House Plan Would Ease Medicare Into Pay-for-Performance

April 04, 2013

Physician reimbursement in Medicare would gradually shift to a hybrid of fee-for-service (FFS) and pay-for-performance with an option for unspecified "alternative payment models" under a plan that leading House Republicans unveiled yesterday.

The plan, not yet in the form of legislation, gives provider organizations such as medical societies the job of developing ways to measure physician performance.

Expanding on an earlier version issued in February, the House GOP proposal also would repeal the notorious sustainable growth rate (SGR) formula that Medicare uses to set its rates. The SGR formula, which works hand in hand with FFS reimbursement, will trigger a 24.4% pay cut on January 1, 2014, unless Congress acts to avert it.

Organized medicine has advocated that Medicare slowly ease into a pay-for-performance system, and a Medicare payment bill introduced in February 2013 by Rep. Allyson Schwartz (D-PA) and Rep. Joe Heck, DO (R-NV) takes this go-slow approach. However, the Schwartz-Heck plan envisions the gradual demise of FFS reimbursement, while the House GOP plan leaves its future open-ended. Another thing that distinguishes the Republican plan is its emphasis on letting clinicians develop specialty-specific payment criteria together with the US Department of Health & Human Services (HHS).

"This draft makes a concerted effort to avoid a 'one-size-fits all' approach in favor of a versatile and inclusive process that provides for the maximum amount of individual choice," write Rep. Dave Camp (R-MI), chair of the House Ways and Means Committee, and Rep. Fred Upton (R-MI), chair of the House Energy & Commerce Committee, along with the chairs of their respective health subcommittees, Rep. Kevin Brady (R-TX) and Rep. Joe Pitts (R-PA).

Graded on Cost-Effectiveness in 3rd Phase

In the first phase of reimbursement reform, the FFS status quo would prevail, minus the SGR. Physicians would receive "stable, predictable fee schedule updates" — updates referring to pay hikes or pay cuts — for an unspecified number of years while provider organizations develop new payment criteria geared toward their members. The criteria fall into 3 categories — measures of clinical quality, measures of efficiency, and "clinical improvement activities."

Quality measures pertain to either desired healthcare processes or health outcomes. Providing yearly eye exams to patients with diabetes is a process measure while keeping their HA1c levels under 7% is an outcomes measure. The medical profession is familiar with both kinds through Medicare's Physician Quality Reporting System (PQRS) and pay-for-performance programs operated by private insurers.

In the second phase of the House Republican plan, a physician's Medicare reimbursement would consist of a base rate and a variable rate. The variable rate would be linked either to scores on quality measures or the execution of a clinical improvement activity such as the use of decision support tools or patient registries to manage chronic illnesses. With quality measures, physicians could choose to undergo a peer-to-peer comparison, or else be graded on how their scores change over time.

"Quality measures are to be risk-adjusted as to the severity of illness so that providers are not penalized for treating sicker or more complicated patients," the 4 House Republicans write. "Providers can choose whether the assessment of their quality occurs at the individual or group practice level."

The plan's third phase would continue to base part of physician reimbursement on the quality of care. Physicians could earn even more if they score well "on efficient use of healthcare resources," which is a long way of saying "cost." HHS would consider per-capita costs as well as costs over an episode of care in evaluating physicians. Efficiency measures would be developed by providers, and adjusted for both risk and geographic differences.

Performance-Based FFS

The updated House Republican plan for Medicare reimbursement gives physicians the option at any stage to participate in an alternate payment model (APM), such as those underway in the private sector, Medicaid, and Medicare. The Affordable Care Act, for example, has spawned Medicare experiments centered around accountable-care organizations, shared savings, and bundled payments for episodes of care.

The 4 GOP congressmen write that the "stable period" of phase 1 would give providers time to assess the applicability of public and private APMs. The growth of pay-for-performance as an adjunct to fee-for-service in phases 2 and 3 would help spur APM development, they noted. Quality measures developed by providers could become tools in APMs. And clinical improvement activities "are intended to enhance provider readiness for [APMs]."

The plan seeks to give APMs enough time to evolve and become "sustainable in the long-term." However, the Republican congressmen do not foresee APMs replacing what they call "performance-based fee-for-service."

"The overarching goal," they write, "is to reward providers for delivering high quality, efficient healthcare, whether in a FFS system or in an [APM]."

The 4 congressmen are circulating their plan and seeking responses from provider organizations.

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