Medicare Compliance & Reimbursement

How long until providers are paid based on quality? 

 What Medicare will do is still unknown, but the Medicare Payment Advisory Commission - and a growing number of private payers and health insurers - are making a strong push to move forward with pay-for-performance systems.

In a P4P scheme, some of an individual physician's or group practice's payment is based on the quality and efficiency of care provided. Data profiling physicians' style of care provides the information basis for such efforts.

MedPAC, which advises Congress and the Centers for Medicare and Medicaid Services on payment issues, is virtually certain to recommend launching some form of P4P in Medicare in its 2005 reports.

A staff paper presented at MedPAC's Nov. 16 meeting posed the question, "Is it feasible to base a small portion of physician payment on quality?" While no votes have yet been taken, based on Commission discussions, the panel's answer to that query is: Heck, yes.

Among MedPACians leading the charge is Arnold Milstein, MD, medical director of the payer group Pacific Business Group on Health and health-care thought leader at Mercer Human Resource Consulting. California's P4P incentive program for physicians - conducted through the Integrated Healthcare Association - is a good model for what can and should be done, he suggested Nov. 16.

The IHA P4P project has recently reported first-year results and the group, led mainly by managed care organizations, is looking to move forward aggressively, increasing both the number of quality measures on which it collects data and the proportion of physicians' pay that would be at performance risk, said Milstein.

Putting "1, 2, or 3 percent" of payment at risk - as is currently suggested for P4P in Medicare - is "just too small," said Commissioner Ralph Muller, chief executive officer of the University of Pennsylvania Health System. "We now have 30 years of evidence that the payment system drives practice more than anything else."

In the United Kingdom, doctors can get up to 50 percent higher compensation from the government-run National Health System based on the country's new quality-reporting system. But MedPAC analyst Karen Milgate noted that the NHS had been significantly underfunded before P4P and the extra pay there involves real new funds that are being added to the system.

MedPAC likely will recommend beginning cautiously with a small percentage, so it can catch any unintended consequences before they get out of hand. "My understanding is that 1 to 2 percent is a starting point, not an ending point," said Chair Glenn Hackbarth.

One potential strategy for phasing in P4P would begin with tracking clinical information-technology adoption for both individual docs and physician groups, move on to add process measures such as whether diabetics receive periodic eye exams, then add outcomes measures such as potentially avoidable hospital admissions for diabetics, according to MedPAC documents. Information could be reported in several ways, but some panel members said that claims data - likely enriched with more clinical information - looks like a viable option.

Meanwhile, some in the private sector are moving aggressively to gather and analyze data for P4P and other quality work. Insurer Humana Inc. - whose top actuary, John Bertko, sits on MedPAC - announced this month that it will pilot software developed by the RAND Corporation for "screening common administrative claims data to ascertain whether recommended or contraindicated care is being provided."

The RAND QA Tools software is based on the 2003 study by analyst Elizabeth McGlynn that found U.S. adults are receiving care recommended by clinical expert guidelines only about half the time.