incentives that may be responsible for lowering morbidity rates and length of stay (LOS) times, according to a new report from the Commonwealth Fund.

"Hospitals are indeed becoming better at saving lives through better diagnostic techniques, early interventions, better treatments, more effective rescue efforts, reductions in errors and other initiatives," the report concludes. And these improvements come largely as a result of public demand for more efficient hospitals. "A steady, significant reduction in risk-adjusted LOS over time seems primarily to reflect ongoing financial pressures on hospitals to reduce costs," the report says.

Some industry insiders have expressed concern that the economic pressures of the P4P system imposed on hospitals may negatively impact the quality of care, but at least one data set cited in the report rejects the conclusion that decreased LOS time leads to the discharge of sick patients who will have to be readmitted.

"An examination of the CareScience private data (the public databases do not permit examination of readmissions) shows a basically flat readmission trend line, suggesting that the readmission rate has not significantly changed in the three years studied," the report states.

In Medicare primary care settings, paying for performance does not appear to boost quality or efficiency, largely because Medicare patients switch primary care physicians frequently and often need to consult with specialists. Only 35 percent of Medicare beneficiaries' visits each year resulted in a meeting with their assigned physician, the NEJM article reveals.

This dispersion of care to several different doctors creates additional administrative costs that negate the potential efficiencies of a P4P system, according to [...]